Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.
~ Margaret Mead
“If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.”
“You have to recognize that every ‘out front’ maneuver you make is going to be lonely, but if you feel entirely comfortable, then you’re not far enough ahead to do any good. That warm sense of everything going well is usually the body temperature at the center of the herd.” — John Masters
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”
THE MAN IN THE ARENA
- Excerpt from the speech “Citizenship In A Republic”
- delivered at the Sorbonne, in Paris, France on 23 April, 1910
- Theodore Roosevelt
And a bonus third:
“You must not fool yourself, and you are the easiest person to fool.” - Nobel Prize-winning Physicist Richard Feynman
A friend once advised me to be careful of startup purgatory. The story below was my response to him.
Imagine two people setting out to cross a large lake, each in a small rowboat. The first sets out on a clear day with the lake surface as still and flat as a mirror; a gentle breeze and a steady current pushing the boat from behind. Each time the oars are dipped into the water the boat shoots across the lake. Rowing is easy and delightful. Quickly the rower reaches the far side of the lake. She may congratulate herself for being quite skilled.
The second rower heads out across the same lake during a great storm. Powerful winds, currents, and waves move in the direction opposite the boat. With each pull of the oars, the boat barely moves forward, only to lose most of the distance gained when the oars are raised out of the water for the next pull. After much effort she makes it to the far side of the lake. This rower may feel discouraged at her lack of skill.
Probably most people would prefer to be the first rower. However, the second rower is the one who has become stronger from the exertion and is thereby better prepared for future challenges.
From The Issue At Hand by Gil Fronsdale.
I’ve always been fairly OCD about how software is built. Traditionally I’ve believed in process, organization, and tight communication. I once loved burn down charts, issue tracker reports, daily standups, deadlines, and frequent planning meetings. Not anymore.
Working on MemCachier with David and Amit has taught me otherwise. David and Amit are both incredibly talented engineers. They would be slowed down by process, organization, and superfluous communication designed to help me, the OCD team member, sleep better at night. And they’d probably be annoyed and upset, too.
We’ve adopted more of a chaotic engineering process, where we don’t have meetings, tracking tickets, release processes, and deadlines. And we work where and when we want. This way of building software is drastically different than what I’m familiar with, but it’s proven to be a better model for us while we build MemCachier. It’s also been better for me as an individual contributor. I’ve been far more productive lately than I was when I stayed organized. And I’ve been writing better code, too. Although maybe David and Amit will disagree ;).
The transition has been hard for me. In the early days I’d argue with David and Amit about adopting more process. Over time I’ve become more patient and open minded, and slowly but surely I’ve adopted David and Amit’s ways.
The best way I can describe our culture at MemCachier is as a hacker culture. And I’ve written in more depth about it here in case you’re curious. Also, if our culture sounds appealing, send me an email — MemCachier is hiring.
Last week a friend told me he’s considering quitting his job to pursue his own startup. He’s spent the last few months researching and refining his business plan. But he hasn’t made enough progress to give him the confidence to quit his job and live without an income.
He wants to create a very specific type of food product. He’s asked me to not share the details, so let’s pretend that he’s making a new energy bar to compete with PowerBar and CLIF Bar. He’s made the bar in his kitchen and tested it on himself with great success. But his research has indicated that he’ll need capital for manufacturing, packaging, and labeling. So now he’s started researching fundraising, investors, and pitching.
I told him to stop researching and instead to start building a small business. He should make small quantities of the bar in his kitchen and sell them. Let’s pretend his target customer is an endurance cyclist. He should setup a booth on a popular bike route, perhaps at the top of a hill where cyclists normally rest, and see if people buy the bar. If they buy, his idea will be validated and he’ll be in a great position to fundraise. And if they don’t buy, he’ll get great customer feedback, which will help him iterate on a better product, eventually leading to sales.
The first thing you should do when considering starting a business is build a prototype and validate that it’s something people will pay for. Most ideas have a simple version that can be built without a lot of capital (popularly known as a minimum viable product). Spend your time finding that simple version, building it, and selling it. Then research how your simple prototype can grow and mature.
Pitching your research to an investor won’t go well for you. The investment would be too risky — investors don’t know if the product can be built, if customers will buy it, and if you can successfully market your product. Instead, show the investor that you already have a business with a prototype and paying customers. And raise money to fuel growth into a large market.
Investors are more likely to invest in lower risk opportunities, so take out as much risk as you can by building as much of the business before you pitch. Secondly, asking for money to fuel growth is a far stronger position to be in than asking for money to validate your research. So stop planning and start doing.
Today Fred Wilson, one of the most prominent consumer internet investors, wrote about how the consumer internet space is becoming harder and harder to break into:
The wind that has been at our back for 7-8 years in consumer internet is no longer there. It’s tougher sledding and will likely continue so for some time to come.
I’m not surprised by Fred’s observation — I predicted this back in June. I’ve spent the last 18 months on a journey to find and start my own business. In those 18 months I’ve built both B2C (business-to-consumer) and B2B (business-to-business) products. I’ve witnessed firsthand how much more difficult a B2C product is to build than a B2B product.
The formula for a successful B2B product is straightforward: businesses buy software that is valuable to them — software that cuts costs or grows revenue. With little exception, businesses will buy products that create value.
In contrast, consumers are fickle. Their buying decisions are random — sometimes based on logic, and other times based on emotion or mood. Ad-supported consumer internet companies don’t even impose a buying decision on the consumer. Instead the company tries its best to distract and entertain the consumer — more pageviews yields more revenue. Keeping consumers entertained is hard.
MemCachier, the product I’ve been building for 8 months, has had more immediate success than any other product I’ve built. MemCachier sells a software-as-a-service to websites. Every decision we make is based on creating more value for web developers. And because I’m a developer, I understand what will create value for our customers, and hence sell more product.
Plus, I enjoy building software that developers use. And building a software-as-a-service brings much of a the same excitement as a B2C product. Every day, new customers signup through our marketing channels, without talking to us. They use our product every day. And sometimes they tell us how much they love our product, and how much easier it’s made their lives.
I’ll save B2C products for side projects and build businesses out of B2B products — they’re easier and equally as fun.
Most companies get founded when one entrepreneur has an idea that she recruits her friends to build with her. The common assumption is each founder will work well together because they get along and their skills compliment one and other. So the founding team gets formed right away, ownership and voting rights are set during the incorporation, and everyone starts working.
The scenario I’ve just explained often leads to one or many founders leaving the company. They recognize after weeks or months of work that the company isn’t the right fit — maybe the role isn’t interesting, or maybe one of the other founders is too difficult to work with. A company that loses one or many founders isn’t necessarily doomed for failure, but the process you’ll go through is messy, expensive, and emotionally draining for everyone.
The founding team should be formed carefully and patiently. By being careful, you’ll save yourself much frustration in the future when one or many founders need to leave.
Here are the steps you should take when choosing a founding team:
- Get to know one and other — break bread and drink beer.
- Work on a side project — something that won’t share intellectual property with your future startup, yet something you’re passionate about.
- Brainstorm — bounce ideas off one and other; make sure you can rev on ideas.
- Push a few buttons — see what people do when they’re upset, sad, or vulnerable.
- Discuss the startup — the product, go-to-market strategy, branding, competitors.
- Discuss roles and responsibilities — who will run product, engineering, sales, recruiting, etc.
- Discuss the board and ownership — equity split, vesting schedule, and board seats.
- Incorporate and start working full-time, guns blazing.
Here are qualities you should look for in a founder:
- They have a passion for the product.
- They’re product minded.
- They’re onboard for the long haul.
- They have a skill that will give your startup a competitive advantage.
- They’re fun to work with.
- They’re good at communicating.
- They’re positive, inspiring, and excited.
- Ideally you’ve worked with them before.
- They make you better at your job.
Here are founder qualities that should raise a red flag:
- They’ve never worked at a startup before.
- They have lots of side projects that they enjoy maintaining.
- They’re considering going (back) to school or a job.
- They want a quick exit (acquisition).
- They’re hesitant to quit their preexisting commitments.
- They don’t have a passion for the product.
- They’re negative.
Lastly, here are general tips for incorporating. These are very subjective:
- Put everyone on the same vesting schedule — don’t forward-vest anyone. 
- Give all founders a one-year vesting cliff. 
- The founding CEO should be the founder most dedicated to the company’s success.
- The founding CEO should have control, which usually means they have more stock. (I used to think otherwise. And there are lots of varying opinions on this subject.)
Don’t expect founding a company to happen quickly. You should date potential founders for months before you decide to work together. The founding team is more important than the idea — the founding team is everything. Be careful and patient when choosing or joining a founding team. And do not rush into a founding team.
 Each founder will work on the company for years, so vesting schedules don’t matter.
Update: Steve Blank agrees.
Surviving a bad day is like enduring a mountain climb on a bicycle. You’ll inevitably suffer, hating the world more with each stroke of your pedals or negative thought. You’ll want to scream at anyone who talks to you. Or send a nasty email to someone who doesn’t deserve it.
Eventually you’ll get through the bad day, and you’ll have the long descent on the other side to bring you back to your normal state of mind. You aren’t angry. You aren’t mean. You’re struggling through something and soon you’ll be over it.
Hold your tongue and keep the suffering and struggle to yourself. You’ll regret any brash decisions you make during your time of despair. Don’t let the bad day turn into a bad week, a bad decision, or a spoiled relationship.
Suffer through the bad day alone, as you would if you were riding your bike. Keep your thoughts and angers to yourself. They won’t do anyone else any good. And they won’t do you good, either.
Exactly one year ago I quit my job with the dream of starting a technology company. I didn’t have a plan except to work hard and learn. Yet I could have used a lot of advice in the early days, which is why I’m writing to you today. My hope is that the below advice will help guide some of you if and when you make the decision to quit your job and pursue a startup.
I have two blog posts summarizing the year and the six products I’ve built. The first — here — is a telling of what I’ve done, what products I’ve built and what I’ve learned from each. The second — the post you’re reading right now — is a summary of advice for others who are in a similar position as I was a year ago.
1) Be prepared for dark days: the last year has been both the hardest and most amazing year of my life. There have been days where I was angry at everyone, scared that my life-long dream would drift away out of reach because of my insufficiencies. And there have been days when I’ve been on top of the world, literally running down the streets skipping with utter joy. You’ll have both of these days, but you’ll remember the dark ones. They’ll leave a stain on you that only washes off with a good attitude and a happy candor.
2) Try not to freak out about your personal runway: I have a panic attack once every few weeks about my personal finances. I’ve emptied multiple 401k plans, consulted on the side, and sold other financial holdings that shouldn’t have been sold. I’ve done what I’ve needed to do to survive, but I’ve probably done a little too much. That is, I’ve let my anxiety control my financial decisions.
Set aside plenty of money to keep yourself afloat, and try not to stress out too much. Chances are good you can find money to keep going when you’re close to running out. But when you have money in the bank, try to focus on building your startup. Easier said than done, at least for me :).
3) Raising money is not success: until recently I assumed that success meant raising money. Perhaps the Silicon Valley culture has rubbed off on me too much. Raising money is not success. In fact, it’s an incredible distraction from running your business. The lure of getting meetings with big-shot investors is strong, but your time is probably better spent elsewhere.
Only raise money if you truly need it. Come up with a rough 6-12 month plan for your startup and determine all the possible costs. If those costs are too large and can’t be offset with revenue or personal funds, raise money. Otherwise, don’t raise money. It’s as simple as that. Furthermore, the best time to raise money is when you aren’t raising money. Build your business/product, not your pitch.
Plenty of awesome businesses started without investment, Atlassian and Github to name two. Raising money is not success unless you truly need the money.
4) Raising money is not easy: a common assumption right now is that raising money is easy because there’s a lot of it out there. If you have an easy time raising money it’s either because you’re awesome or because you have shitty investors. Good investors will ask great questions and find holes in your business. You’ll need to do a lot of selling and a lot of convincing. And you’ll need to infect them with your energy and passion for success.
If/when you decide to fundraise, take it seriously. Learn from every meeting, find mentors to help you with your pitch and strategy, and go into meetings prepared. Don’t let a bad meeting get you down. You’ll probably have more bad meetings than good ones.
5) Start fundraising with investors who know you well: a successful seed round starts with one good investor. With one good investor all other meetings you’ll have will be easy. When it’s time to raise money, find someone who knows your market well and has worked with you in the past — your former CEO, a friend who’s in the space, etc. Get this first investor to commit $10-50k on terms you both agree on. Then go pitch other investors. Pitching an investor when money is already committed is much easier than otherwise. The conversation goes from “please give us money” to “you can participate if you want.” The latter is a far better position to be in.
Again, try to get $50k committed from investors who know you before you speak to a professional investor. If you’re interested in learning more about raising a seed round, I’d suggest you read this.
6) Customer development is key: customer development is the most important thing to get right in the early days. The best customer development is with a product, not a survey. Get a prototype out there, get people using it, and become friends with those people. Your early adopters will make a huge impact on the success of your company. Get to know them, treat them well, and listen. They’ll fall in love and they’ll tell all their friends.
The following three questions matter the most:
- Why do you use our service?
- Will you continue to use our service?
- Will you pay $XYZ for our service?
Know the answers to these questions before you take any idea seriously.
When determining what features to build and what directions to go, never start with “I think we should …” Always start with “Customers want X so we should …” What you think doesn’t matter — your intuition is probably wrong, unless you’re incredibly talented or you’re your own customer. Your customers are all that matters. Without them you have nothing.
7) Team matters, a lot: there are incredibly few people out there who can build a successful startup by themselves. Furthermore, finding good co-founders isn’t easy. Pick a great team before you enter anything risky — before you pay legal fees for incorporating, before you plan to pursue something for the long term.
Pick team members who you’ve worked with before. Have a total of 2-3 cofounders, anything more is too complicated. Do not assume your team will work out until it does. Doing a startup with someone else is like having a child or getting married. You’re entering a commitment and everyone needs to have the same expectations around success, failure, and day-to-day operations. Everyone needs to feel like a part of the team. Otherwise your team will fail to work well together. And your startup will probably fail, too.
Everyone on your team should have complimentary roles. You shouldn’t overlap too much in what you want your role to be. For example, two of three co-founders shouldn’t want to be the CEO or CTO. This is an early sign of a dysfunctional team.
8) Divide equity evenly amongst the founders: I can’t stress this enough. Do not be a founder with someone if the equity isn’t split evenly. Uneven splits almost never make sense. You’re all going to be busting your asses for years on this crazy idea of yours. One person doesn’t deserve more — I don’t care how much more work they’ve done to get things started. Split things evenly. No exceptions. The success of the company rests on each of your shoulders equally. Compensate yourselves equally, too.
If one of your founders isn’t comfortable with an even split, they probably don’t trust the rest of the founding team, which isn’t good. Or maybe they feel entitled, which also isn’t good.
If one founder did more upfront work than the other founders, put them on an accelerated vesting schedule. Don’t give them more equity.
9) “Business people” fight an uphill battle: I don’t mean to discourage you, but your path to success is harder and longer than those who can build a product on their own. Try to find a technical co-founder. Unfortunately that’s the best advice I can give you.
10) Seek out advice and mentorship: make friends who are also entrepreneurs. Find good advisors/mentors and meet with them regularly. Try to work around other startups, either by camping at a friend’s office, or by paying for coworking space.
11) Balance passion, skill, and opportunity: you will succeed if you do something you love, something you’re good at, and something that has opportunity. Try to build a startup that has a little of each of these.
12) Keep learning: you’ll never know all the answers. After you read this post you’ll know more about the early startup process. But when you finally get there you’ll have endless other things to learn. Be ready for this. Try to love the opportunity of learning something new. Keep reading, and stay hungry for knowledge.
13) You might need to search a while for the right startup: I spent most of a year soul searching, building products and staying busy. It took me nine months to find MemCachier, my current project that I’m in love with. Don’t expect that after you quit your job you’ll know exactly what to build. Stay busy, and ship as many products as you can while you’re in the experimentation phase. You’ll find the right startup eventually. And when you do, you’ll be so happy you spent time searching for it.
14) The best reason to get investment is for growth: investors want to invest in success. Investing in a company without traction is risky. Investing in a company that has traction and wants to see huge growth is less risky and very exciting. There are plenty of good reasons to get investment. But growth is the best reason.
15) Understand what type of investor you want: do you want an investor with good connections? A trophy investor? Someone with operational experience in your market? Or do you just want money? Understand what type of investor will help your business succeed and look for investors that fit the bill.
16) Starting a company is the most rewarding thing I’ve ever done: this whole process has been absolutely unbelievable. There have been lots of hardships: my personal relationships have suffered, I’ve dried up nearly all of my financial holdings, my net income for the year is -$40,000, I hardly buy or indulge in anything, and I’ve been highly stressed for almost an entire year. Yet I wouldn’t trade this last year for anything. For the first time in my life I’ve found work that I love, which is truly difficult to do. I’ve pursued my life long dream. And I couldn’t be happier about it. It’s all worth it.
Questions? I’m more than happy to answer them. Write a comment and I’ll get to it soon.