Category: start-ups

Start-Up DNA: The Formula Behind Successful Start-ups

Yevgeniy Birkman has put together one of the most informative and interesting presentations on start-ups I’ve literally ever seen. There’s a lot of food for thought but what makes it special is that this is the view from someone who is in the trenches; a guy that is actually building everyday, not an investor, blogger, pundit, etc.  I’ve embedded it below, enjoy!

Thanks to big homie John Ruffolo (who you should follow) for the tweet helping me discover the slides.

Don’t Be Mr. Start-Up, Keep Coding.

Disclaimer: Don't know who this guy is but the pic works for the post. If this is you, sorry :)
Disclaimer: Don’t know who this guy is but the pic works for the post. If this is you, sorry 🙂

I can’t stand this guy:

– Start-up founder

– Company is funded by investors yet has no traction (or hasn’t even launched)

– Sitting in a First Class seat instead of coach…and thinks he deserves it. Which is why I can’t stand him.

Back when I started my first company I took a flight from Toronto to San Francisco. It was the first time I was going to visit Silicon Valley and I was excited. I met this guy while waiting to board the plane. I had recently seen his picture in the paper and a write-up on his startup; it was just getting started, hadn’t launched yet, but they did a story on it. This was 2007, a little before the “its cool to be a geek” world we live in now.

Being a fellow entrepreneur I introduced myself and said hello, thinking its cool that two Canadian kids are heading out to the Valley. He didn’t reciprocate much at all. Ok, no problem. When I boarded the plane I walked past him as he sat in business class, he looked up slightly and smirked. Figuring a plane wasn’t the right place to be keepin’ it real and let a fist fly, I let it pass but I wondered how this guy is in business class when his product hasn’t even launched.

Fast forward a year and his company is out of business. Squandered investor money, co-founders fighting, etc.

In recent years, I’ve seen this type of guy more than a few times. It’s the same guy talking big at conferences about the “success” of his company because they’ve raised money. He’s sometimes on a panel talking about all the great things his company is going to do, how they’re going to change the world…and even if any of it is true, it hasn’t happened yet and it’s the team back at the office coding all night to make it happen. Not him.

I can’t stand this guy because the two founders reading about him on tech blogs dream to be him while they work hard and hustle on their idea. They think he made it and for some reason a lot of others think so to even though all he’s doing is pissing away investor money and playing the hype. He’s an emperor with no clothes and he sets the wrong example for the true soldiers working on their dream.

It seems like this guy is everywhere. And it’s wrong.

Part of (actually, a lot of) the blame is the startup culture that’s been created in the past few years. It became more about showing up to every conference you can get into, in an obviously undersized t-shirt, scruffy, with your backpack with a Mac in tow and blabbing about your idea or critiquing the other guy’s. All talk. All show. No substance.

To the true entrepreneurs; those pouring their time, savings, frustrations and joys into what they hope will be a success: Keep going. Ignore the hype. Ignore what’s written about these so-called stars, their 15 minutes will soon pass. Keep coding and stay focused on your goals. Real success is when you’re giving your customers something they love, having fun doing it, and making good on all that you (and you’re investors if you have any) have bet on. It’s that moment when you look back and be truly proud of what you and your team nurtured from nothing into something special.

You’re either going to make it or you’re not. If you don’t it won’t be because you spent your time at conferences show-boating instead of working hard. If you make it then that first class seat is going to feel great because you earned all the leg room you deserve.

Keep coding and dreaming big. You guys are the true stars.

 

 

 

Co-Founder Equity & The 50-50 Mistake

50-50I meet quite a few first time entrepreneurs and in many cases, by the time I meet the co-founders they’ve already decided that all is equal. You came up with the idea together and you’re both, or all, if more than two co-founders (which I think is another mistake), working hard so therefore equity is split evenly. It’s the easy thing to do…and it’s one of the biggest early mistakes you can make.

We all like shiny new things. At the beginning your idea is shiny and new. You’re going to change the world together and its exciting. Then the work begins and it’s not easy. Long nights, strained personal relationships, no money, long sales cycles, VCs not getting back to you, and you’re both dismayed that everyone isn’t as excited as you are. And then your co-founder isn’t as excited either and needs a “break”.

When the rush fades and the struggle continues, not everyone is up for the fight. It’s what separates the winners from the wanna-bees. Some reasons this might happen:

  • Need money: Your co-founder needs money and so decides that its better to get a job. They promise to still help and be involved. That may be true, but while you’re feeling the pain they’re getting a paycheck.
  • Need the girlfriend (or boyfriend): The stress of the job is affecting their relationship to the point that they need to choose. They don’t choose the company and start putting in less time than you do.
  • Need their own time: They’re demoralized that all the hard work isn’t paying off and decide that they need to take their foot off the gas. Your foot is still burying the pedal to the car mat.

All of these are valid reasons. They’re not wrong, they’re part of life. I’m not saying that if you’re homeless and stealing to eat, or you’re on the verge of divorce and you haven’t seen your kids in weeks because of your job that you shouldn’t re-evaluate your priorities. What I am saying is that all of these outcomes change the equation and 50% each doesn’t seem so fair anymore when one person is all in and the other isn’t. Of course, it’s also important to not fall in love with your ideas and know when to fold if it becomes evident that maybe your idea wasn’t so hot after all. I’ve folded a couple of times and the lessons learned paved the way for later success. If that time comes then its a realization moment between founders and it’s bittersweet but until that time its only fair that everyone that is getting an equal share is putting in equal effort.

The right thing to do is set expectations and lay out fair equity principles and an agreement from the beginning. It’s the next thing you do after registering your company (which is the first thing you do before you start taking any action on an idea). Be fair with each other and talk to a lawyer to get this done. Some of the concepts to consider include:

  • Allocation of Founders percentages
  • How the percentages are manifested in shares
  • Vesting: dictates when founders earn their shares and therefore guards against someone getting 50% of your company when they walk away and you’re still running the ship. Typical share vesting is either time-based, performance-based,, on a seminal event or milestone or a combination of all.
  • Any provisions where someone can be bought out
  • Any causes that result is losing equity
  • Creation of an equity pool that will be used down the line for early employees, investors, etc.

If you take early VC funding be prepared for the VC to want to re-visit and maybe change all of this anyway but that may never happen and even if it does, you need these guiding principles to ensure that whoever puts in the blood, sweat, and tears enjoys the fruits of success.

 

Web Site vs. Web App: The Difference & Why You Care

Guest post by Jason Miller, my co-founder at Carbyn and an absolute engineering whiz. You can follow Jason at @_developit.

When Jaafer asked me to start pouring my tech savvy into a post I started thinking about what would make a great read; something that sticks to the purpose of this blog which is to provide objective free-wheeling thoughts and knowledge, mixed with some humor and maybe even little controversy (after all not everyone will agree with everything I or Jaafer say (even though everyone should!)). So, I decided to write about something that’s becoming an increasingly hot topic in the web/mobile community and has come to be a part of my everyday work (and thoughts)….and something that is effecting web and mobile users every single day.

What’s the difference between a web app and a web site; what differentiates these two seemingly similar but in realty very different entities?

Is Twitter.com a web app? Yes. Is this website a web app? No. Is Gmail a web app? That one is debatable, but yes. What even defines an online resource as being an “app” instead of a “site”? I think the most definitive answer is that web apps transfer presentation separately from data, and do not employ a strict request-response technique for doing so.

Your users called, they want their time back.

Users care about speed, functionality (therein usefulness) and ease-of use. As developers, we can draw rather direct parallels to the technical aspects of web development from these general requirements. For speed, and since this is the web, we’re talking almost exclusively about speed of data transfer (requests take much longer to transfer than to execute on the server). Functionality is created by selecting the most effective set of features for an application (more is not always better). Ease-of-use is important in web apps because we are still collectively helping computer users to adopt a new way of thinking about applications – if a user’s first web-based application experience is horrible, they will most likely avoid using web-based software in the future.

So.. why classify “apps” and “sites” based on what the data looks like?

Users care about speed, and we know speed is most affected by data transfer time, so that’s where we can draw a clear line between the “old” and “new” approaches. A website transfers data and formatting via a single request, which is optimal when loading new pages is the primary means of retrieving new data. A web app transfers formatting and presentation information as part of an initial download process, much like downloading a desktop application. Once this information has been stored, data is then downloaded in a serialized format – optimized for speed in a situation where page loads don’t occur. Examining the data being transferred makes it easy to determine which paradigm something is optimized for. Simply look to sites like Facebook and Twitter, where you can see an evolution in the direction of “web app” for no reason other than to provide a better experience to users.

Doesn’t that mean everything should be an app?

You’re not getting the point – that would be premature optimization at its finest. If you are establishing a web presence for a business, where your needs are little more than an online business card or simple e-commerce site, don’t build an app. Your time would be better spent working with the client to optimize their site for Search Engines or creating PPC landing pages. However, it would certainly be beneficial to apply lessons learned from the world of web apps to your website – things like HTML5’s ApplicationCache and AJAX history can go a long way to improve user experience. A general rule-of-thumb is this: if your project is web-based, data-driven and is its own product, a web app would be a wise choice.

So, there you have it. Apps, both web and native, have an initial download followed by speedy data transfer. Sites throw everything into a pile and download formatting intermixed with data.

The Next Start-up Darling

I’ve long been amazed how us techies jump on the “hot company of the day” and create the next big thing in our minds; even if the mainstream hasn’t heard of them and no money is being made.

My quick list of the past few years is below with roughly the years when each company became a household name, or the darling of the start-up world, not years founded:

2005 – MySpace

2006 – YouTube

2007 – Digg

2008 – Facebook

2009 – Twitter

2010 – Foursquare

2011 – GroupOn

All of these companies became superstars in the start-up community well before the masses had even heard of them. We congratulate and admire them while the average joe wonders what they are. It’s a phenomenon that energizes founders to press on for mainstream adoption, gives fuel to VCs, and allows products to mature through feedback. It also however, generates inflated egos among founders, and ill-fated attempts by others looking to create a better mousetrap of the shiny new thing.

The biggest problem is that hype runs ahead of value and founders often miss the boat. We get into a cycle of “new thing-geek fame-inflated ego-no success-death”. When you look at the list above only Facebook survived the cycle and established a revenue model that delivers. Twitter? Sorry, not there yet. Foursquare? Unless you’re nuvo-tech you’re not using it, and GroupOn is printing money but advertiser value is a question mark while everyone from Facebook to my next door neighbor is replicating the model – long-term success is a toss-up.

Case in point #1: Digg

A few years ago Digg was the start-up darling, the place to go for the best news headlines. To get “dug” was huge, and being near the top of the list meant massive traffic. Jay Adelson and Kevin Rose built a winner complete with an advertising deal with Microsoft. What happened? Digg didn’t sell and a real revenue model never came. Today Digg is in shambles after a failed re-design, losing traffic, and there are better ways to find top news stories. Is it worth $200M today? Doubt it.

Case in point #2: Foursquare

That’s right, Foursquare, the start-up darling of the day. Well, badges or becoming a “mayor” don’t really make money so the play is now partnering with brands. I hope it works and Foursquare is successful. But in the same rewards space is Shopkick, who built around the rewards+location model from the outset and is in market; Best Buy has rolled Shopkick out to 257 stores.

Let’s take a look at Foursquare’s roller coaster year…

– Everyone in the start-up world is checking in, becoming a mayor, and having a blast. Average Joe has no idea what Foursquare is.

– A few months later, Gowalla, MyTown and Foursquare are growing and getting massive praise in the blogosphere. Average Joe still has no idea.

– In April, Techcrunch’s Mike Arrington urged Foursquare founders not to sell to Yahoo but to go for it. In September, Techcrunch sold to AOL for $30M.

Facebook Places launches directly competing with Foursquare et al. and with massive reach in their pocket and likely not looking to give people badges.

– Recently, Foursquare founders were featured in a Gap ad. Only geeks noticed.

– Just last week, Techcrunch published an article questioning Foursquare (and Gowalla) and labeling them the past unless they do something. Average Joe still isn’t checking in.

My guess is that Foursquare will either sell to Google or someone else that will attempt to figure out a business model. I hope it doesn’t become Digg v2.

Don’t Miss the Boat

My point is simple, it comes down to what people will pay for. Don’t believe your hype and get screwed. Make money or sell.

a) You have a cool company without a business model, but early adoption is growing fast. You’re the darling of the start-up crowd, and others are starting to copy you.

You need to: figure out what your real value is and how you’ll make money while you have the time. If you can’t figure it out but you have a big fish interested then sell while you’re hot. Don’t kid yourself – early adopters move on to the next new thing, VCs lose interest, and you’re left holding the (empty) bag.

Examples: Facebook figured it out. YouTube and MySpace sold. Digg didn’t. Foursquare and Twitter are on the clock.

b) You figured out your revenue model early and built your company to realize it. People/companies are excited because what you provide makes sense and they will pay for it. Technology is simply the tool that’s solving a real problem. Your company might be getting less hype but it’s making money and you’re happy. Personally, these are the companies I love. You run a great business (Amazon) or get acquired at a price that recognizes your hard work and accomplishments (Zappos, PayPal).

Examples: ShopKick and OpenTable are making money. Zappos and PayPal made real money then got the big payout. Google, Amazon, Ebay, and lots of other great companies just keep growing and never sold.

The latest rumor is that Google is interested in GroupOn, offered to buy Twitter, and might be interested in Foursquare. Henry Blodget thinks they should buy all three. I’m not sure I agree that it’s a smart idea for Google just because they have the cash, but I will say that it makes sense for all of these companies to sell. GroupOn is making money but the space is getting crowded fast and could become a commodity. Twitter is still looking for revenue and I hope figures it out, and Foursquare…well, remains to be seen if brands really care.

Do something great that adds value. You’ll have a blast and make money and if a big fish comes knocking you’ll be in the driver’s seat to sell and do it again or keep doing your thing.