Tag Archives: startups

Hello, Venture News

VentureNewsBackground-BIG

I have to admit it: I’m a news junky. I’m addicted to my Twitter timeline, RSS feed, and often frequent the comment sections of Hacker News, Quora, Reddit, AVC, etc. I love it all. There is so much great stuff out there.

My news habit comes with great rewards. Building startups is such a difficult task, it helps to be a sponge and soak in the knowledge people are sharing across product, design, development, growth, marketing, community, data science, analytics, industry trends, etc. Everyday, I come across awesome stuff that alters my perspective, teaches me valuable lessons, or even solves my current problem of the day!

The only problem is that all of this requires a significant amount of time and effort. Let’s take Twitter as an example. It takes time to learn how Twitter works. It takes time to find the right people to follow, as well as discover who to unfollow. And, it takes time to sift through 1000+ tweets for the golden nuggets that invariably appear. RSS, HN, Quora, and Reddit are different, but time consuming in other ways.

So how do I keep the rewards, but save myself the time and effort?

A simple experiment.

This summer, while rifling through ideas and hacks with my friend Leslie in the Pejman Mar Summer Founders Program, we stumbled across something. Among the hacks was a little tool to discover frequently-shared links by 300+ venture capitalists on Twitter. It started super simple, but proved useful as an instant way to capture the daily conversation in the venture capital community.

We hopped into Gmail and sent the top 10 links of the day to two people at Pejman Mar. The next day, after positive reviews from our sample set of two, we created a Mailchimp account and began adding more friends, colleagues, and advisors to the mailing list. After playing around with so many ideas, it was cool to be able to send out this daily email that people we knew enjoyed.

In the following days and weeks, people began trickling into the mailing list from word of mouth. Our friends continually let us know that they loved the email, and wanted us to keep them coming. New users would email in to tell us how it covered much of their startup news needs. Mailchimp analytics showed us awesome email open and click through rates.

Great! So, why not make this the start of a thing?

Venture News

We registered a domain at http://www.venturenews.co, and put up our mailing list signup, as well as a live version of the links. Soon after that, Chris Messina posted Venture News to Product Hunt, which was relatively well received.

What now? Leslie and I are experimenting on the newsletter and on the website. We’re balancing new product features, talking with subscribers, and developing a broader vision for the future. It’s exciting, and feels like the seed of a news experience that includes just the gold nuggets without requiring much time or effort.

If you’re interested in a quick fix of startup news with minimum hassle, please give Venture News a spin. Even better, sign up for the mailing list to get a curated daily digest delivered directly to your inbox. Hopefully we can help simplify your daily tech startup news habit 🙂

VentureNewsScreenshot

 

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 😉

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.

Are startup valuations and payouts too high?

Since I have jumped into the startup game, I’ve consistently heard people comment on the high startup valuations/acquisitions and the high payouts that successful founders and early employees get in liquidity events.

These comments/complaints sound something like:

  • Snapchat just turned down 3 billion. Is it really worth that?
  • Pinterest and Dropbox have valuations of 4+ billions. That’s crazy!
  • Twitter just raised close to 2 billion on a 14 billion valuation.. built on top of a table storing 140 character tweets!
  • Tumblr? 1 billion? Damn, that is a lot of money.

There are also similar comments about the money people end up with:

  • Snapchat just turned down 3 billion? Even with modest founder equity percentages, the founders would have banked. Is it fair that they make so much?
  • Instagram had twelve people and sold for a billion? That is a boatload of money for 10+ people.
  • etc., etc., etc.

People seem to have a hard time with these kinds of numbers. Are these high numbers alright? And are the high payouts for founders and early employees fair?

I believe that for the most part, the high valuations and payouts and 100% warranted. I’m no economist, finance wizard, or even that good with numbers, but I don’t think it is difficult to come to this conclusion.

High startup valuations.

As a quick exercise, check out the market caps of the Fortune 500 companies (and these are for 2012). You see that? Apple is at 568 billion! Microsoft is at 269 billion. Those are some big big numbers.

People squawk about startups valued at a few billion. Seriously? They don’t believe that a startup could speculatively be valued at 1% of Apple? At some point, the breakout unicorn startups will be surely be worth a few percent of Apple. And possibly more in the future if they do a great job.

Individual don’t usually deal with huge numbers in their bank accounts, but businesses do. You shouldn’t be stunned with you see billions in the business world. It is a regular thing for the real large successful companies out there.

 High founder and early employee payouts.

The real insight here is this: a person’s pay should be related to the value they bring to the market.

It can be easy for employees of large corporations to lose sight of this. Why? Because they go to work everyday, and collect a nice paycheck regardless of the value they bring to the market. The employee doesn’t directly bring value to the market. Instead, the business does. The business is a money making machine, and it pays employees to keep this money making machine sustainable.

Founders and early employees have a different job than employees. Their job is to figure out how to create value for the market, and then turn this value into a money making machine. Their job is to create the beast which, if successful, may one day have a market cap in the 10’s or 100’s of billions!

When you think this way, it surprising that founders and early employees of successful companies are well compensated? Not really.

A common dialogue.

I have many friends in the tech industry, and I have already repeated this conversation several times. In turns out, I have many friends in research, so it makes this conversation even easier. It goes something like this:

Friend: Dude, Snapchat just turned down 3 billion cash! The founders could have easily walked away with 100’s of millions cash, if not more. Isn’t that crazy?

Me: Well, it really isn’t that crazy. You’re a good software developer at Google/Facebook/etc. I bet your yearly compensation is somewhere between 150K and 200K right? Possibly more?

Friend: Yes.. that is in the right ball park.

Me: And I bet your boss makes more right? As does you’re boss’s boss. They must make 200K-1M a year depending on how big they are right?

Friend: Yes… probably.

Me: OK, well tell me: what happened to your project this last year or two?

Friend: Well we’ve been working on something, but the project just got cancelled and we’ve been put on something else. (Again, having friends in research makes this argument really easy.)

Me: Hmm.. OK. So you and your bosses are banking a cool fraction of a million per year without creating value in the world. Do you know what the Snapchat kids did? They have 30+ million active users and are sending 400+ million messages a day. It is quite a feat. That is real value, and it is real world impact. Are you telling me that they don’t deserve a payout that is orders of magnitude more than you and your boss?

Friend: Ummm….

Me: Oh yeah, and if you want another way to think about it, Paul Graham has this really good essay on how to make wealth. You should check it out.

–

P.S. This is post number #75 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Or, check out my current project Soulmix.

The graduate school startup accelerator

My PhD stomping grounds where I should have been trying to build startups.

My PhD stomping grounds where I should have been trying to build startups.

(Note: my academia-related posts are strongly colored by my experience studying computer engineering. Other fields will/may differ.)

Being an academic-turned-entrepreneur puts me in the interesting position of continually second-guessing my prior academic career. In an effort to cover both sides of the story, I’ve already written a post on how my PhD has carried over surprisingly well into entrepreneurship, as well as a post on the two biggest differences between academia and entrepreneurship.

Aside from the similarities and differences, one question has constantly been on my mind.

Why couldn’t I have done a grad school for startups?

Look, I spent 5+ years as a funded graduate student. In those years, I met a lot of really good people, and was able to study almost anything that I wanted (granted that occasionally, I had to publish some research findings).

It was an intense period of time where I was learning rapidly and investing in my future.

I came out of those 5+ years with a PhD degree, a few good papers, and a gut instinct for interesting academic research that made me a candidate for faculty positions, industry research positions, and lots of other good tech jobs.

Pretty good right?

And let me re-iterate, I was completely funded for 5+ years! It wasn’t a lot of money, but enough to live a pretty good life.

Fast forward to the present.

What am I doing now?

I am 18 months into my new career as an entrepreneur. I am doing what I can to meet interesting people. I am learning whatever is necessary to create stuff, ship it, learn what works (as well as what doesn’t), and then iterate.

It is an intense period of time where I am learning rapidly and investing in my future.

It feels a whole lot like graduate school, with one big difference.

I am NOT funded. Instead, I am bleeding money.

But it is worth it. I know it is worth it because I am learning ridiculously fast. I can only imagine where I’ll be in a few years; that is, if I find a way to sustain monetarily.

So back to the question.

Why couldn’t I have done a grad school for startups?

It feels to me like a grad school which functioned like a startup accelerator would do a lot of good for the world.

I don’t mean an M.B.A. It is only 2 years, and the goal isn’t to build a startup during school. Plus, you have to pay for it.

I don’t mean a normal accelerator like Y Combinator, Techstars, 500 Startups, Angelpad, etc. These are three month programs to accelerate you to Demo Day, and then it is over. Yes, you are plugged into an amazing network, but it isn’t 5+ funded years to figure out how to do startups.

There has be something else. I’m pretty sure of it. I don’t know if it would be better off inside or outside of the university setting. But, it would be an interesting new direction for people to go (I may have to try one day when I have the resources).

I often imagine myself, and all of my academic buddies, with 5+ years of funded time to build startups. We were a good bunch, and I’m fairly confident we would have done some good shit. At the very least, we’d all gain valuable experience. But really — if we all had 5+ years to build and ship stuff? I bet at least one valuable business would have popped out the other end.

–

P.S. This is post number #18 in a 100 day blogging challenge. See you tomorrow!

Follow me on Twitter @alexshye.

Check out my current project Soulmix, your daily mix of food for the soul. Request an invite now for free access to the private beta!