(De) bunking some myths about those $1b startups

I want to direct your attention ton interesting article about $1 Billion Startups – “Unicorns” – on TechCrunch today. Some myths debunked and others confirmed:

So, we wondered, as we’re a year into our new fund (which doesn’t need to back billion-dollar companies to succeed, but hey, we like to learn): how likely is it for a startup to achieve a billion-dollar valuation? Is there anything we can learn from the mega hits of the past decade, like Facebook, LinkedIn and Workday? (from: Welcome To The Unicorn Club: Learning From Billion-Dollar Startups | TechCrunch🙂

 

More about GreenGoose and the Brush Monkey

Amazing story of a great looking product, and awesome demo, on the spot investment of $100,000 and still… It didn’t work. The story was told by Scott Kirsner in the Boston Globe:

“Today, GreenGoose is out of business, and Krejcarek is grappling with $80,000 in credit card debt — his approach to funding the company after investors’ money ran out earlier this year. When he says, “I’m trying to scrape together spare change to buy gasoline,” it’s hard to tell if he’s kidding.” (from The Boston Globe)

You have to admire that the founder of Green Goose (Brian Krejcarek) was willing to share his experience with Scott and the rest of us. There are many lessons there. To really appreciate the story you need to see how it started, with the demo at the Launch Conference. It was an unbelievable and triumphant presentation:

And yet. Here’s a page of Bonus material where you can read more of how it ended:

“Krejcarek says that the company spent much of the money it raised exploring different product concepts. By the time he launched Brush Monkey, there was about $200,000 left in the bank. The product wasn’t simple enough for people to set up. And there was no big distribution partner putting it on store shelves and helping to promote it. “Distribution is probably one of the hardest problems for a startup to solve,” he says.” (from Innovation Economy, Scott’s Blog)

Audacious startups

I remember when this project was first announced and ‘PR’d. It’s just another good reminder about the unpredictability of these world-changing projects. Sad but interesting:

Electric car company Better Place shuts down after burning through $850M | VentureBeat:

Better Place is the electric car company that hoped to change the world with its ambitious battery-swapping stations. But today it said it’s shutting down. The closure brings to an end arguably the most audacious “clean tech” company ever attempted.

 

Good tips for building products that people want

Here is a good cheat sheet on how to build products that people really want. It is cribbed from this article on TechCrunch.

  • Draw On Previous Experience and Understanding – The biggest problem is startups in search of a problem. Chase what you’re passionate about; you’ll probably already have knowledge in the space.
  • Have A Hypothesis About How You’re Different – Have a point of view about your startup. Why is there a special opportunity for this now?
  • Never Build Without Sketching – Mike says he and Instagram co-founder Kevin Systrom would go to a cafe with little iPhone design pads where “we’d build and throw away entire features. You’d waste three or four pieces of paper, not three weeks of coding.”
  • Learn In Weeklong Increments – Start with a question: “Will folks want to share photos on the go? Can we build filters that look good?” Spend the week investigating, and by Friday have a conclusion and move on.
  • Validate In Social Situations – “We called this the Bar Exam. If you can’t explain it to the guy or girl at the bar, you need to simplify.” Don’t just test with your techy friends.
  • Know When It’s Time To Move On – “I know ‘pivot’ has become a dirty word, but if there’s no unanswered questions left, then it’s time to move on.”
  • The Wizard Of Oz Techniques For Social Prototyping – You don’t need to build everything at first. You can be the man behind the curtain. Krieger says him and Systrom tested an early version of a feature which would notify you when friends joined the service. Instead of building it out, they manually sent people notifications “like a human bot” saying ‘your friend has joined.’ It turned out not to be useful. “We wrote zero lines of Python, so we had zero lines to throw away.”
  • Build And Maintain A Constant Stream Of Communication With Your Audience – Don’t spend months building something without any idea if someone actually wants it.

New Book: Founder’s Dilemmas

This book looks good: “Founder’s Dilemmas: Anticipating and Avoiding the pitfalls that can sink a startup”. I came across it in the “Startup Lessons Learned” Blog, which may be the best blog about leann startups.

This excerpt talks about a common scenario with startups, where the founders assume that they way they chose to split equity on day 0 will continue to work for them as time goes on:

“How should founders deal with such developments? In short, by assuming when they do the initial split that things will change, even if the specific changes cannot be foreseen, and therefore structuring a dynamic equity split rather than the static splits used at Zipcar, govWorks, and many other startups. As important as it is to get the initial equity split right—by matching it as closely as possible thefounders’ past contributions, opportunity costs, future contributions, and motivations—it is equally important to keep it right; that is, to be able to adjust the split as circumstances change.” (fromFounder’s Dilemmas: Equity Splits)

I think I will be getting the book.

p.s. not to be a scrooge, but shouldn’t the title be “Founders’ Dilemmas”?

Paul Graham: Fear and Startup Ideas

Paul Graham’s new essay is “Frighteningly Ambitious Startup Ideas.” From my reading of it, it talks about great startup ideas, fear and cynicism. The meat of the article is a series of shall we say audacious startup ideas, most of which you’ve had yourself and in each case you may have thought: “You’d have to be crazy to try this!”.

I once read, “If you’re not a little bit nervous, you’re not pushing yourself enough”. I like that mantra. It works for me. This essay is related to that thought:

“One of the more surprising things I’ve noticed while working on Y Combinator is how frightening the most ambitious startup ideas are.” (from Frighteningly Ambitious Startup Ideas.)

And if you are a certain kind of person that also may translate to always being able to find the 100 reasons why something will not work.

I’ve often said that if I think of my proud career accomplishments so far, in each case I tried something because I didn’t have any idea what I was getting myself info. Ignorance is bliss.

Paul Graham goes a step further:

“In this essay I’m going to demonstrate this phenomenon by describing some. Any one of them could make you a billionaire. That might sound like an attractive prospect, and yet when I describe these ideas you may notice you find yourself shrinking away from them.

Don’t worry, it’s not a sign of weakness. Arguably it’s a sign of sanity. The biggest startup ideas are terrifying. And not just because they’d be a lot of work. The biggest ideas seem to threaten your identity: you wonder if you’d have enough ambition to carry them through.” (from Frighteningly Ambitious Startup Ideas.)

Read the article. It will inspire you!

Preparation needed

I’ve been thinking a lot lately about what kind of preparation college students need as they graduate to pursue their futures. Thomas Friedman writes an excellent column in the New York Times where he says:

“Look at the news these days from the most dynamic sector of the U.S. economy — Silicon Valley. Facebook is now valued near $100 billion, Twitter at $8 billion, Groupon at $30 billion, Zynga at $20 billion and LinkedIn at $8 billion. These are the fastest-growing Internet/social networking companies in the world, and here’s what’s scary: You could easily fit all their employees together into the 20,000 seats in Madison Square Garden, and still have room for grandma. They just don’t employ a lot of people, relative to their valuations, and while they’re all hiring today, they are largely looking for talented engineers.

Indeed, what is most striking when you talk to employers today is how many of them have used the pressure of the recession to become even more productive by deploying more automation technologies, software, outsourcing, robotics — anything they can use to make better products with reduced head count and health care and pension liabilities. That is not going to change. And while many of them are hiring, they are increasingly picky. They are all looking for the same kind of people — people who not only have the critical thinking skills to do the value-adding jobs that technology can’t, but also people who can invent, adapt and reinvent their jobs every day, in a market that changes faster than ever.” (From The New York Times: The Start-Up of You)

This is really true. If your life’s ambition is to pursue an advanced degree then often a college degree is great preparation. For many though, their life’s passion is to join or create a startup and have a really big impact on the world.

Lies people tell themselves

Michael Arrington is a famous Tech-pundit-commentator-blogger who recently left or got fired from AOL because he wanted to be a VC while being a journalist covering the companies he is investing in.

One way or another that led him and AOL and the super-popular blog he started, TechCrunch, to part ways. All that is interesting back story.

Arrington recently wrote a very provocative article arguing that people who are serious entrepreneurs in serious startups, especially in Silicon Valley, should be willing to give up their life for work: Startups are hard. So work more, cry less, and quit all the whining. Yes he is a genius provocateur.

“… You might be sad that you work long hours and that sometimes your boss yells at you when tensions run high. But you also know that there is nowhere on earth like Silicon Valley. Nowhere else that is structurally designed to help you make whatever you can imagine into reality. Nowhere else where there are so many like minded people who are willing to sacrifice and work hard to create something new….” (from Uncrunched)

This is the usual drivel that is fed to innocents in startups and would hardly be worth mentioning except that it got a huge reaction (both pro and con) in the rarified tech geek startup ranks. If you read the article you notice that Arrington quotes at length from a Jamie Zawinski who captured his feelings in a diary from 1994, for example:

“I slept at work again last night; two and a half hours curled up in a quilt underneath my desk, from 11am to 1:30pm or so. That was when I woke up with a start, realizing that I was late for a meeting we were scheduled to have to argue about colormaps and dithering, and how we should deal with all the nefarious 8-bit color management issues. But it was no big deal, we just had the meeting later. It’s hard for someone to hold it against you when you miss a meeting because you’ve been at work so long that you’ve passed out from exhaustion.” (from NSCP Dorm)

You get the idea. Well wouldn’t you know, Jamie Zawinski for 2011 is not so happy about being used to bolster Arrington’s article. In “Watch a VC use my name to sell a con” he writes:

“Follow the fucking money. When a VC tells you what’s good for you, check your wallet, then count your fingers. He’s telling you the story of, “If you bust your ass and don’t sleep, you’ll get rich” because the only way that people in his line of work get richer is if young, poorly-socialized, naive geniuses believe that story! Without those coat-tails to ride, VCs might have to work for a living. Once that kid burns out, they’ll just slot a new one in.” (from Jamie Zawinski)

You might gather that in this case I am more in Zawinski’s camp.

The 7 deadly sins and 10 lessons of a failed startup

Check this post The 7 deadly sins and 10 lessons of a failed startup from Don Dodge on The Next Big Thing:

“Building a startup is the most difficult, and most rewarding, thing anyone can do. Sometimes you can even make some money at the end of it all. There are so many things that can go wrong it is a miracle when a startup actually makes it. It is important to celebrate our successes, learn from our failures, and value them equally. Failure is important…because success is a terrible teacher.”

Originally posted on Jul 24, 2008. Reprinted courtesy of ReRuns plug-in.