This is a guest posting by Glenn Kelman, CEO of Redfin, a company that enables people to buy homes online. He offers a counterpoint to my posting about how easy it is to make millions of dollars with “user-generated, long-tail, Web 2.0, social-networking, open-source content.”
Last month, Guy called James Hong and Markus Frind heroes for running multi-million dollar websites like Hot or Not and Plenty of Fish in their underwear. Their stats are jaw-dropping: twelve billion page views, 380 hits per second, two hours of work a day.
Lately I’ve been thinking how hard, not how easy, it is to build a new company. Hard has gone out of fashion. Like college students bragging about how they barely studied, start-ups today take care to project a sense of ease. Wherever I’ve worked, we’ve secretly felt just the opposite. We’re assailed by doubts, mortified by our own shortcomings, surrounded by freaks, testy over silly details. Trying to be like James or Markus has only been counterproductive.
And now, having been through a few startups, I’m not even sure I’d want it to be that easy. Working two hours a day on my own wasn’t my goal when I came to Silicon Valley. Does anybody remember the old video of Steve Jobs launching the Mac? He had tears in his eyes. And even though Jobs is Jobs and I am nobody, I knew how he felt. I’d had the same reaction–absurdly–to portal software and more recently to a Redfin, a fledgling real estate website.
“The megalomaniac pleasure of creation,” the psychoanalyst Edmund Berger wrote, “produces a type of elation which cannot be compared with that experienced by other mortals.” Jobs wasn’t just crying from simple happiness but from all the tinkering, kvetching, nitpicking, wholesale reworking, and spasms of self-loathing that go into a beautiful product. It was all being paid back in a rush.
Like the souls in Dostoevsky who are admitted to heaven because they never thought themselves worthy of it, successful entrepreneurs can’t be convinced that any other startup has their troubles, because they constantly compare the triumphant launch parties and revisionist histories of successful companies to their own daily struggles. Just so you know you’re not alone, here’s a top-ten list of the ways a startup can feel deeply screwed up without really being that screwed up at all.
- True believers go nuts at the slightest provocation. The best people at a start-up care too much. They stay up late writing Jerry Maguire memos, eavesdropping on support calls, snapping at bureaucracy, citing Joel Spolsky on Aerons, and Paul Graham on cubes. They are your heart and bones, so you have to give them what they need, which is a lot. The only way to get them on your side is to put them in charge.
- Big projects attract good people. If you aren’t doing something worthwhile, you can’t get anyone worthwhile to work on it. I often think about what Ezra Pound once said of his epic poem, that “if it’s a failure, it’s a failure worth all the successes of its age.” We’re not writing poetry, but it matters to us that we’re trying to compete with real estate agents rather than just running their ads. You need a big mission to recruit people who care about what you’re doing.
- Start-ups are freak-catchers. You have to be fundamentally unhappy with the way things are to leave Microsoft, and yet unrealistic enough to believe the world can change to join a start-up. This is a volatile combination which can result in group mood swings and a somewhat motley crew. Thus, don’t worry if your start-up seems to have more than its fair share of oddballs.
- Good code takes time. One great engineer can do more than ten mediocre ones especially when starting a project. But great engineers still need time: whenever we’ve thought our talent, sprinkled with the fairy dust of some new engineering paradigm, would free us from having to schedule time for design and testing, we’ve paid for it. To make something elegant takes time, and the cult of speed sometimes works against that. “Make haste slowly.”
- Everybody has to re-build. The short-cuts you have to take and the problems you couldn’t anticipate when building version 1.0 of your product always mean you’ll have to rebuild some of it in version 2.0 or 3.0. Don’t get discouraged or short-sighted. Just rebuild it. This is just how things work.
- Fearless leaders are often terrified. The CEO of the most promising start-up I know of recently used Hikkup to anonymously ask his Facebook friends if we thought his idea was any good. Just because you’re worried doesn’t mean you have a bad idea; the best ideas are often the ones that scare you the most. And for sure don’t believe the after-the-fact statements from entrepreneurs about how they “knew” what to do.
- It’ll always be hard work. Most start-ups find an interesting problem to solve, then just keep working on it. At a recent awards ceremony, Microsoft CEO Steve Ballmer tried to think of the secret to Microsoft’s success and could only come up with “hard, hard, hard, hard, hard, work.” This is an obvious cliche, but most entrepreneurs remain fixated on the Eureka! moment. If you don’t believe you have any reliable competitive advantage, you’re the kind of insecure person who will work your competition into the ground, so keep working.
- It isn’t going to get better–it already is. In the early days, start-ups focus on how great it’s going to be when they succeed; but the moment they do, they start talking about how great it was before they did. Whenever I get this way, I remember the Venerable Bede’s complaint that his eighth century contemporaries had lost the fervor of seventh century monks. Even in the darkest of the Dark Ages, people were nostalgic for…the Dark Ages. Start-ups are like medieval monasteries: always convinced that paradise is just ahead or that things only recently got worse. If you can begin to enjoy the process of building a start-up rather than the outcome, you’ll be a better leader.
- Truth is our only currency. At lunch last week, an engineer said the only thing he remembered from his interview was our saying the most likely outcome for Redfin–or any startup–was bankruptcy, but that he should join us anyway. It’s odd but the more we’ve tried to warn people about the risks, the more they seem to ignore them. And since you have to keep taking risks, you have to keep telling people about them. You don’t want to be like Saddam Hussein, who never prepared his generals for invasion because he couldn’t admit he didn’t have nuclear weapons.
- Competition starts at $100 million. A Sequoia partner once told me that competition only starts when you hit $100 million in revenues. Maybe that number is lower now. But if you do something worthwhile, someone else will do it too. Since you can’t see what’s going on behind a competitor’s pretty website, it’s natural to assume that all the challenges we just went over only apply to your company. They don’t, so keep the faith.
PlanHQ.com is an online Business Planning and startup development tool. Doesn’t sound very sexy does it but you’d be wrong. Having been crazy enough to start three different businesses, I can painfully testify that writing and even more challenging…sticking to the thinking within a good Business Plan is extremely tough. Plan HQ is an innovative web application that helps entrepreneurs and startups not only create a business plan, but allocate tasks and track progress across the key players. If Plan HQ gets the kind of traction it should then Plan HQ will be a great little business with any number of service and product extensions for the entrepreneur. Move over 37Signals!
Plan HQ has a nice and simple business model…all elements of the application are hosted by Plan HQ. No downloads, no maintenance, no hosting, no contracts – If Plan HQ does work out for you or you stop needing their service, just leave. Think ‘Salesforce.com’ for business planning. Plan HQ offers a 30 day free trial (http://www.planhq.com/signup/) and then the fees are based on number of users on a monthly basis. So membership types and prices:
Mini = $9 month / 3 users / 5 active goals
Small = $24 month / 5 users / 10 active goals
Professional = $49 month / Unlimited Users / 10 active goals
Some Core Functionality:
The Plan HQ Product is sub-divided into some management categories that are usually ‘key’ for most startups and early stage companies and of course there’s a ‘Dashboard’ so you can manage and track the imperative tasks. Management ‘uber’ categories include:
- The Dashboard – Covering main tasks, actions, upcoming goals, financials
- The Market – Your Markets, the Competition, Customers and basic market and customer analytics
- Goals – Actual Goals, Add new goals, confidence of achievement and more
- Financials – Performance, Indicators, graphs
- The Business Plan Document itself
- Team – Who have you got, who do you need
I really like the Plan HQ business model and the product itself, it’s especially relevant for those businesses that are focused on moving towards significant growth and the Venture Capital route.
- The Product seems to cover the key elements of what a young company needs to focus on and allows enough configuration that the users are not ‘locked in’ to Plan HQ already good business management methodology
- I hate to put it like this but for those ‘new’ to building businesses from just a plan, the product can really help ensuring the key team members focus on what’s important to any business but especially the ‘young’ business…Customers, revenues, the team and fund raising.
- As its a web ap, this product is especially helpful for a distributed or virtual team and also for bringing angels, other investors and advisors easily into the key decision making process. It could actually help get Advisors pulling their weight by locking them into real trackable actions. Wow! Could this product really do this?
Not so much dislikes as potential questions and ‘like to sees’:
- Paypal as a form of payment. As a small business owner I don’t like adding my credit card to ongoing online services.
- The positioning is ‘Create, update, track and collaborate around your business plan’. Business Plans eventually fall by the wayside as the business scales and grows beyond a certain stage or size. As a ‘virtual’ investor, I’d like to see how all the data captured through initial usage and the service ’scales’ with the business. i.e. beyond the business plan and becoming an ongoing discipline and tool for managing the business ongoing.
- I’d like to see a referral program and a ‘Reseller’ model. For example, a startup I’m involved with ‘Advisor Garage’ (http://www.AdvisorGarage.com) has 1000+ entrepreneurs, angels and VCs onboard. This is a service many of our members would probably like to use – can our company ’subscribe’ and offer the Plan HQ service to our members for a fee? I hope so! Let me know if any Plan HQ folks read this…
- how the data exports or integrates with other systems – i.e. quickbooks etc
- Are the ‘Permissions’ configurable? Will all signees be able to access all data? Would a CEO want that?
My Virtual Investment:
With my virtual $1M, I would ask PlanHQ to include me in their ‘Virtual Investment’ plans to the tune of $750K. Once they establish this market, their are so many obvious product extensions that driving great revenues will be easy and hey…they have the tool to manage those new businesses. Great job Plan HQ!
Andrew – Founder
If you are an entrepreneur in a startup and currently seeking capital, come prepared with your best 60-second elevator pitch. If you are an investor come and listen to entrepreneurs pitches. You never know where you’ll find your next deal. Find out how our panel of investors rate the
Advisor Garage and the Advisor Garage Community is an online service for entrepreneurs to connect with Advisors, Angels, Venture Capitalists and other entrepreneurs. It was established by three people – the founder (Andrew Makunas) and two really fantastic tech guys. Another interesting interview from Loscreador. Let’s find out more…
The idea for Advisor Garage came to Andrew Makunas at Harvard Business School. He was guided by various advisors there who helped him realize his ideas and start his various businesses. Advisor Garage hopes to achieve that same goal, but for entrepreneurs all across the world.
Advisor Garage is still in the initial stage, but promises to be a huge success with the every increasing number of talented entrepreneurs and always helpful guides who want to help. Andrew has taken these both and created a wonderful combination.
In this insightful talk with Los Creador, Andrew tells us what he wants Advisor Garage to achieve and the journey that still has a long way to go.
Los Creador: How did you get the idea for AdvisorGarage?
Andrew Makunas: As an entrepreneur, I realized that one of the most challenging and time consuming tasks for entrepreneurs is the ability to connect with great advisors, investors and new team members. In my case, it took months to get everything lined up to get my businesses really thriving. Advisor Garage was created to make that process much easier and faster. Speed is critical when starting businesses because every day without revenue is a day closer to failure. If AdvisorGarage can help connect the dots for an entrepreneur then they are much more likely to realize their startup dreams and objectives.
LC: What’s Advisor Garage all about?
Andrew: Advisor Garage and the Advisor Garage Community is an online service for entrepreneurs to connect with Advisors, Angels, Venture Capitalists and other entrepreneurs. The core site allows entrepreneurs and advisors to search according to their interests and needs so they can reach out to people that can help them move their businesses forward. The newly launched Advisor Garage Community site gives members the opportunity to connect right now with other Entrepreneurs, Angels and Venture Capitalists members through the free blogs, forums and networking groups. They can build up their personal entrepreneurial network through a ‘linking’ system with private messaging.
LC: Skilled and experienced advisors would be the bedrock of AG. What is your plan to attract such people to your site? What do you offer them?
Andrew: There are multiple ways that Advisors find out about AdvisorGarage. Perhaps the most important is member referral or recommendations. AdvisorGarage has grown to include hundreds of advisors through word of mouth. In addition, the management team reaches out to their own personal network and alumni of their own business schools and encourages them to join. But the real ‘hook’ for advisors is to discover fresh new entrepreneurial talent and great new businesses. Advisors and investors love the idea of discovering new innovative people and businesses and Advisor Garage and the Advisor Garage Community are good channels to do this.
LC: How many people are involved with AdvisorGarage? Tell us a little more about them?
Andrew: Advisor Garage was established by three people – the founder (me) and two really fantastic tech guys. The interesting thing about the team is that none of us work full time on Advisor Garage – we frankly cannot afford to as we do not charge for the service and will not do so until much later. What we would ideally like to do is to take any revenues we make, when we make it and channel is straight back into product development. We have already mapped out where Advisor Garage is going and the services we would like to provide for our members. We would like to pass every dime the site (eventually) earns into improving the services and offerings for the members rather than paying expensive salaries. For those reasons, we build and manage Advisor Garage during our long nights and too short weekends. Part of the entrepreneurial journey I guess!
LC: What are your plans for the future of the site?
Andrew: Ah ha! If only I was allowed to tell you! What I can say is that now that we have the basic Community site live (http://www.AdvisorGarage.com) we would like to refine and improve it and from there we have another two or three key services that revolve around helping entrepreneurs with their key challenges at various stages of development.
LC: How did you begin your business networking?
Andrew: I don’t think I ‘business network’, I think I generally enjoy spending time with people and both new and old contacts. Its not a conscious effort, meeting and working with people is something I just plain enjoy.
LC: Which site do you visit everyday other than your own?
LC: Who are your idols in the IT space? What is it about them that you think is really great?
Andrew: There are too many people – if pushed it’s probably Guy Kawasaki. What’s great about Guy? He tries to give back to the broader entrepreneurial community and the upside of that is it also builds his personal equity and brand.
LC: What is the greatest challenge to your success? How did you or plan to overcome it?
Andrew: The greatest challenge to our success (and still is) is building a comprehensive member focused site that delivers the range of services that can really help them and their businesses without cash. Could we go out and get cash from angels or VCs? Probably, but we want to focus the business on our members rather than on the bottom line so we struggle every day to manage and improve the site from our own personal savings.
LC: What was the one main reason for starting something on your own?
Andrew: I can’t help it. I’m an entrepreneur! I basically come up with new business and product ideas on a daily basis. The shower is usually where it all happens! Some ideas ‘stick’ others disappear when the next idea comes along. I’m compelled to pursue the ones which stick. Advisor Garage was one of those.
LC: What is the one accomplishment till date you’re most proud of?
Andrew: Aside from the personal stuff, probably designing and launching the world’s smallest, safest fire escape ladder which is now a permanent exhibition in New York’s MOMA and being sold in multiple accounts. It feels good to have brought a product to market which saves lives.
LC: What’s that one big dream or accomplishment you are working towards?
Andrew: The next iterations of Advisor Garage and related services will be the next set of accomplishments. In terms of dream – to help a significant number of entrepreneurs build great and successful businesses world wide.
LC: Time to play soothsayer. What according to you is the next big thing?
Andrew: I’m not sure there is truly a next big thing – I thing all next big things come back to the consumers. If they don’t then they are destined to be the next big ‘has been’.
LC: Any advice for other web entrepreneurs out there?
Andrew: Whatever you want to try, give it a shot. Don’t worry too much about Business Plans, its better to get it out there and modify and build as you get customer feedback. Pick the right team members from day 1. Get some good advisors and leverage them until they squeal!
LC: How early in life did your relationship with computers/internet start? Tell us about your first few interactions with technology.
Andrew: This will show my age but my first ever computer was when I was about eight or nine. It was called a Sinclair ZX81 and that was closely followed by the Sinclair Spectrum, the Commadore 64, and the Apple LC…after that I’m afraid I sold out to Windows machines and so after that point the computers stopped being memorable.
LC: Which was the first company you worked with? What did you do there?
Andrew: The first company I worked for was Procter & Gamble. I was a brand manager for Cover Girl cosmetics – a bit weird for a guy but it taught me some good lessons on marketing and delivering great products to consumers.
LC: Can you elaborate on your hobbies and what you enjoy doing to pass your time?
Andrew: Spending time with my family and martial arts – a combination of JKD, Muy Thai and mixed martial arts. It’s a great way to get your mind to switch to something aside from entrepreneurialism.
LC: Where are you based now? Any plans for the immediate future.
Andrew: I’m in New Jersey right now. Immediate plans for now are email this to Los Creador and go get some lunch.
BTW, please check out our new Community site . A shameless plug but as we have a zero dollars marketing budget I won’t apologize too much
Thanks for the interview…
You don’t have to wait for venture capitalists or angel investors to lend a hand. Follow these tips to get the ball rolling on your own. If you have a great idea that can change the world, then bootstrap your way until you can prove it. Funding will come just when you don’t need it.
I founded two tech companies, co-produced a Hollywood film, and helped raise close to $100 million in private and public financing. Over the years, I’ve also mentored dozens of entrepreneurs. There always seems to be a catch-22 — you need seed financing but no one will give you a cent until you have a marketable product. Ironically, raising millions of dollars is always easier than raising thousands.
BEYOND IDEAS. A myth propagated by business schools is that the way to build a venture is to create a great business plan, perfect your elevator pitch, and present this to venture capitalists. If that doesn’t work, you knock on the door of angel investors.
Ask any entrepreneur who has called on venture capitalists and they will likely tell you that it is almost impossible to even get calls returned. If you get lucky and are invited to present your idea, the due-diligence process will drag on for many months while you mortgage your assets and survive on hope. If you do hit the jackpot, you are required to trade away your first born in exchange for an investment.
To be fair, most business plans don’t deserve funding. Venture capitalists receive hundreds of plans every week, and few are worth the paper they are printed on.
Posted by kind permission of author
There often comes a time in the life of a startup when the founder must decide if it’s better to own a small piece of a big pie. That’s because bootstrapping can only take you so far. When you’re lucky enough to reach the stage where you have a product that customers really want, a business model that works, and a management team that is itching to take over the world, start weighing your options.
Raising millions through venture capital allows you the luxury of not having to watch every penny. You gain experienced investors who can help you focus on the big picture and plan your growth strategy. But there are many strings attached to this money—it’s practically like getting married.Let’s start with the good that comes with venture capital money.
1. Experience, advice, and mentoring. Whether you work in the tech world or the film world, the principles of building a business are the same. Those who have done it before can provide tremendous value. Venture capitalist firms are usually staffed by experienced executives who have not only been successful on their own, but have also watched dozens of startups succeed and fail. They can guide you through your journey.
2. Objectivity. What drives the most successful entrepreneurs is their vision and their determination to succeed at all costs. It’s very easy to believe your own press and lose objectivity. Having experienced partners there ready to throw cold water on you can provide a healthy balance.
3. Networking. It’s always about who you know. Venture capitalists maintain extensive contacts with other venture firms, executives of firms with whom they’ve done business or served on boards, investment funds whose money they manage, and so on. Their Rolodexes are usually worth more than their weight in gold if you don’t want to make cold calls (see BusinessWeek.com, 06/06/05, “”Ask for Help—and Offer It””).
4. Recruitment. It is hard to know what to look for when you’re interviewing for all the diverse positions you have to fill (see BusinessWeek.com, 05/19/06, “Countdown to Product Launch, Part III”). What do you ask when you’re interviewing a lawyer, for example? How can you tell if the VP of sales is more adept at selling himself than your product? Management teams are usually the top priority of venture capitalists, and they’ll help you recruit the best.
5. Credibility/prestige. During the first couple of years of your startup, you’ll feel like adding “we’ve never heard of you either” to every conversation. You can’t even get the local press to write about you. Yet everything seems to change when you complete an investment from a venture firm. It’s like joining a special club that gives you respectability. Even customers feel more assured when you tell them about your strong financial backing.
6. Shared risk. Things will go wrong. The market will tank at some stage, deals will fall through, and key employees and customers will defect. Venture capitalists usually have deep pockets and keep reserves for subsequent rounds of funding. Good venture capitalists will support you when things get tough.
7. Big picture. It is very easy to be focused on your product and market and lose sight of the forest. With the hundreds of business plans that VCs review every month, they develop a good feel for the trends.
8. Exit assistance. Nothing lasts forever. If things are going well, you will want to climb the next mountain. But the best strategy may be to cash out and start again. Your venture capitalists will watch for the best exit strategy.
All this seems too good to be true. What are the downsides?
At 37signals, a company with just eight employees whose Web-based collaboration software is used by thousands of small businesses, there isn’t time to sit around a conference room sipping latte and deconstructing memos. Come to think of it, there isn’t even a company conference room. There are just a couple of cubicles, loads of brainpower and three simple goals: make useful business software, make it easy to run, make money selling it. Repeat.
An article with some great ideas and lessons for entrepreneurs. Worth a read!
Andrew – Founder