Building a startup? There are no rules.

No_Rules_by_Fallen0113

Building a startup is tough. Because it is so hard, it makes sense for entrepreneurs, founders, and VCs to trade advice. We see advice everywhere. The blog posts. The essays. The coffee meetings. It is all useful. Yet, it kind of isn’t.

One of the things I’ve begun to realize is that there just aren’t any hard and fast rules to building a successful startup.

OK, there may be one: create value in the world which can scaled and captured.

That seems true and obvious, but unfortunately isn’t very actionable. Other than that, I’m not sure I can give you a rule which is 100% true.

You may hear that design matters, but I can point you to successful website that are ugly and janky.

You may hear that you should raise as much money as you can, but there are successful companies which have been bootstrapped.

You may hear that the Lean Startup movement is the way to go, but I am show you many of the Alexa Top Sites that didn’t follow the principles.

You might hear that you need a cofounder, but there are startups which have succeeded with a single founder.

You may hear that these accelerators and incubators are great, but many great startup successes have been built outside of these communities/ecosystems.

You may hear you should move fast and break things, but there are other successful startups that don’t seem to move fast on product at all.

You may hear about the benefits of a private beta, but other founders have found success just getting their stuff out there.

I could go on and on.

For any piece of advice, you could follow it and be successful.. or you could not follow it, and be successful.

How do you proceed?

Too much analysis results in paralysis. And, at any moment, there are a ton of decisions to make. For each one, you can deliberate and ask for advice, but at the end of the day, you have to make a decision and run with it. If it is a mistake? Change directions 😉

Entrepreneurs: the eternal optimists

 

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Recently, my girlfriend and I have started running together a few days a week. It is the perfect chance to exercise, talk about how our days went, and chat about anything that may be on our minds. So far, it has been awesome.

During our run today, I began to get excited about my current work on Soulmix. I started talking about how great things could be, and how exciting the big vision could be. I didn’t get more than a minute or two into this before my girlfriend stopped me.

The following conversation went something like this:

Her: “Alex, the big vision is great and all, but you need to figure out how to get it off the ground from nothing.”

Me: “I know, I know.. I’m just talking about how I’m starting to see more potential in the project.. of course, if it pans out.”

Her: “I just don’t want you to count your chickens before they hatch. In the past two years, you have gotten this excited 3 times already, and then later on decided to work on something different. It might be good to not focus on the big vision that much right now, and keep focusing on what comes next in the short term.”

Me: “Yes.. it has already happened a few times. But hey! I’ve been learning a lot, and I have to choose something to be working on. I’m only going to choose, it might as well be something which I believe has a big vision behind it. Whether it actually does? I’m not sure. I guess I will find out somehow. But I need to believe it.”

The last sentence seems to be one of the defining characteristics of entrepreneurs: we want to believe.

We are eternal optimists. Actually, it is more than that. We have to be eternal optimists.

The entrepreneurial journey is tough. It is a rollercoaster of a ride, and it would be difficult (if not impossible) to withstand the continual ups and downs without believing in ourselves, and believing in the vision. At times, that belief is all there is.

We are eternal optimists, but not eternal blind optimists.

The trick is to believe, and then forge ahead with eyes wide open, looking for the obstacles and market realities that will render the belief useless.

How do you manage this?

I don’t know.. I’m still figuring it all out. But I can tell you it certainly ain’t easy.

 

Thinking big and small

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I came across this post today by Gabriel Weinberg on thinking big in startups, and it struck a chord with one of the biggest lessons I have learned in my startup career thus far.

As far as I can tell, it is critical for an entrepreneur to be able to think both big and small.

Thinking big gives you a clear understanding of how you intent to change the world. It gives you your mission, which drives you through the entire startup rollercoaster (which is damn tough!). Thinking big ensures that you are tackling a large market. The big vision is essentially what your startup could look like once it hits traction and scales out.

However, thinking big has a major problem. You begin a startup with nothing. Zero traction. Zero scale. No code. No users. No data. Nothing. You don’t magically take over the world overnight. You have to begin with a few small steps.

Here is where thinking small is critical.

You must take your big picture, and distill it down to that first step. The first step is your entry point into the large picture. It is best if this entry point (1) can be tested in a small amount of time, (2) requires relatively little resources, and (3) is something that a market needs right now. Some people may call this an minimum viable product (MVP), but I like to call it my entry point. If selected properly, the entry point should be simple, but powerful. It is enough to begin gaining traction, and sets you on your way towards your larger vision.

What order do you go in? Big first? Or small first?

From what I can tell, Amazon seems to have gone big first. I would bet that Jeff Bezos understood where he was going, and began with an online bookstore. On the contrary, Mark Zuckerberg seems to have gone small first. He built a small thing for his university that gained traction. Afterwards, he developed the large vision and mapped out the steps for accomplishing it.

It appears you can go either way, but at some point, you must be able to think both big and small.

P.S. This is post number #91 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

Be good (the startup version)

Yesterday, I wrote on a big lesson that consistently pops up in my life: be good. The lesson is simple: if you want something, the only thing that matters is to be good.

Most recently, I have been learning this lesson with respect to startups.

When I quit my job in April 2012, I had no idea what I was doing. I only knew that I wanted to create an impact in the world, and that I probably had to figure it out on my own.

The first thing I did was consume everything I could find on the web and in the bookstore. I devoured books and blog posts. I watched as many videos as I could find from founders I respected. I browsed Hacker News daily, reading a good fraction of all the posts on the front page. At the same time, I started doing a lot. I picked up web programming. I started blogging. I continually networked as best I could, taking coffee meeting after coffee meeting.

In the first year, I met a lot of people, and learned a great deal about the VC and tech world. However, I hadn’t built anything worth anything. I had built and scrapped three prototype products. So where was my startup? At ground zero.

After I scrapped my third code base, I remembered that lesson that I always seem to come back to: be good.

Since then, I’ve browsed Hacker News a lot less. I’ve drastically cut back on coffee meetings. Instead, I spend almost all of my time building and iterating on product.

Why?

A startup is defined by it’s product. Build a great product, and you’ve built the beginnings of a great startup. Fail to build a great product, and there is no startup.

You can have the greatest network in the world, but without a good product, you are just simply good at schmoozing and connecting with people.

You can figure out a way to raise millions of dollars, but without a good product, you aren’t a startup. You are just a bank account.

You can churn out thousands of lines of code, but if it doesn’t turn into a good product, those lines of code are going to be thrown away.

You can build your Twitter and blog following, but without a good product, you are a talking head.

You can read all of Hacker News, Techcrunch, etc. but without a good product, you are just a listener.. most likely listening to a bunch of talking heads.

You can learn all you want about growth hacking, but without a good product, you have nothing to grow.

Only one thing matters in building a startup: being good at building product.

And how do you build a great product?

I wish I could answer that one. I only know that the start of that answer again is to be good. I don’t think there are any tricks. Great products don’t just pop out of thin air. They are created by people who are good at building product that people want.*

Knowing this, there is only one thing to do: focus on understanding great consumer web/mobile products. I’m not good yet, but hopefully if I keep focusing and working, I’ll get there one day.

* One may say there is some luck involved, and I would agree. But it isn’t all luck, and the best way to maximize your luck is to be good, and be persistent.

* You may ask why I am blogging. First, I am rounding out this 100-day challenge. Second, and more importantly, I have learned that blogging everyday forces me to reflect and think about the big picture on a regular basis. This forcing function has actually been great. So even if I write horribly with typos and grammatical errors all over the place, the writing is really good for me. I’m not sure what I’ll do when the blogging challenge is over, but I may keep writing everyday.

P.S. This is post number #82 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

Startups, money, and happiness

money-happiness

A commonly cited Princeton study on money and happiness claims that money correlates to happiness until you reach a 75K/year salary. Past that, money doesn’t make you much happier.

You can argue about locations, standards of living, etc. but I think it is easy to agree that money provides decreasing marginal utility. That is, the amount of happiness you gain per dollar decreases as you make make more money.

People often think about the marginal utility of money with respect to an annual salary, but there is another interesting way to look at it: the marginal utility of money earned in a lifetime. This becomes particularly interesting for people making the decision between their tech job, and their desire to give the entrepreneur/startup thing a try.

Let us use an example of Jeff, a fictional dude that has 30 years of work in him. He has the choice to either work at a company for 30 years, or to give up 5 years of salary to give a startup a try. If we assume Jeff makes the same amount each year (which obviously isn’t true, but please just go along with it for now), Jeff gives up 16.67% of his lifetime income if he goes the startup route.

Is this a good tradeoff?

I’m going to argue that going the startup route is the right decision (granted that deep down, he really wants to try it).

Jeff only needs a certain amount of money in his lifetime before reaching of point of diminishing returns with respect to happiness. At that point, the only way to significantly increase happiness is to significantly increase the total money earned.

If Jeff’s cushy tech job pays anywhere near 6 figures (as many in tech jobs do), he is way above the 75K/year number in the Princeton study. If he gives the startup thing a try, he doesn’t stand to lose much lifetime happiness when reducing his lifetime income by 16.67%.

However, by trying a startup, Jeff gains the chance to significantly increase his happiness in two ways.

First, he gets the chance to chase a dream. The impact to happiness here is hard to measure, but it can be significant. In the short term, there are benefits to having purpose and hope while chasing your dream. In the long term, there are also big benefits. Whether he succeeds or fails, when Jeff is on his death bed, he will be proud that he gave the startup thing a try.

Second, should the startup actually make it big, he has the chance to significantly increase his lifetime earnings. By “significant”, I mean 2x, 5x, 10x , or possibly more. At these multiples, the increase of lifetime earnings can significantly impact your life happiness, and change your life style.

Yes, this example is rough, but it should be enough to get the picture. I believe that for a knowledgable and skilled person who wants to try a startup and optimize for life happiness, the rational decision is to take the plunge and go for it.

Obviously, I would say this because I’ve done it. What do you think? Does it make sense?

P.S. This is post number #80 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

The problem with righteous entrepreneurship

Recently, there have been a lot of press on the troubles of VC firm Kleiner Perkins. They were once legendary in their pick of tech companies, as early investors in Amazon, AOL, EA, Google, Intuit, Netscape, Sun Microsystems, Tandem, etc. More recently, they went all-in with cleantech, and did not come out smelling so great.

Linked to the article from Gigaom is another good article this, and on the problem with righteous investing. VCs play a large role in innovation by picking and choosing the right startups to fund. However, this choice is critical. VCs can’t just pick a lofty mission, and dump money into it. As I’ve been learning (and wrote about in a prior post), the market always wins. Lofty visions are great, but there must be a market, and the market must want your product.

However, VCs are only one side of the story. The other side is the entrepreneurs. And the same law applies: lofty visions are awesome, but at some point the vision meets reality, and the reality of the market wins.

This is critical for entrepreneurs to think about. Passion matters in entrepreneurship. Most people don’t leave perfectly good jobs (with perfectly good paychecks) unless they have a passion for something. The most passionate are often driven by the largest missions, and there are many great missions out there: world peace, feeding the poor, educating the world, etc. Clean tech may be one of these (although I’d bet that timing was the real issue). These missions sound great, but can be huge traps. Maybe they would be great as a non-profit, but as a startup? Tread lightly.

This has been one of my biggest lessons so far in my time as an entrepreneur. Look at yourself and make sure you aren’t being a righteous entrepreneur. Passion is great, but the market always wins.

P.S. This is post number #79 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

Notes from the PandoMonthly with Mark Suster

For the past few weeks, I have been burning through PandoMonthly fireside chats and keeping notes on them. Since the talks are so long, I hope the notes will be useful in helping you determine if you want to watch the full interview.

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Today I’ll be writing on the PandoMonthly with Mark Suster, a prior entrepreneur, a VC at Upfront Ventures, and a blogger at Both Sides of the Table. The interview is a bit under 2.5 hours, and has a ton of great advice in it.

Here are some paraphrased notes of my favorites points during the interview.

  • CEO as chief psychologist: You have sales working with marketing working with engineers, and they have different viewpoints. Everyone ends up fighting with everyone else. CEO’s job is to handle this. If the CEO wants everyone to love them, you can’t make the right decisions, and handle these problems correctly.
  • Deflationary economics: Almost every great success story on Internet is built on massively deflationary prices. Drive costs down, drive margins down, create large overall market doing so, and it is impossible for the big incumbents to beat you.
  • Finds it a shame he sold company: There were many currently successful companies built on the ideas that his company was working on. He was tired, employees were tired, etc. They ended up selling the company, and didn’t see it through, but could have had a great future.
  • Why big VC blogs in NY, Boulder, LA:  Necessity of mother of all invention. Fred Wilson (NYC), Brad Felt (Boulder), and Mark Suster (LA) weren’t plugged into Silicon Valley ecosystem. They needed to work harder to get out there. It ended up being a great investment.
  • Commercializing academic work is tough. Very difficult, especially in California. The UC system has a unified policy is they want 2% royalties on sales. That makes most of their startups untenable. If a professor is involved, it makes it worse. The tip is to not touch university resources or professors. Universities should embrace equity like Stanford.
  • Internet of everything.  Mark isn’t a big fan of wearable. He is a big fan of things talking to each other: objects all talking to each other, broadcasting, and communicating. This will be powerful for logistics, manufacturing, transportation, etc..
  • Consumer vs. enterprise. Marc Andreeson recently said that Andreeson-Horowitz generally wants to do enterprise A round, and consumer B round. Consumer is hard. Enterprise and unsexy stuff has less competition, you know users, and monetization more clear. In enterprise, you can listen to consumers. With consumer, you can’t because its always angry consumer that is loudest.
  • Keep communication simple about startup and vision. Be more like George Bush, less like Al Gore. Al Gore speaks too intelligently. Keep message simple so that everyone will easily understand it.

If you’ve got the time, check out the full interview here:

P.S. This is post number #71 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.