Hi everyone:
I have decided to take a break from writing Daily Good Read. Instead of writing about startups, it is time for me to do another one again. Everyone gets different sign. Mine was when I found myself having kimchi-favored instant noodle for lunch. but decided to add roasted flax seeds and organic seaweed to give myself a balanced diet befitted of a 53-year old, while washing it all down with a glass of Zinfandel ... Can't keep this up for much longer.
See y'all on the other side.
I still write about things that interest me, but not necessary related to LoveMyTool or StartupForLess. You can follow me on Google Buzz or subscribe to my RSS feed.
--Denny--
2010/2/4
Note: Comments below are drawn from Denny's 2nd Book.
([*] at the end of comment refers to relevant chapter.)
Past Recommendations (January 2010)
- How Not To Promote Your New Startup (Hacker News) - 2010/1/2
For all first-time entrepreneurs, first read the original post and then remember the following as your first lesson of 2010. Whatever you do, don’t post on the web immediately after you fail. Don’t try to make yourself look smart. Don’t try to rationalize your failure. Talking about failure doesn’t make failure go away. It just opens yourself to saying things you will surely regret in later days. Instead of talking, you would be much better served if you just shut up and peddle like hell. Now is not the time to seek fame and recognition. With success, you will have both. It is much more fun to do a Blog when you fully recover and share your hard earned experience from the vantage point of sweet success. Otherwise people would make the obvious observation that you are nothing but a wannabe. However, if you inadvertently discover you have a knack for on-line comedy, then you should give up being an entrepreneur. It is a much better career anyway.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Working With People Who Make You Uncomfortable (by Mike Speiser) - 2010/1/3
What I have learned in my last two startups is that diversity is really important for success. Ultimately, your co-founders are the ones who would protect your proverbial back and the more that they bring to the table (that are not already on the table), the better. In fact, the less that you have in common initially with each other, the less baggage that you each would bring to the partnership. Over the years, I have learned painfully that in addition to learning to work with people who are different from us and would initially make us uncomfortable, we need to refrain from starting our company with family and friends. Starting a company together is the quickest way to destroy friendship. Starting a company with family (or hiring family into your company) is the surest way to alienate your business partners. Sex and startups, two things in life that are best to pursue outside our gene pool. - Why Vest Founder Stock (by Scott Walker) - 2010/1/4
My best advise from a friend who is a successful entrepreneur is that "legal issues that are unimportant to you when you are successful are also unimportant to you when you are unsuccessful." Interestingly, the opposite is also true. For example, vesting of Founder stock is that one issue that is important whether or not you are successful. Ownership needs to be earned and there has to be a vesting schedule even for the Founders' stock. It matters a great deal how you can discharge a partner if they don't perform. This is true if the partnership is a success and interestingly even more true if the partnership is a failure (since you would need to restart the company with different partners). Over-protecting yourself is counter-productive but not protecting yourself adequately is irresponsible ... true for sex, true for startups. - Ten Rules for Web Startups (by Evan Williams) - 2010/1/5
No entrepreneur should build a startup these days without strategizing China, either as your factory or as your future market. By the token, no entrepreneur should build a startup these days without strategizing the web, either as a channel or as a destination. This is true even for high mileage white hair (or no hair) baby boomer retreads like myself. The barrier-to-entry for web startup is basically zero but the market potential could be infinite. So this is an exciting time even though it is a very dark time. Entrepreneur cannot ever afford to be a pessimist but what I have learned painfully is that startup CEO also cannot afford to an optimist. And now is not the time to be an optimist. Be greedy, be very greedy. Samples can be given away for free. But sample does not wear out cash registers. I should know ... I have spend way too many nights as a struggling entrepreneur being awaken by silent cash register. - Advice for Closing Deals in 2010 (by Scott Walker) - 2010/1/6
Realistically, the only startups that could close an investment deal in 2010 are mature companies that have demonstrated a robust revenue model and are in need of money (and *only* money) for expansion. My advice to them is the same as what I received in 1999 after I secured my first term-sheet. After almost three years of hard work I finally had something to show to my attorney friend and I asked him what to do next. He said, “now go out and get another one just like it.” In other words, getting a term-sheet is only the first measurable step and to close any deal, you must have competitions. But all entrepreneurs should remember that “Every problem in a startup (including funding) can be solved with the timely arrival of a PO.” So even if you can't close any investment deal in 2010, as long as you have sustainable revenues, all other problem can be solved. In other words, focus on "value creation" and "valu-ation" will follow. - Stop or Continue? (Hacker News) - 2010/1/7
Doing a startup is not unlike taking a long bike ride. You will fall off your bike time and time again, either due to inexperience or obstacles along the path. Now is the time to do an equipment check before you ride again. Don’t try to restart your journey right away unless you are confident that you have the physical endurance and the support of your family. Think of your family, your health and your startup as the three legs of your three-legged stool. If you wobble on one but solid on the other two, then at least you have a fighting chance. If you have any doubt on anything, now is the perfect time to walk away and blame it on a broken bike. But keep in mind that as I have learned in my recent climb in Africa, you don't get to the top of Kilimanjaro by stopping, you do so by resting.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Can't Succeed by Giving Up (by Nate Kontny) - 2010/1/8
The most important life lesson that I have learned that I like to share with fellow entrepreneurs who have failed in startups or friends and family members who have lost a job is the old Chinese saying that, “Grass survives the heaviest of rock.” The emphasis here is “grass”. If you put a rock on a flower, flower will die. If you put a rock on grass, grass will find a way to survive. As entrepreneurs, we are not entitled to anything. We must not think of ourselves as flowers that deserve sunshine and nutrients. We must accept that we are the lowest form of beings, or we won't find the courage and the clarity to survive. As I learned to say in America, as entrepreneurs, your ass is grass and the world is your lawnmower. So don't go looking for “love” in the wrong places.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Startup Advice In Three Words (by Dharmesh Shah) - 2010/1/9
My own contribution to this amazing list is "Avoid Negative People". When we do startups, we don’t just leverage. We levitate. We “will” our startups into existence. And we do so by defying all laws of physics and by tapping into the positive energy of our surrounding. We create opportunities; we don’t destroy. Be careful with whom you hang out with. Unfortunately, my own experience is to stay away from other failed entrepreneurs (who tend to be negative until they bounce back). And in particular stay away from people who hold a grudge on you or whom you have a grudge with. Don’t get mad; don’t even try to get even. With success, you can get them all. Misery breeds misery and success breeds success.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Single Founders Please Stand Up (by Gabriel Weinberg) - 2010/1/11
My first startup I was the sole Founder and I had a number of early employees. I was the prime mover and I was the one who had the most stock. Until we were funded, their salaries were paid with my savings. My second startup I was the Founder but I had a bunch of early employees who were called co-Founders. I was still the prime mover but no one was getting paid until we started to ship products. We basically had equal amount of stock even though I started the company first and I took risk when no one else would. My experience is that it was a lot harder to get VC fundings when there were large number of co-Founders. VC's are not company builders and in order to ensure timely execution towards a financially successful exit, they would have no problem firing the Founder(s). So in some way, having a large number of co-Founders is sub-optimal (for the VC's).[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- The PayPal Lessons (by Sachin Rekhi) - 2010/1/12
I believe PayPal is the Fairchild Semiconductors of its time and likewise will be recognized for the quality and subsequent success of its key founding employees. I also agree that the ability to recruit and build a strong founding team is the most important life-and-death contribution that a Founder/CEO can made to a startup. My own experience is that in startups, it is all about trust and trust is in fact a far more important currency than even money. But trust in a startup has a different meaning than trust in everyday life. By trust, I am talking about trusting a person’s judgment and their abilities. So after you recruit them, you need to build them into a cohesive team by developing a trust among them so that when someone agrees to a schedule or proposes a budget, they are in fact doing so knowing what they are capable of delivering and understanding the consequence if they don’t. - Time to quit your day job (by Ali Davar) - 2010/1/13
My own experience is that succeeding in startups takes more than just quitting your day job, you also need to change your mindset as well. For example, if you are a lawyer, a doctor or an engineer, you can quit and become an entrepreneur. But you cannot succeed if you continue to have the mindset of a doctor, a lawyer or an engineer. First of all, there are always more than two sides to an issue and often the right place is to be is in the middle - an option that a lawyer does not have. Also, in startups, there is not always an answer to every question; or if there is an answer, it might not be unique. So waiting for perfect data to arrive at a perfect solution is a luxury that you don’t have as an entrepreneur. If that bothers you, then you should go back to being an engineer. Finally, as an entrepreneur, you often have to shoot your patient (and I have).[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- The Founder Factor (by Fred Wilson) - 2010/1/14
Google is a unique company and its Founders are in a unique vantage point that I doubt many of us struggling entrepreneurs would share. However, this article is a thought-provoking good read for anyone who is a Founder/CEO of a startup, who are both the owner and the executive. In fact, in the beginning of the startup, being the Founder means that you own 100% of the company but at the same time, you are also its first employee. Interestingly, these two distinct roles provide two different and potentially conflicting sets of responsibilities. As an owner, your responsibility is to yourself and your family and you are free to make any political statement that you wish to make. On the other hand, being an executive means that you have accepted a fiduciary duty and the mandate to protect the interest of your shareholders. In any case, I beleive Google leaving China would be a devastating blow to the Chinese citizens AND to the Google shareholders. - How to join a startup (by Bijan Sabet) - 2010/1/15
For anyone out there who is interested in joining a startup, my suggestion is that you go in with open eyes, not open heart. If you are going to be hired as employee, make sure you are treated as an employee and are compensated accordingly. The test is simple. Are you going to be paid at market value? If you are, no problem. It would be a great learning experience and you are not taking any financial risk (opportunity risk, may be). But if you are asked to cut back (or even forgo) on salaries, then you are a co-Founder no matter how long the startup has been around, how long the Founder has been working on his/her idea and who is the VC's behind the scene. Make sure you are rewarded as such (i.e., lots of Founder stock, not stock options). Most importantly, you need to learn the difference between "liking" someone and "respecting" someone. As an entrepreneur, you don't need to "like" someone to have a business relationship with them. It is not an ethical violation to pretend to like. You just cannot pretend to "respect". - [Video] Entrepreneurs keeping up with tech changes (by Steve Jurvetson) - 2010/1/16
How do you know if you have an idea good enough for a startup? I had done two startups in the last fifteen years. The first one everyone thought it was a great idea, especially the VC's. It required tremendous amount of capital and I was able to secure $65M of VC funding. However, as with most startups in the late-90's, we crashed-and-burned when the last bubble bursted. My second company was completely bootstrapped. The VC's thought it was a terrible idea but fortunately most customers we talked to thought otherwise. After we became profitable, the VC's were kicking down our door wanting to buy a piece of the action. I took the opportunity to start my early retirement (before the bubble bursted in 2007) and I am now "on a break" pondering my next startup. Lesson learned: listen to Paul Graham but kick it up a notch. Don't just build something someone wants and don't just build something someone willing to invest, instead build something someone willing to buy. - Is S-Corp a Tax Scam? (Hacker News) - 2010/1/19
The problem is actually the opposite, that S-Corp is not a scam but LLC is a tax hawk. If your bootstrapped startup ever becomes profitability, you will learn quickly that taxation (with or without representation) is your number one cost (more than labor, more than sales and marketing). First you pay 15.3% self-employment tax, then 35% Federal tax, then 9.3% State tax (if you live in California) and finally 9.25% sales tax (if you live the Bay Area), that's 69% tax before net profit (necessary for rainy days). As my good friend Art once told me, everyone eventually becomes a "conservative", you just have to have something to "conserve" first. I immediately became a conservative when I saw profit and I believe you will too. If you want to avoid double-taxation (i.e., first tax as an individual, then as a Corporation), then you have two choices. You can form an LLC or you can form a S-Corp. The advantage of LLC is that there is a lot less legal overhead and there is no restriction with foreign ownership (this is a big deal if you happen to have a co-Founder who is not a US resident or citizen or if you have partners overseas). The problem with LLC is that *ALL* of your profits are taxed as self-employment income (15.3% off the top). On the other hand, with S-Corp, you do need to pay yourself a market-value salary (or you will be subject to audit so it is never a scam as some commenters would suggest). In my own experience, the optimal solution turns out to be that of forming your startup as an LLC but file a S-Corp (form 1120S). - 5 Myths That Kill Startups (by Michael Fisher and Marty Abbott) - 2010/1/20
The biggest myth is when VC talks about building team, they always talk about recruiting A players, with the idea that only A players could recruit more A players whereas B players would recruit only C players, etc. Having taught at UCLA for nine years, my own experience is that there are two kinds of A students. The first are nominal A students who on occasion receive A+'s and the second are really B+ students who on occasion receive A-'s. The A+ students tend to be extraordinarily smart but interestingly, most are also extraordinarily generous. They don’t worry too much about competition and they don’t mind others in their class also receiving A’s, doing well along with them. In other words, they have no problem sharing oxygen. The B+ students who work hard to get A’s are smart as well but they tend to be very competitive and in comparison less generous. In other words, they are passionate but not necessarily compassionate (like me). My experience is that they tend to carry more emotional baggage and they are high maintenance (like me). In summary, it is not enough to recruit A students. Unless they are generous as well, they tend not to be good team players. - How to raise money without lying to investors (by Simeon Simeonov) - 2010/1/21
I think the biggest problem with VC's is that there is absolutely no quality control. When an entrepreneur decides to raise money, we will need to talk to at least 20 to 50 firms and most of the VC's that we speak to really have no clue as to what it takes to build a sustainable business. So after a while, if all we do is to chase after VC money, we become part of their echo chamber. My experience is that VC's are not miracle workers. I believe one study shows that 5% of the VC’s make 95% of the money. Therefore as entrepreneurs, we are competing with 95% of the dogs for 5% of the meat. I think bootstrapping is very important for both entrepreneurs and for the VC's. In my experience, the only way to have a meaningful conversation with VC's is when we are already shipping products. I usually don't even prepare a separate PowerPoint presentation. Instead I start the meeting by saying, "Let me show you how I convince customer ABC to buy our product". Life is good after that.[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- [Video] 20 Questions for Startup Success (by Norm Meyrowitz) - 2010/1/21
Ever since I graduated from college, I have been fired from every job I ever had. Each time, I decided that the timing was right for me to start my own company. In retrospect, I failed whenever I focused entirely on my "vision" and succeeded when I learned to rely on my "peripheral" vision. This is a tough time to be an entrepreneur. It is too easy to think of the current downturn as just another economic setback. Instead, we need to think of this as the end of a 60-year cycle. Since 1949, the Chinese have been lifting themselves by their bootstraps, initially with their communist ideology but eventually by manufacturing low-cost consumer products and by reinvesting their earnings in foreign debts to keep interest rate artificially low (sort of like the Opium War in reverse). Now there are two World powers competing for markets and resources, fundamentally changing the long-term prospect of the American middle class. But for every crisis, there is an opportunity. Going forward I encourage all bootstrapping entrepreneurs to be patient, to keep an eye on the peripherals and to maintain discipline by consistently ask ourselves these really tough 20 questions. This is not a race. When my son and I climbed Kilimanjaro last year, the porters would constantly sing in Swahili, "Haraka haraka haina baraka, Pole pole ndio mwendo", meaning "hurry hurry has no blessing, slowly slowly the world moves." Sounds about right.[14] Startup Lessons Learned While Climbing Kilimanjaro - Part 1 (by Denny K Miu)
- How To Find a Great Startup Mentor (ReadWriteWeb) - 2010/1/25
My wife asks me the other day whether or not I am "retired", "on a break", or just waiting for new opportunities. To which I said I don't know. But what I do know is that I no longer have the fire in my belly and until I get it back or until I meet someone who has it, I am just whatever. First-time entrepreneurs often underestimate the importance of having mentors and the importance of having conviction, and how alluring and contagious that ball-of-fire can be to potential mentors. Years ago I met an older gentleman who obviously had a lot that I could learn from and I was excited that he was willing to listen. But he told me that he was busy and asked that I returned the following week. When I returned, he said he had studied my presentation and thought that it had potential. More importantly, he was interested in taking a closer look. Then he tossed my business card across his desk and said, "If you want me to help you, you need to change your business card. You are not the VP of Engineering, you are the CEO. If you don’t believe in yourself, how do you expect others to believe in you? Don’t waste my time if you are not willing to take charge of your dream." This turns out to my most important lesson in selling, especially about selling shit that I don't have. As Yoda would say, "Believe in the force or not believe in the force, there is no try." - Lessons in Reputation Management from Conan O’Brien (Successful-Blog) - 2010/1/26
No entrepreneurs would walk away with a $45M severance package and call it a failure. However, when entrepreneurs do fail, either due to our own inexperience or outside factors, the first thing we need to repair is our reputation. Again, my own painful experience with recovery is not that different from falling off a bike. In the process of getting back on track, your attitude and your outlook are the most important. It is natural that you want to get even. Think positive. Whatever you do, do not get into other people’s way and do not wish for other people’s fall. You are now at your most vulnerable and deflated stage of your life. You don’t have any money. You don’t have any friends. Your reputation is in complete ruin. As a result, you can’t afford to be negative and you can’t afford to be surrounded with negative people. Not having the ability to be constructive doesn't give you the license to do destructive. Whatever you do, stay away from bad Juju. Now is the time to levitate yourself. Now is the time to fill your head with positive thoughts.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Decision Making for Start-Ups (VentureBeat) - 2010/1/28
My own experience is that there are two kinds of decisions in startups, one that is life-and-death and one that is not. Life-and-death decision is very easy to make. But making the right life-and-death decision is like avoiding a car accident that never happens or saving the economy from total collapse. Your only material reward is that you get to live. Decisions that are not life-and-death are much more difficult to make in a startup. They are actually much more important to the success of a startup. Making good decisions in startups obviously requires experience but it also requires good judgment. And good judgment has to do with when and how to build up creditability with your co-Founders and your shareholders, and when and how to cash in your political earned capital to mobilize the company behind an unpopular decision that you have made based on imperfect data. More importantly, good judgment has to do with maintaining a positive feedback loop to constantly re-up your credibility with your constituents so that you do not inadvertently over-extend your reserve. I believe when the President spoke about "deficit-of-trust" last night, he understood.[1] Why Startups Fail and Why We Should’ve Too (by Denny K Miu)
Past Recommendations (December 2009)
- The Boostrapper’s Dilemma (by Alex J. Mann) - 2009/12/1
Consumer patterns have changed dramatically in recent years and a new generation of entrepreneurs is now at the best and unique vantage point to visualize what their peers need and want. So this is not about solutions looking for problems or problems looking for solutions. It is about creators of solutions being also the consumers of solutions ("entre-sumers"). There is much less need in gambling lots of money and wait to see "if the dog would eat the dog food". Entrepreneurs are the "alpha" dogs. We are our own "surrogate" customers which means that we don't need a lot of money to "supersize" our company anymore. As struggling entrepreneurs, our first directive is very simple which is not to get funding but to acquire customers. - Startup Lessons for Aspiring Entrepreneurs (by unknown) - 2009/12/2
There are infinite number of ways to fail a startup but there is only one way to recover which is similar to getting up after a fall from riding a bike. You must first decide if you want to ride again. In another words, you must first make a binary decision, which is whether or not you want to continue. If you believe that being a successful entrepreneur is in your destiny, then there is no point of crying in the dirt (or even writing a post-mortem). But on the other hand, if you believe that you have had enough and don’t want to be an entrepreneur again, then you can do whatever you want and heck with what other people think. Either way entrepreneurship is a lonely business.[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- Startup Advice from Paris Hilton (by Gene Marks) - 2009/12/3
"Is this a good time to start a company?" Anytime is a good time to start a company because paradoxically, for a struggling entrepreneur, anytime is a bad time. When the economy is doing well, everyone is doing well and there are a lot more competitions for your customers' limited resources. When the economy is doing badly, as it is now, few entrepreneurs could afford to start companies. That's the good news. The bad news is that customers are really struggling so you must have an exceptionally compelling solution that could save them money and help them survive before they would listen. In summary, the World conspires against an entrepreneur irrespective of the economy and it would be like asking, "Is this a good time to fall in love?" - [PPT] No One Cares About Your Stupid Little Startup (by Matt Brezina) - 2009/12/4
No one cares about your startup, especially not your customers. It has been said that the key to success is to sell solution and not technology. But it turns out that you need to do more. You need to sell solution that solve existing problems for your customers that fit within the constraint of their “current” job description. In other words, the most important thing is to make sure that your customers can buy your products without stealing other people's budget and without fundamentally changing their own career. If you do, then they really don't care. As far as your customers are concerned, life is just too damn short. And you are not helping.[1] Why Startups Fail and Why We Should’ve Too (by Denny K Miu)
- What VCs look for in a Startup (by David Skok) - 2009/12/7
When going after VC money, entrepreneurs should understand that while the financial interest of VC’s can be aligned with that of an entrepreneur, they can never be identical. VC's portfolio is much more diverse than ours. Therefore, after we take VC money, it is not enough that we succeed; we must succeed big enough to make up for their other losses (or losses by other partners of their firm). In general the VC's and their partners are willing to take much greater risk than entrepreneurs alone since in their eyes, succeeding small is as bad as failing big (“go big or go home”). So by taking money from VC, we will substantially increase our own risk profile and force our financial outcome to be binary, either a small piece of a big pie or nothing. My own experience is that with VC investment, your probability of having a zero outcome is not only real but common.[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- Tips for Alternative Funding (by Sean Murphy) - 2009/12/8
Entrepreneurs must bootstrap their companies through the R&D phase by forgoing salaries. By recruiting a small number of like-mind co-Founders to fill out the initial team, and convincing each to not take salaries, you are essentially making your own "pre-tax" investment, leveraging many-to-one. Since you don't need to put money in anyone's pocket (including your own), you don't need to raise lots of VC money. You might need a few tens of thousands of dollars. But no one needs a few millions or tens of millions to build a company anymore. My own experience is that if you can bootstrap your company to the point where your are generating sustainable profits, then you are in a seller's market. VC's will be kicking down your doors wanting to buy shares from the founding team, taking money off the table but yet allowing the company to continue to grow. - Skills I Look For in Entrepreneurs (by Mark Suster) - 2009/12/9
Entrepreneurs need to learn from the fishermen, that there are high tide and low tide. Growing up I notice that during high tide, fishermen are very busy and they would start their days early knowing that they would be able to sell their catch on the streets at night. But interestingly, I notice the women are busy too, sun-drying octopus and anchovies, clearly preparing for a time when they would have less. Then when the low tide came, the fishermen would be even more busy. They are busy repairing their fishing nets and they are busy putting their fishing boats on tilts, so that when the tide return which it would always, they wouldn't find themselves stuck in the stinky mud. No one would disagree that the economy is in low tide right now but entrepreneurs should get busy because when the high tide comes, you don't want to be stuck in the mud neither. - Learn to Listen to Unpleasant Truths (by Bruce Judson) - 2009/12/10
My own experience is that entrepreneurship is a character flaw. Entrepreneurship is not something that can be rationalized and easily explained away. Entrepreneurship is a deep desire to create and destroy at the same time. It requires simultaneous distain for authorities and respect for past artisans. In fact, if I thought there was a cure, I would have taken the blue pill. Therefore if one could accept entrepreneurship as what it really is, then there is a much less immediate need for acceptance and validation (except in the marketplace). The end result is that entrepreneurs would have a very different perspective on listening to unpleasant truth, that rejection is not an undesirable and unavoidable side product, but in fact part of the journey.[7] Why We Must Embrace Rejection to Succeed (by Denny K Miu)
- [Video] How to Achieve Failure (by Eric Ries) - 2009/12/11
Entrepreneurs need to defy Silicon Valley VC myths. Instead of innovating, you need to "nanovate". Instead of vision, you need to have peripheral vision. Don't think outside of the box, think inside the box. Instead of supersizing your business with VC money, you need to sacrifice growth by making sure that your early-adopter customers are so happy with your products that they are willing to be your champions. VC's always want us to aim high, but in a down market such as this, it is best to shoot low. Focus on your current customer base and make sure everyone is happy. The cost of acquiring a new customer is extremely high in a down market. A perfect defense is your only offense. Ignore your competitors and focus exclusively on your existing customers. Don't look for the knee of the hockey stick. Instead, wait for the pivot that would get you onto a different game. Got to stay in the game before you know what the real game is. - A Startup’s Twelve Days Of Christmas (by Phil Reed) - 2009/12/17
Pick your team members according to the four R’s. The first R is Rebellious. Surround yourself with people who have a burning fire in their belly and are willing to take chances to make a difference. The second R is Respect. Successful entrepreneurs are the ones who respect the environment that they so determine to destroy. A rebel who shows no respect is no entrepreneur. The third R is Responsibility, i.e., willingness to take responsibilities and determination to fulfill them. The last R is Resourcefulness. Startup is all about solving problems. Those who are less resourceful tend to solve problems by beating them into submission. Those who are more resourceful tend to solve them by avoiding them in the first place. - Tenacity Versus Failing Early and Often (by Albert Wenger) - 2009/12/20
There is no sure way of knowing when to stick and to kick. The key is not to over-compensate. It is similar to riding a bike. Just because you fell on the left last time doesn’t mean you will fall on the left again. Sometimes entrepreneurs over-compensate by learning their mistakes all too well. If they failed because they had too much money, they will try to do the next one bootstrapping. If they failed because there wasn’t enough understanding of the market, they will try to do the next one with a bunch of salesmen. We need to learn from our past but we also need to keep in mind that every opportunity is different. Time does not stand still and the rest of the world does not wait. Don’t be a victim of your own experience.[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Don't Care Too Much What Other People Think (by Nate Kontny) - 2009/12/28
The reason that my previous startup was successful was the fact that all of my co-Founders had been long-time veterans of their own industry (which they help built in the past 20+ years). No one couldn’t have gotten that important product insight by just talking to customers. Customers know what to object and what to improve when you present them with an imperfect product but not when you present them with a perfect PowerPoint. Henry Ford had said that if he had listened to his customers, he would have built a faster horse because that was what his customers wanted. Similarly, Steve Jobs could not have designed his iPod (and iPhone) had he not been a music fanatic. Entrepreneurs must learn to listen to our hearts if we believe that we are the perfect "surrogate" customer. Good luck, everyone.[1] Why Startups Fail and Why We Should’ve Too (by Denny K Miu)
- What I learned in 2009 (by Matteo Manferdini) - 2009/12/29
Being an entrepreneur is a tough business. My own experience is that it is even tougher if you have no co-Founders. It is really true that it takes two pieces of wood to sustain a fire and perhaps even a third to light the fire. One of my favorite scenes from my collection of Woody Allen movies is the one where after sex, his date compliments him on how great a lover he is. Allen smiled with confidence and uttered, "I practice a lot when I am alone." Very often, as entrepreneurs, we prefer to practice alone and to execute alone. We will do everything and anything possible to avoid confronting our worst nightmare which is to get in bed with the wrong people. Our excuse is that we are not ready. Our business plan is not ready. Our elevator pitch is not ready. Our prototype is not ready, etc. Having partners allow you to diversify your gene pool and having partners allow you to try different positions. It is true in love as in building companies. It is a scary world out there but you must take a leap and share your dream with someone. - [PPT] How to Build a Lean Startup (by David Weekly) - 2009/12/30
My last company was started in 2003, another very tough time for entrepreneurs. What I learned is that being in the darkest part of a long dark tunnel can be the most strategic place to start digging. In 2003, there were no VC money and we had no choice but to spend every hour and every minute thinking about why our customers would buy our product and worrying about how to convince them to buy from someone who had no money and no track record. Knowing that our customers had an unsolved problem that was burning a hole in their pocket was the black hole that was pulling us forward and giving us faith to struggle in total darkness. My advise to any first-time entrepreneur is to build a lean and modest business and bring it to profitability, with basically free labor from your co-Founders. This is indeed rocket science, except you are asking your passengers to provide the fuel. - How to launch your company in 10 steps (by Jun Loayza) - 2009/12/31
This is my last post for 2009 and what I say to all first-time entrepreneurs is that "you don't need no permission" to start a startup. Just do it already. When I first came to the United States in 1971, we didn’t have Internet, we didn't have cable, we didn’t have satellite, we didn’t even have VCR or DVD. Instead we had a one-button remote and a choice between VHF and UHF. For all practical purpose, we had only three TV channels. Ironically, this was called broadcasting even though the "tubes" through which information was distributed were indeed very narrow. Today we have the opposite; we have narrowcasting. It is now possible for each of us to “cast” specific information to a very narrow niche of consumers and make money. It still takes a lot of resources to innovate but if you are smart, you can "nano"-vate. I succeeded in my last startup because I worked hard and I had experience, but most importantly I was lucky. And luck turns out to be the "absence of bad luck". So good luck everyone and may you enjoy a profitable 2010.
Past Recommendations (November 2009)
- Startup Team Break Up Advice (by Dave Gehring) - 2009/11/01
David is a Bay Area entrepreneur with a web-based startup. Here he talks about the emotional complication that comes with walking away from a partnership. It is short so I should just let you read it. My only comment is that two years ago I asked for a "divorce" from my former partners and what guided me was what my mom taught me, "Don't hug the baby you're about to abandon", i.e., don't make it emotional.
- Lean Startups Aren’t Cheap Startups (by Steve Blank) - 2009/11/2
For the same reason that lean cuisine aren't cheap cuisine, there is a reason why lean startup is also a mean startup. Steve is a successful entrepreneur turned educator, writing books as well as lecturing on what it takes to build viable early stage companies. I just love this article. It encompasses so much of my own experience and what I have been writing about ... Don't confuse "value creation" with "valu-ation".
- Startup Hiring Advice (by Jason Cohen) - 2009/11/3
Jason is a serial entrepreneur who had built companies with no VC money. Here he talks about hiring employee #1. I find the advice equally applicable to hiring co-founders. In most startup situations where you have to bootstrap with your own cash, your best leverage is to treat initial key employees as co-equal owners and give them a piece of the action. Just swallow your pride and cry all the way to the bank.
- [Video] The Meaning of "Free" (by Chris Anderson) - 2009/11/4
I am able to enjoy my early retirement mainly because I succeeded in NOT competing with "Free". Ironically, I am also convinced that my next success will come when I figure out HOW to compete with "Free". For entrepreneurs of my generation, this is a tough emotional barrier to overcome but overcome we must. There is no better authority on "Free" or "Freemium" as a business model than Chris, editor of Wired and author of two books.
- Is it Time for You to Earn or to Learn? (by Mark Suster) - 2009/11/5
Another good one from Mark. After you read it, do the math backwards. You NEED $3M post-tax to retire. With a $30M exit (possible and probable), you need to own at least 15%. In summary, forget about options, you need to own Founders Stock and you need to own lots of it. When you are ready to take the plunge, be sure you are a co-Founder, or if you are a key employee, be sure you are treated like one. Otherwise, it is just a job.
- Absolutely, DO NOT, Get A Co-Founder! (by BitGeek) - 2009/11/6
This is a two-year old posting. The comments are very useful and cover lots of ground. My own experience is that "it does take two pieces of wood to sustain a fire, and often a third to start." So you do need co-founders or at least early-stage key employees who own big chunk of the company. However, there can only be one Founder (even though there might be multiple co-Founders). It's the one who is crazy enough to start from zero.
- An Entrepreneurial Life (by Jay Goltz) - 2009/11/7
Jay is a successful entrepreneur and a prolific writer/speaker. This article reminds me of what Art my good friend told me. An entrepreneur's life rests on three legs, your health, your family and your career. What I have learned is not to let one endanger the other, i.e., not let your work affects your health, not let your health affects your family, etc. If you have two steady legs, you can fix the third. If two are broken, you're done.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Cutting Up the Founders' Pie (by Frank Demmler) 2009/11/8
Frank is currently a full-time lecturer at CMU. His article raises more questions than providing answers, but the topic is important. My formula for dividing ownership is very simple, just keep thinking that it will take another five years to succeed. So if you have spend a full year working on a startup and you are bringing in a second co-Founder, then you own 20% and the two of you spilt the remaining 80%. It doesn't always work but it is a start.
- 10 Questions to Ask Before You Join a Startup (by Guy Kawasaki) - 2009/11/9
This is another top-10 classic from Guy Kawasaki. These are the same 10 questions that every entrepreneur should ask themselves every single day, especially the one about whether or not anyone in the team has ever shipped a product. In fact, my experience is that you need two teams, one to develop and one to ship. One solves problems by avoiding them and one solves problems by beating them into submission.
- What Startup Bloggers Don’t Tell You (by Jason Cohen) - 2009/11/10
Jason is a successful entrepreneur (building companies with no VC money). This article reminds me of what people always asks when they find out that I have started my own company, "Aren't you excited?" My answer is always, "I ain't got time. I am too busy being scared." If you haven't done one yet, imagine what it feels like when you "fly upside down and navigate by feeling the bumps on your head as you glide pass the tree tops."
- [Video] How to Listen to Your Customers (by Paul Buchheit) - 2009/11/11
This is from last year's YC Startup School but I still enjoy it. Paul was the inventor of Gmail and now the Founder of Friendfeed. You can find his slides on Omnisio. Paul's best tagline is that "all advice is based on over-generalization of limited life experiences". So whoever is giving you advice is basically giving you bad advice. The key is to listen to yourself and to have someone in your team who can be the "surrogate" customer.
- Choose Your Customers, Choose Your Future (by Seth Godin) - 2009/11/12
In the past, my biggest challenge was not just knowing when and how to say NO to potential customers, but also in convincing my team to do the same. Paradoxically, if you are solving a REAL problem, then your customers would have already found an alternative solution. Otherwise you would have to create both the problem and the solution. Your job is to break them away from their tunnel vision; you do that by first saying NO.
[1] Why Startups Fail and Why We Should’ve Too (by Denny K Miu)
- Lessons Learned from A First-Time Entrepreneur (by Swaroop CH) - 2009/11/13
Most first-time entrepreneurs confuse action with activity, one is a vector and one is a scalar. If you have a technical solution and you are looking for a problem, you are a scalar looking to become a vector. If you focus on a problem and a set of customers who are willing to pay for a solution (any solution), you already have a well defined direction and you will succeed if you could get enough wood behind that arrow. It is too easy to keep yourself intellectually occupied with scalar activities.
- [Video] Start-Ups Have No Room for VPs (by Steve Blank) - 2009/11/14
What most entrepreneurs do not understand is that building startups is not just about building products and features but about mitigating risks for your customers. Until you can successfully do that, no one can put their career and their families at risk by buying your products. So the best way is to get all your co-Founders and early employees together and have them focused on what it takes to best serve your customers. When you can do that then you will find that customers do expect a CEO and a bunch of VP's because their managers expect the same. So this is about helping your customer who is now your champion. But the trick is to make sure that everyone on your team knows that their titles and positions are only temporary (including the CEO) and their job is to build the company to the point when they can find their own replacement.
- So You Want to Work for a Startup? (by Giff Constable) 2009/11/15
My son once asked me, "What's the difference between sales and marketing?" I answered, "In a startup, they are both sales, one sell shit that you don't have." First of all, we should all have technical background, but our contribution might not be engineering. Some of us need to be in sales (i.e., sales development). But how do you sell when you don't even have a product? In a startup we never sell product, we sell solution. And solution exists from day one. If you are convinced that the solution exists, then you can convince your customers and you can start selling (the idea). And sell you must. You sell to your customers, your early employees, your vendors, and potential angel investors. You just keep selling, especially on shit that you don't have.
[7] Why We Must Embrace Rejection to Succeed (by Denny K Miu)
- Raising Money (by Jessica Mah) - 2009/11/17
The best advice I ever received from a VC is that "Whereas a banker will loan you money only when you DON'T need any money, a VC will only invest when ALL you need is money." In other words, contrary to popular beliefs, VC does not invest in entrepreneurs to help them build companies. It is up to us to "will" an idea into a viable business and we do that by aligning everyone's interest along a common vector (including co-Founders, early employees, vendors, etc.). My own painfully learned experience is that chasing VC money actually diverts us from this vector. It is a big waste of time and effort. As experienced entrepreneurs, I feel that we have a duty to help all first-time entrepreneurs to understand this inconvenient truth, sooner rather than later.
[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- Things I Wish Someone Had Told Me About Starting A Company (by Richard Luck) - 2009/11/18
Entrepreneurship is a solitary business. As a Founder/CEO, we don’t really have any peers. In retrospect, I wished I had listened more to my own instinct. It turns out that entrepreneurs are different (but not unique) in that we are better in parallel processing and we can do free association better than anyone else. Like hungry dogs in the wild, we are a unique breed. Sometimes we forget or we choose to ignore that differentiating difference. Whatever you do, don’t lose your confidence in yourself and for goodness sake, don't dumb down and don't allow yourself to be domesticated. There is no guarantee that just because you keep trying, you will necessarily succeed. But if we fail because we have elected not to trust our instinct, then we are screwed for eternity.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- What Makes an Entrepreneur? Just F%^&ing Do It (by Mark Suster) - 2009/11/19
There are two kinds of decisions in startups. Any CEO who is capable of trusting his/her own instinct tends to make the right life-and-death decision, which is like avoiding a car accident that never happens. Decisions that are not life-and-death are much more difficult to make. The key is not to make the “right” decision but to make the decision right. In order to make the “perfect” decision, one has to have “perfect” data. Typically, in a startup, there are two ways to compensate for the lack of perfect data. One is to wait for more data and one is to seek consensus. CEO who procrastinates hoping to get incremental data is as deadly as a CEO who jumps to the wrong conclusion before enough data is in. Similarly, a CEO who is afraid to make tough and unpopular decision and hides behind the shield of consensus will almost always lead a startup to the proverbial cliff.
[1] Why Startups Fail and Why We Should’ve Too (by Denny K Miu)
- [PPT] VCTips Workshop (by Various VC's) - 2009/11/20
While VC's have become our favorite punching bags, it is important for entrepreneurs to understand that VC’s are “agents” no different than any other agent who gets a cut on the transaction. Whereas we are expected to put in our body-and-soul and our angel investors to invest their own cash, VC is all about making use of someone else’s money. So unlike us, VC's financial interest is coupled with their professional interest, i.e., their career WILL come before ours. If they are not a partner of their firm, their personal goal is to make partner and if they are not a managing partner, then their focus is on raising the next fund and becoming managing partner.
[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- Failure (by Fred Wilson) - 2009/11/21
There is an old Chinese saying, “Grass survives the heaviest of rock.” The emphasis here is “grass”. If you put a rock on a flower, flower will die. If you put a rock on grass, grass will find a way to survive. As an entrepreneur, we must not think of ourselves as flowers that deserve sunshine and nutrients. We must accept that we are the lowest form of beings, or we won't find the courage and the clarity to survive. You take a hit, you learn and you move on. You just keep marching until you get to the other side of the dark tunnel.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Lessons Startups Can Learn from Obama (by Marc Gayle) - 2009/11/22
Regardless of your political conviction, there are plenty of lessons that entrepreneurs can learn from our Upstart-in-Chief: product Simplicity, operational Agility, customer Intimacy and financial Leverage (SAIL). "It's the simplicity, stupid". Don't try to change the World. Don't attempt to "fly a new engine with a new air frame." Minimum Viable Product is the key. If your idea is a new product, don't try to force a change on consumer habit. And if your idea is a new distribution scheme, don't try to use it to introduce a new service. Don't innovate, nanovate.
- The Perfect Interview Test (by Guy Kawasaki) - 2009/11/23
Interviewing for startups is an art form, whether it is for early employees or co-Founders. The most important survival skill in a startup is the ability to listen and it is surprising how few people could truly listen. Over the years, I have developed a few techniques that have served me well in punching through the veneers of most potential candidates, to be sure that they have the necessary listening skills. One technique is that I would often stay uncharacteristically silent in the middle of a conversation. For those who likes to talk but unable to listen, this would drive them crazy. The more I stay silent, they more that they want to fill in the gap. Another even more effective technique is to stop someone abruptly in mid-sentence and start talking. Those who can listen would stop immediately and those who can't would insist on finishing.
- You’re Just Getting Started (by Des Traynor) - 2009/11/24
When releasing products, I believe in "Go Early, Go Ugly." Most first-time entrepreneurs prefer the opposite because their DNA is to avoid rejection. Their primary focus is to seek validation, from their peers and from their mentors (in time also from their customers). In their mind, rejection is merely an undesirable outcome, which they unfortunately tend to take very personally because they think of it as a failure and a painful reminder to be more prepared the next time around. But rejection is not a failure. We don’t learn much from positive feedback. We learn a whole lot more from negative feedback. Entrepreneurs who avoid rejection are essentially depriving themselves of important “learning moments”. It's like learning how to sail, you don't start learning until you get wet.
[7] Why We Must Embrace Rejection to Succeed (by Denny K Miu)
- Bouncing Back: Dealing with Post-Startup Depression (by Sean K. Murphy) - 2009/11/25
Everything I need to know about bouncing back from a setback I learned from my dad who taught me how to ride a bicycle. My father has given me many advices, the best one turns out to be "don’t touch it, just let it heal." After you fail, be sure to stay away from your former colleagues and your former investors for as long as you can. Don't try to make it up to them and don't try to shift responsibility to make yourself feel less guilty or less embarrassed. Whatever you do, don’t make it worse. Go make new friends. Go find a new team and new investors. Find new market opportunity. The old one is dead; no need to beat on the proverbial dead horse. It is time to move on. Move across the street, move across country. Give it time. Give it distance. Time might heal wounds but time does not remove scars. Only success can remove debilitating scars.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Be Thankful for Entrepreneurs in America (by Gary Reece) - 2009/11/26
Being a foreign-born naturalized American, I can say with evidence that America is unique in the World in how we deal with failure. It is not true that we romanticize failure. Americana does not tolerate failure. We just don’t overly penalize people who fail because we truly enjoy seeing the spectacle of fellow Americans rising from the ashes. It is the frontier spirit in us, that we are equal, that we live in a meritocracy, both in success and in failure. Indeed we have much to be thankful for.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- Five Startup Mistakes to Avoid (by Steve Strauss) - 2009/11/27
First-time entrepreneurs often choose between false choices, between audacity and practicality and between making meaning and making money. Building a successful startup requires the perfect alignment of many people’s diverse interests and desires. People are driven by many things: money, fame, power and destiny. An entrepreneur’s never ending job is to align moving vectors. To succeed, we must figure out how to provide our constituents with what they need and what they want. So clearly helping others make meaning is an important part of our repertoire. But as the company grows and as more and more people are brought together, the only thing that everyone has in common would be money. So from the beginning, as an entrepreneur, we must focus entirely on making money and when we are successful in making money, we will be making meaning as well.
- A Lot Can Happen In Five Years (by Fred Wilson) - 2009/11/28
The days when an entrepreneur can flip a company in a matter of months are long gone and even if our financial systems were to recover, those days would not return. I should know. I had lived through the ups and downs a few times as a struggling entrepreneur. Therefore when we start a company, we need to be prepared to be in it for the long haul, building it from scratch and if we are lucky, eventually growing it to be a sustainable company. What this means is that the quality and integrity of our partners and the love and respect that we have for each other are that much more important. Entrepreneurs do it for money but we also do it for love.
- What We Shouldn't Learn From Steve Jobs (by George F. Colony) - 2009/11/29
Steve is the CEO of the decade. But what makes a CEO a good CEO in a startup? What does a CEO do in a startup? In any size company, a CEO is someone who connects the dots. In a startup, as with mature companies, there are many dots, some outside the company (customers, vendors, resellers, partners, service providers such as lawyers and accountants, etc.) and some inside the company (investors, co-Founders, executives, employees, etc.). The difference here is that in a startup, none of these dots exist in the beginning and if they exist, they are not connected. A startup CEO is someone who starts with a SINGLE dot, and successfully creates a constellation of connecting dots. It is like the thousand points of light, except there is no light.
Past Recommendations (October 2009)
- The Five Phases of Losing a Job (by Paul W. Smith) - 2009/10/27
Not having a backup plan is ironically often the minimum prerequisite for building a successful startup. Similarly, in my experience, being fired from my last job is often the perfect beginning for launching something of my own. But first, you must live through the emotional roller coaster.
[3] What I Learned From My Dad Who Taught Me How To Ride A Bicycle (by Denny K Miu)
- What Startups Are Really Like (by Paul Graham) - 2009/10/28
Another classic by Paul Graham, Founder of YCombinator. Interestingly, this one is written entirely based on inputs from entrepreneurs of his portfolio companies, asking them what were their surprises about starting a startup. I agree with all the points that Paul brought up including co-founders are like marriage partners, persistence is more important than intelligence or even ability, launch sooner and simpler, and finally, investors are clueless.
[2] How to Turn Your VC into Your Worst Enemy (by Denny K Miu)
- Choose Your VC Investor Carefully (by Mark Suster) - 2009/10/29
Mark is a successful entrepreneur turned VC and writes a very interesting blog. In this post, he compares VC's with seagulls, who shit on you and then fly away. First of all, I have to be honest and say that I agree with his observation. But far from a sensational piece, Mark takes a very serious look at the relationship between VC's and entrepreneurs which he argues is more permanent than marriage. So choose carefully.
- Slow Capital (by Fred Wilson) - 2009/10/30
Slow food, slow sex and now slow capital. Fred is a VC and writes an interesting blog. In this post, he recommends investors and entrepreneurs alike not to rush to conclusion, put company first, grow organically, and not focus on an exit. All seem reasonable to me. In fact, I am a proponent of "No Capital". Bootstrap a viable business with blood and sweat and good co-founders, and let the VC's beat a path to your door. Works for me.
[8] Why We Must Bootstrap to Succeed (by Denny K Miu)
