So Aaron Hillegass who started Big Nerd Ranch got the entrepreneurial community all in an uproar with his post "Don't Start A Company, Kid."
The article is directed toward soon to be college graduates that BNR is trying to recruit. And while I disagree with the rationale that Aaron presents I actually agree with his conclusion. For the vast majority of college graduates the best thing to do is get a job. Get some real world experience. Pay down those college loans. If starting something is your thing look for some opportunity in the marketplace that your company or client is not willing to execute against. The insider idea.
The biggest issue I have with Aaron's logic is this statement:
"Having Enough is awesome. How would I define “Enough”? Enough means that you can take a friend out to a nice lunch and not have to worry about how much it costs. I have hung out with a couple of billionaires—my experiences indicate that being a billionaire is just incrementally better than Enough.
Thus, as you look at your future, the question should not be, “How can I become a billionaire?” You should ask, “Where can I get Enough?”"
I am calling BS.
For many people, myself included, having enough is not awesome. It is not going to help me achieve my goals. For some it is. Not me. And not for most entrepreneurs. Having enough to me sounds a little like being mediocre. And if you want to create wealth having enough is not going to do it. You can not create wealth from personal income.
Last night I was reading The Everything Store: Jeff Bezos and the Age of Amazon. This is Bezos talking about walking away from his very high paying Wall Street job to start Amazon:
“I knew when I was eighty that I would never, for example, think about why I walked away from my 1994 Wall Street bonus right in the middle of the year at the worst possible time. That kind of thing just isn’t something you worry about when you’re eighty years old. At the same time, I knew that I might sincerely regret not having participated in this thing called the Internet that I thought was going to be a revolutionizing event. When I thought about it that way… it was incredibly easy to make the decision.”
So go to work for Aaron or some other company. Learn. And when the time is right. If it is right for you. When you find that thing that you might regret not doing when you are 80. When you find your revolution. Go do it.
Or you can have enough. I hear it is awesome.
|Posted in Entrepreneurship
Over the Thanksgiving break I breezed through Nick Bolton's "Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal." It is a fast paced easy read filled with exactly what the title promises. Co-founder/board/executive level drama. There are some good lessons as well.
Don't hire your friends just because they are your friends. This, along with slow decision making, is portrayed as Ev's downfall and the reason for his ouster as CEO.
Have no mercy. When Ev pushes Jack out of the company he leaves him with a ceremonial board seat. Jack uses the seat as a place to plot his revenge and oust Ev.
Backup your application. At one point pretty far in there is no backup of the Twitter database.
People behave differently when a lot of money and power are at stake. What begins as a small team trying to do their best to start a company can turn into something much more complex pretty darn quick.
Fred Wilson comes across as a hard ass. Nothing at all like the friendly guy on A VC. Not sure if I believe the portrayal. Then again, people behave differently when a lot of money is at stake.
I don't know how accurate the tales are in Hatching but it is a darn good read with many lessons. Highly recommended.
|Posted in Entrepreneurship, Social, Startups
Allen Nance posted a nice article on Startup Grind the other day. In it he asks this simple question.
There is a lot of startup events and conversations happening around Atlanta, it is exciting to see, but I am wondering: “is it really helping, honestly, is it helping create better entrepreneurs and more awesome businesses?”
The short answer is yes.
The longer answer is a little more complicated and I have written about it before (the link is worth the trip for the comments). My short take is that there are too many events, or to be a little more specific there is an opportunity for entrepreneurs to attend too many events if they are not disciplined in focusing on creating products, getting customers, and building companies. Attending events is easy. Those other three things are hard.
Since I wrote that first article on the subject back in 2010 I have moved from helping entrepreneurs to running a business. I have taken my own advice. I typically do not attend more than two events per month. I have also taken to following David Cummings advice on work life balance throwing out the word "average." No more then one evening event per week. It forces me to make choices and keeps me focused.
|Posted in Entrepreneurship, Startups, Too Many Events
So a bright young entrepreneur walked into my office the other day. Interesting market. Has assembled a team. Built a product. Has significant user traction. And revenue.
He was looking to raise $400k with a pre-money valuation of about $1.6 million. Seemed reasonable to me. Asked me if I wanted to see his PPM. Uhh, not really.
A PPM is a private placement memorandum. And in my opinion they should never be used by an early technology startup to raise funds. There are three reasons for this.
One is that they are costly. Just for the sake of discussion it is going to cost somewhere between $10,000 and $20,000 to get a real attorney to create a PPM. An argument could be made that the cost will be paid for out of the investment but investors rarely pay the attorney fees for a startup raising money. More often than not it is the other way around. The startup pays the investors' attorney fees.
Two, and perhaps much more importantly, generally speaking sophisticated technology startup investors do not invest in startups that have created PPMs. Angels and VCs tend to like to negotiate their own terms and have the round written on their own paper. When the startup has a PPM with checks already in it becomes too difficult if not impossible to get the types of terms they want in order to invest. Bill Payne has a nice post explaining the problem with private placement memorandums.
Three, sophisticated technology investors don't think entrepreneurs that have created PPMs are very sophisticated.
In all my time coaching entrepreneurs on raising money I can not recall one doing so via a PPM. They cost money and scare away smart investors. Just say no.
|Posted in Entrepreneurship
Back in the day when deal sites were all the rage and Andrew Mason was still CEO of Groupon he would talk about "clones" all the time. Clones being competitors. It seemed he used the term in a derogatory manner that always struck me as odd.
In every large fast growing market I have been in, Internet service, email security, social media analytics, and online deals, the market is flooded with competitors. It's flooded with competitors that are pretty much the same sans positioning. It's the execution that wins.
Regardless Groupon is making some interesting moves. Groupon has changed it strategy of sending out daily emails for short-term running offers to building an e-commerce marketplace of longer-running deals that can be searched for on its website. This is a powerful move with great operating leverage. It is actually this exact same model that attracted me to Half Off Depot back in 2011. It was Half Off Depot's model. And it works.
Groupon's most recent move is to ungate it's website. To allow visitors to see the products it is selling without inputting an email address. Another smart move and one that Half Off Depot implemented shortly after my arrival in 2011.
As Charles Caleb Colton once said "Imitation is the sincerest form of flattery." I'll just leave it at that.
|Posted in Deals, E-Commerce, Half Off Depot, nCrowd
Back in the day when I used to listen to lots of investor presentations I was sitting in a room one day listening to a pitch with a group of angels and VCs doing exactly that. The entrepreneur got to his financial projections slide. Everybody started shaking their head yes. They liked the numbers.
At that moment it dawned on me that every time I saw numbers in that range I would see the same reaction from investors. I wrote them down in my trusty Moleskin.
The other day I was helping an entrepreneur with his financial model. And like a flash those numbers came back to me. I did not remember them but I knew where to look them up. My notes from December 2008.
While certainly not right for every startup these numbers seem to be pretty good guidelines for the type of ramp that early stage investors like to see in presentations. Fact of the matter is any number put together like this is purely a work of fiction and achieving them takes great execution and a little luck. Very few startups make it to revenue numbers like year four and five.
But if you are looking to pass the sniff test of early stage investors having a solid financial model with results somewhat in the range above will have you coming out smelling like roses.
|Posted in Entrepreneurship, Startups
I love Twitter. I was an early adopter of the micro-blogging platform. As a matter of fact today marks my seventh anniversary using the service.
And today is a big day for Twitter. The company is set to go public on the New York Stock Exchange. And the IPO is creating quite the noise. Congratulations is always in order when you go from three guys sitting in a San Francisco park to an IPO.
As a long-time user of Twitter and a guy that co-founded two startups (Socialytics and Twitpay) based on the Twitter ecosystem I have a pretty good understanding of the company. I like it as a business. The way that the company is positioned to complement traditional media creates more staying power than Facebook. You can't watch a sports program without announcers throwing out their Twitter handles. With that said, like Facebook at the time if its IPO, Twitter is overvalued.
Last night Twitter priced its offering at $26 a share. That values the company at $14.4 billion. Twitter has $535 million in trailing 12 months revenue. The valuation is 26 times revenue. Twitter is being valued in the same range as Facebook when they went public. And Facebook had net income. Twitter does not.
All the hype around the Twitter offering is going to make the shares fly like a little birdie in the short-term. Longer term I expect the stock to behave like the infamous Fail Whale. That will be the time to buy.
|Posted in Social, Stocks
The Fall 2013 version of Atlanta Startup Weekend is taking place this weekend at ATDC. The 54 hours of fun kicks off on Friday night at 6:00 and concludes on Sunday night with the judging and awards.
While some angel funded startups have emerged from this fest (Skibit, Twitpay, and Synapp to name a few) it is mostly about meeting people and building relationships.
After leading a few of these I have graduated to sitting in judgement at the end. Looking forward to seeing what folks create.
|Posted in Entrepreneurship, Networking, Startups
Last night at the end of the work day I walked down the hall at Atlanta Tech Village to a The Founder Institute info session. I did it primarily because I wanted to hear what The Founder Institute was all about.
It's good stuff. The Founder Institute rightly positions itself somewhere between Startup Weekend and tech accelerators such as Atlanta Ventures and Flashpoint. The group is set up to help gainfully employed thirty or forty something corporate director/VP types that have an itch to strike out on their own.
They take the folks that are accepted into the program, charge them about $900, and put them through a rigorous curriculum. A curriculum that gets them to the point of either stopping or to graduation. In order to graduate a founder needs their concept validated by program mentors, a business plan of some sort, work done toward a funding event, incorporate a company, and complete all the program assignments. Basically get them in a position to quit their day job.
During the meeting I was asked my thoughts on the program by an entrepreneur. My honest assessment is that their positioning is spot on and if someone has not started a company before this program seems to have the expertise and rigor to increase the odds of success.
If you have an interest you can apply here. The initial application can be completed in less than 30 minutes.
|Posted in Accelerators , Entrepreneurship
Alan Dabbiere wrote a most excellent article on the WSJ blog The Accelerators. A lot of folks (David Cummings and Stephen Fleming to name two) have been writing about why Atlanta is a great place to build and scale a startup recently but Alan really hits the nail on the head. This is from a guy that started and built two billion dollar market capitalization companies in the ATL. The money quote:
"Here you can start and build a great business, meet your first customer, access to a deep bench of talented individuals and the innovation produced by our great universities. At its core, Atlanta is also a great place to live."
Atlanta has the ingredients to start companies. Being a great place to live is just the cherry on the cake. That's why I'm still here.
|Posted in Entrepreneurship, Quotes, Startups
So last Thursday I made my way to Villa Christina for the Silicon Valley Bank client appreciation party. Kyle pretty much nailed it.
Somewhere along the line I ran into Alan Taetle. Pretty soon the conversation turned to dress.
"What is it with the Atlanta technology scene dress code. I just got back from Austin and everyone gave me grief about how I was dressed in khakis, a button down, and a sport coat. Everyone told me I was overdressed. What is it with Atlanta that makes everyone think they need to put on a suit? It's ridiculous!"
Standing there in my open collar grey suit I had to agree. Even more so as I wore jeans and a nice t to work and took a suit to change into to attend the SVB event. I felt pretty ridiculous at that point. It's because it's the South I said. It's because people call on other businesses and need to be dressed up. It's because entrepreneurs get coached to dress up. It's because investors wear suits.
Alan was not buying any of it and after a little debate either am I. No more hauling suits to the office for me. It's just a waste of energy to dress for the approval of others without any reason for doing so.
|Posted in Networking, Startups
It's kinda odd some of the discussions that I have recently had with early stage entrepreneurs about angel rounds. Folks wanting to raise $800k at a valuation more than $5 million. Seems a little rich to me and I said as much.
Well Silicon Valley Bank is out with their Q2 Halo Report. And sure enough the median angel investment was $590k with median pre money valuations at $2.5 million.
You can download the full SVB Halo Report Q2 2013 if you want to see the details.
|Posted in Angels, Entrepreneurship
The subject of startup equity distribution is one that seems to generate a lot of interest. Mine was piqued again by James Altucher's brilliant article on The Ultimate Cheat Sheet for Starting and Running a Business. I wish I had have written this one line, "The rules are: I'm going to give no explanations. Just listen to me." It's a masterpiece. If you want to start and run a business and don't have the time to read this article just stop right now. It's that good.
My suite neighbor John ripped on the post and one of his favs was also mine. Number seven.
How much equity should you give a partner? Divide things up into these categories: manage the company, raise the money, had the idea, brings in the revenues, built the product (or performs the services). Divide up in equal portions.
It is a little unfortunate that James used the word equal portions. Just listen to me. Equal is bad. But I am going to use a hypothetical to highlight what I believe James was saying.
Imagine it is early 2015. Both Accelereyes and nCrowd are setup for exits. Gonna happen. John and I are hanging out on the yet to be built roof top of Atlanta Tech Village for Friday night happy hour and start talking about what is next. We get in this quite intense discussion about how we can leverage the GPU and camera functions in computers to determine what consumer offers on a web page are most enticing in real time and sell this to local advertisers to create more efficient online marketing campaigns (I made this up on the fly, just accept it.)
It is our idea. The two of us. We each get a share and start working on seeing if this is real. It is.
Several Friday night happy hours go by and somehow or the other I am able to convince John that I am a better business guy than him. That I should focus on running the business. One share for me.
John agreed to let me run the business because he knows that he is much better than me at all things technical. He is going to build the product. He gets a share.
John and I are each going to stroke a check from our anticipated exits, but this is a big idea and we are going to need more. He is going to be deep in product development. It is my job to go get the coin. I get a share.
About the same time as all this is going on some BLiNQ Media sales friend decides to get out of Gannett and join our new venture. One share for her.
So at this point there are six portions. I have three. John has two. And the sales lady has one (and she gets paid nice commissions). 50%, 33%, 17%. Not a bad starting point for a more serious discussion about equity split.
Not equal but equal portions based on the division of labor.
|Posted in Entrepreneurship, Startups