THE DREAM IN ACTION

I’ve been thinking about how my new startup adventure is going to be different than my role with GE and a few things have risen to the surface. So, I’ve decided to do a series of posts on those topics. You’ll be able to follow the series under the tag ‘corpvsstartup’ here.

The first that I want to discuss here on the blog is the need to be bold. In a corporate environment things are usually pre-determined. Processes exist that you have to follow and the challenge can usually lie in just following those pre-defined processes. Aligning resources (PEOPLE) and following the appropriate timing is tough, but it’s still following a plan. In a startup there is no plan, no pre-defined processes. You have to define processes for the first time yourself, you have to write the plan, and you have to be bold to do that!

The story of how I got this opportunity is one that I’m definitely proud of. It’s so undefined, so nontraditional, and nothing that I could’ve ever planned for. But it definitely took some boldness, some balls, for it to happen. Here’s what went down.

Back in early January Travis Kalanick, an angel investor and startup advisor, tweeted this, “Looking 4 entrepreneurial product mrg/biz-dev killer 4 a location based service. pre-launch, BIG equity, big peeps involved–ANY TIPS??” I’d been following Travis for a while and knew that he was working with some awesome startups out in SF and I responded, “@KonaTbone here’s a tip. email me :) graves.ryan[at]gmail.com“. Kind of smart ass, but I figured a boring “I’m interested, please email me” response probably wouldn’t get his attention. It turns out that I was right. He email me that night, then we ended up getting on the phone and had a long conversation about my past experience, what he was looking for and some of the details about the opportunity.

About 3 months, and a few trips to NY & SF later, I’m diving in head first to work for a company that Travis is going to be working with very closely. The team of people behind our company is amazingly experienced and the market opportunity is ripe for disruption. My story is not to brag, although I am pumped how it turned out, but rather to show that this, one of the bolder moves I’ve ever made, really worked. Being bold creates opportunities and that’s the kind of mentality I believe is required to be successful in a startup. It may have even been careless but by really stepping out there and having enough chops to back it up, I was able to land a role running an awesome startup.

This is not even close to the end of boldness required to be successful. The startup path is one of trail blazing and getting your hands dirty in areas you never thought you’d be involved. But when I took the job with GE I had to submit that standard application and resume, and follow the traditional interview and hiring process, not in a startup. It’s nontraditional and requires boldness.

I’m pumped to continue to share other differences from GE’s corporate life to other startup lessons learned. Let me know in the comments if there is anything that you’d particularly like me to touch on.

I came across Andy Swan via Fred Wilson’s blog a few years ago and have followed casually for a while. The other day he wrote a post (below) that might be his best. Every once in a while you need a kick in the ass and this was it…enjoy. If you have comments on the post please leave them on his blog, not here.

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An endless fountain of ideas.  I’ve lost count, but I’d guess an average of 2.5 killer businesses come forth from your brain on an annual basis.  Unfortunately, they get mugged by reality and disappear into the vapor of lost dreams just as quickly as they were formed.

Obviously, there are several reasons for the canyon between your “entrepreneurial” vision and your accomplishments:

1. Geographic location — no one where you live can code or invest like the hippies in San Fran.  Why fight that?
2. Debt obligations — Far be it from you to actually take your standard of living down a notch while trying to do something “revolutionary”…..meanwhile, men jump on grenades.
3. Muted enthusiasm — If your friends aren’t instantly enamored with the 6th complex idea that you describe without having built anything yet, how will anyone else “get” your brilliance?
4. Idea pirates — Obviously, your idea is so unique and valuable that everyone will steal it, take it to the hippies in San Fran and have it built and funded (but not as good) before you finish the sentence.
5. Family — Apparently you married someone that needs a lifestyle that ratchets up slowly and predictably in order to love and support you.  And, ya….your infant children would be devastated if you put money into anything other than granite counter-tops and a paper thin computer with a glowing fruit on it.

The list goes on and on.

You’re screwed.  All that genius and no chance to execute on it.

Poor you, born into the country that rewards, encourages and celebrates entrepreneurship more than any other in human history.

You are an old man in a lazy-boy, so damn comfortable you’re afraid to move.

Cruise-control into the coffin it is.  Enjoy.

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In a related tone, Mark Cuban wrote an amazing post titled, The Sport of Business, that is equally as inspiring and really shows the cut throatness that “it may” take to dominate in business. He surely has.

photo via flickr

The ActionsTalk Story

When Blake and I started ActionsTalk back in early 2008 we were filled with the excitement that comes with a new venture. We hoped that ActionsTalk would become a valuable service for the “non hub” startup communities. We worked to bring deserved attention to startups who weren’t necessarily getting into the limelight because of their location. We worked at that for a long time. We succeeded at that for a while. We got onto the cover of the business section of the Milwaukee newspaper on the same day Barack was elected president and got huge publicity because of it. Our inboxes were flooded and things were looking up. We locked down some advertisers and AT was making money.

But in time the excitement dwindled and the direction changed. In time those changes lead to stresses on Blake and my relationship. And those stresses, since we were friends before business partners, lead to less excitement of making the business grow. I questioned, why I would want to grow something that seemed like it was harming a great friendship? So, the rate at which we worked and posted crawled and AT as a business died. ActionsTalk remains a great video blog with over 40 amazing entrepreneurial interviews, filled with content that I honestly believe any entrepreneur can learn and benefit from. In that sense it was a success, but no business that doesn’t get sold or continue to grow is a true success.

The changes in our business did introduce serious challenges on our relationship and in the end I think we both backed off because the challenges of a video blog business (a challenging and grinding business to be in) weren’t worth harming the friendship. Startups are tough and they WILL affect the dynamic of the founders relationship. Here are 5 ideas to keep in mind and things to focus on in order to understand and prepare for how a startup will affect a founding teams relationship.

1) Talk about the road map

In the case of ActionsTalk we set a goal of doing ActionsTalk interviews for a year. We reached that goal but it was never clear where, if anywhere, we would go after that. Needless to say, right about the year point, we slowed down. Build a road map, work though it from a product perspective, and from a personal life time-line perspective, and you’ll have a lot better chance of long term success.

2) Practice extremely open communication

Albert Wegner recently wrote a post about calling people out when quite during board meetings. He implied that even some startup founders wouldn’t express their real opinion during these meetings, and potentially he would find that founders completely disagree on direction! This is a big problem and any directional decision should be discussed with founders.

3) Keep emotion out of your business but in your friendship (possibly impossible)

This one is probably the toughest. At some point you’ll have to make a decision, what will come first the friendship or the business? There are so many stresses that come into running startup business that it’s going to be extremely tough. I do believe that you can run a business with a friend or family member but it takes a very special relationship and priorities do have to be discussed.

4) Focus on the larger goal

I worked on a project a few months back with my friend Allen. We decided to plan for about 2 weeks and raise money for one week and donate all of that money to building Libraries in Laos. He was traveling there at the time and I did all of the “social media” and out reach work state side. In 5 days we raised a few thousand dollars. Although a little stressful because of the fact that we didn’t actually hit our goal of $5000, our relationship was fine throughout. This may have been because of the shorter time period of the project, but I really do think that both his and my focus on the goal is what kept it so fun for both of us. As we checked our donations daily hourly it became more and more motivating. In the end it was a very successful project because of our ability to focus on the goal.

5) Don’t do it

Lastly, if you think that a friendship will not withstand the pressures of a startup, don’t do it. People are usually your friends because they are similar to you. Those are often the worst business partnerships anyway. The Ying and Yang relationships work better on the whole because you need those complimenting skills and challenging view points. Like I said before, a priority usually has to be chosen and if the friendship is the priority the project can often end poorly.

photo via flickr

This is a really cool recap of Mint’s success directly from Aaron. If you enjoy this post please continue the conversation over on Christine.net where it was originally posted. I reblog this solely because I didn’t want you guys to miss this. It’s that cool. As some commenters will note, this is not meant to be a model for every startup, but it does lay out a potential path and the stages of an early stage web startup. Enjoy.

Aaron Patzer, CEO of MINT.com, dropped by The Funded and Vator.tv’s Juice Pitcher tonight to share some secrets of the company’s success. (Just in case you don’t plug the TechCrunch feed directly into your brain stem: MINT is the wildly successful, soon-to-be-acquired-by-Intuit, #1 personal finance site…and oh yes, full disclosure that First Round Capital is a thrilled investor.)

Everyone knows that MINT has a great product, but few know the strategic moves. To the point, what did it take to get there? How much did it cost to get started? When and how was it smart to raise money such that both the founder and the investors walked away happy? Aaron opened up MINT.com’s books – and his old slide decks – tonight to share some shockingly frank details with the startups in attendance. Even more generously, he was happy to have his lessons be blogged for a more public audience:

The straight shot: Why should you raise money, and how much?

• Step 1: When you’re ready with an Idea: Raise $100K from friends and family, and use it to build a prototype.
• Step 2: Once the prototype is done: Raise < $1M in seed capital, and get into market with an alpha launch.
• Step 3: After that initial launch has traction: Raise $5-10M, and use it to prove/scale the model.

Garage Phase: What are the costs and milestones?

Here’s how MINT spend its $100K of garage money:

• Founders: $30K/year living expenses
• Engineering 1st hires: $30-50K/year
• Office: $400/cube/month
• Tech: $10K
• Legal: Deferred payments for 0.50 – 0.75% of company

Roughly, 2 founders + 1 engineer/contractor = $150K/year burn. This gives you 6 – 9 months of runway before you need to raise a seed round.

In order to get that seed round, you’ll need to understand your competition, and come up with projections. Everyone knows this will change…but you need to show your thinking around it anyway. As an example, MINT originally projected $30/user/year for lead-gen and CPA. (Aaron noted that the company is pretty close to this today. But this is the exception rather than the rule.) Know how the business model works. People do X behavior and it turns into $Y income, add up those $Ys and it’s a $Z business. If you can walk people through these assumptions convincingly, you’ll get that seed round.

Seed Round: What are the next costs and milestones?

• Salaries: $50 – 90K/year ($450K/year for 5 people)
• Overhead: +20% ($100K/year)
• Legal: $25K + $2K/month ($50K/year)

MINT.com raised $750K in its seed round to cover these expenses for 12 months, which is about how much time you’ll need to develop into the Series A stage.

What model do you build next in order to raise the Series A? Testing and learning from your seed model, show user growth, retention, COGS, revenue per sale/user, and profit. The accumulated loss is how much you need to raise, and a well-though funding strategy combined with an understanding of (hopefully good) business economics is what will speed the Series A process along.

Series A: Now what?

• Salaries + Overhead: $200K/year/person
• COGS: Varies, but even one-time expenses magically add up to $150K/month
• Legal: $10-50K/month

Total burn for a 30-person team: $6M/year. Naturally you don’t start out burning this much, as it takes time to grow the team. However the numbers work out, your goals should be the same: Get profitable within 2 years. Raise the capital you need to do this without much distraction.

If you want to raise more after this in order to grow more aggressively or extend otherwise, your success in achieving those first two goals will speak for itself.

If you enjoy this post please continue the conversation over on Christine.net where it was originally posted.

I’ve been studying a lot about raising a seed round of funding for a startup. Once your prototype is out and some traction is shown, if you’re going to need capital you gotta work very hard to get it. Here is the first of a multiple (probably 3) part series on the core things I’ve learned about raising a seed round. Note: I’ve never raised any seed money for a startup. I write these observations to share what I’ve been learning and to motivate myself and the other entrepreneurs in my shoes to get out there and get’r done.

Part 1.

Cold calling is for sales people, get a referral. If you have a recommendation from a trusted source you’ll always be in a better position with an investor. Angel networks &/or individuals will always take a referral over a cold call because you’ve already been through one layer of filtering. So, because of this reality it’s super important to always ask for a referral. Even when you meet with someone who might not be a great fit, as long as you think they liked you and would pass on your name in a positive light, hit them up for a referral.

Time your pitch with 1 cup of coffee. You won’t always have the opportunity to pull out a powerpoint deck or spend an entire meal mulling over the details of your plan. You need to have 3-4 different length pitches ready in your head. If you get a change for 10-15 minutes with a high profile investor you need to have a 10 minute pitch and a list of FAQs in your head so that the 15 minutes is a powerful use of your time. The goal is always getting the money but priority number two is the next meeting.

Beggars can’t be choosers, and you’re the beggar. Go to Angel networks, conferences, networking events and always keep your A-game on. Meet with folks who are Angels, who know Angels, who want to be Angels, etc. Give them the short pitch and setup the next meeting with whoever you can.

Use the buddy system, it’s safer. You should have a partner that you’re able to share your experiences with and that will keep you accountable. You need to be able to digest the conversation with a co-founder or close adviser so that you don’t miss any critical pieces of feedback. As you meet with investors they’ll have different concerns and at each subsequent meeting you should be able to completely address their concern from the previous meeting. If they have the same question or concern twice, and you don’t have an answer, shame on you. It’s easy to miss things without someone to keep you aware of the details. Accountability is key.

Never miss an opportunity. After every meeting you should have a list of what you need to do in order for that person to invest at the next meeting. You should have a list like this for every single person or group in your pipeline. This will become important when your first/anchor  investor is locked down and you need to bring the sub investors to show momentum. Document everything and know what opportunities are available.

Always ask for the money.

image via nardip

This week I’ve been listening to Richard Branson’s: Business Stripped Bare (on audio book), for the second time. It’s a book that, at first, does not seem immediately applicable for someone who is not already running a successful business or conglomerate like Branson’s Virgin, but after paying closer attention to the themes and advice in the book I’ve realized it’s incredibly appropriate and actionable.

There are 7 main themes in the book that Branson goes into depth on. He settled upon these themes after digging through years of his personal “lessons learned” journal and collecting the highlights. The themes are (my thoughts in italics):

1. People – the absolute core of any business or organization
2. Brands & Marketing – Virgin isn’t focused on any industry but succeeds because of the brand
3. Delivery (Execution) – Without delivery on a ‘promise’ you won’t have customers

lanjut →

As you develop a growth strategy for your business there are a few important decisions to be made. The classic choice of what type of a company you’ll be is first; product leadership, operational excellence, or customer service are the basic 3. At some level all companies choose their identity using these 3 categories. You don’t have to re-invent the wheel, but can you just blatantly copy another company? Do you have to be different to be good?

When Harvard Business School’s assistant professor in entrepreneurship, Mukti Khaire, was asked about research he’s done about startup growth, he responded that the most surprising fact he found was that, “there was a very strong positive effect that mimicking older organization had on venture growth.”

Khaire said, “while I expected this based on theoretical frameworks, we have come to associate entrepreneurship with novelty so strongly that I was nevertheless surprised to see that mimicry was beneficial even to young firms that typically do not possess historical institutional baggage.” One startup founder said to Khaire in an interview he conducted during his research, “it pays to be on the bandwagon.”

lanjut →

During my adventures in China I read The 4 Hour Work Week by Tim Ferriss. The man is incredibly motivating and thought provoking in his quest to challenge the socially excepted lifestyle of differing retirement to the end of your life. He promotes spreading the fun and the work out and setting up means of income so that this New Rich (freedom of time and money) lifestyle  can be made possible…now.

The book starts with the process of identifying your dream adventures of knowledge, travel, and life exploration. Although I’ve already read through the book, I’m far from finished with it. I’ll be working through the exorcises and likely even the entrepreneurship aspects of the book over the next few months. Tim promotes the idea of a ‘muse’, a business that you own but don’t even run. By completely automating a source of income you can free yourself from having to “deal with it” and become what you dreamed of as a child.

As I brainstorm both my dreams and my potential “muses” I’ll be sharing much of the process/adventure here.

The really fun part is the dream identification process. Let’s start with this.

These guys literally have figured out a way to fly. By putting on suits that turn them into flying squirrels they’re able to base jump and stay airport with control for minutes at a time. This is def on the list. Thanks Mom for sharing this, now you can’t be mad when I do it :)

wingsuit base jumping

Amateurs built the Arc

Professionals built the Titanic

This is a talk given by Morten Lund, a serial entrepreneur and investor. He’s most famous for his investment (and exit) in Skype. Morten is truly honest with how he feels. You may take him as brash, blunt, maybe even crude or disrespectful but he tells it how he feels it and everyone who knows him speaks very highly of him.

Morten is a great example of the entrepreneurial spirit. He’s in it for the experience not the money. This is proven by his nonchelaunt response to his loss of about 40mm Euros from a print newspaper company that folded a few months ago. He’s quoted saying he was “happier as a poor student, than he was picking out a private jet, so who cares.” Try and get past his grunge euro appearance (which I think is pretty sweet) and listen to how brutally honest he is will his audience, his experience, and his passion.

Morten Lund speech at BIC 2008

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Many of you know that my search for a technical co-founder started here on this blog. I figured that if I needed help and a strong partner to help bring this dream to life I would start where I needed it most. SocialDreamium has now grown into a team of 4 passionate individuals and we are still growing.

We are gearing up and preparing to release our first product, whose name will be released soon, (while already developing our second) and were running into a few issues that we’re going to look to you to help us solve!

SocialDreamium is looking for a web designer/s, who love designing simple yet powerful user interfaces and clean images. Dave and I are very open to both ideas of bringing on another co-founder or managing member position into the SocialDreamium LLC and we’re also open to the idea of contracting the work out. We basically just want whats best for the dream…ium. With lots of passion and a limited budget, which we call a lean budget, we want to find a huge value in whoever we bring in. That doesn’t mean that we are going to rip you off. It means that we’d like to find someone who is motivated if not passionate about the end goal of this product, helping businesses and individuals grow communities better.

In the spirit of community I encourage you to repost, retweet, reblog, this call to the depths of the social web. If there are any questions about what we’re looking for please comment here or email me directly ryan[at]socialdreamium.com. The growth of this dream has thus far been phenomenal and I thank you for your support. We have a powerful product being built…please come help us make it look pretty!

Dharmesh wrote another post on why the economic resession is good for startups. I wanted to post 2 that I’ll be keeping closely in mind as SocialDreamium really picks up here in early 2009.

• You need constraints to build great software. If there’s one thing we’ve got plenty of in this economy, it’s constraints. Make good use of them.

• Constraints enforce discipline. You’ll need to, among other things, manage your expenditure, focus on making products that people actually want to buy, learn the difference between cash flow and profitability and figure out how to market on a shoe-string. Now is an excellent time to forge those skills. You will need them the next time things go bad.

• In difficult times, skill and hard work, which you can control, become more important than luck, which you can’t. I like this soccer analogy. If you want to compare my soccer skills with David Beckham’s then don’t put us both six feet away from an open goal and ask us to kick a ball into the net. I might get lucky, and he might show off and miss. Instead, start us off from the other end of pitch against a couple of defenders and a goalkeeper. Then you’ll get a true picture.

Starting a business is risky, but not as risky as you think. The oft-stated fact that 90% of startups fail within their first year is an urban myth. In reality, the four year survival rate for IT startups is over 50%, and there’s no evidence that this is significantly lower for companies founded in a downturn. And most start-ups that fail don’t crash and burn, owing people money and bankrupting their founders. They are quietly wound down, or sold on, and the founders set something else up or return to employment, with the added skills that even attempting, and failing, to build a business bring.

Dharmesh is an obvious thought leader and subject matter expert when it comes to software startups which is the direction that SocialDreamium seems to be taking. With the combination of his expertise and his optimism, I’ll be listening closely.

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• A Surfing Lesson for Entrepreneurs
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Tonight I was reading the Harvard Business Publishing site and there was an article that caught my eye. It was called, What Surfing Can Teach Us About Managing the Unexpected, and was all about responding to such tough economic times. The point was made, very well, that it’s not so important how we react to economic changes but more about how we prepare and position ourselves in a timely manor to take advantage of such turbulence. This point is hitting me strong as I think about timing and positioning, first I’ll share an excerpt from the article…

Instead of paddling around in circles as though we were in some calm lake, we need to learn to act like surfers — to place ourselves in the rising and falling swells, paddling forward while glancing occasionally backwards, so that we will be ready when the big wave comes. If we do that, we will stand up at the right moment, establish our balance, take a deep breath, and ride the exhilarating force of history all the way to shore.

Growing up surfing this analogy really make sense to me. When teaching surfing (I used to give lessons) I’ve always told people that “riding waves is pretty easy, but catching them is almost impossible”. This makes so much sense from a business standpoint too because the right business idea could be ridden out by many folks…these are called employees…sure it still takes work, but not nearly as difficult. What is practically impossible is catching that wave, starting and executing on the right business in the right market, with the right product, and the right people. Timing and positioning.

I’m encouraged that SocialDreamium is actual timed well and positioned accordingly. On Read Write Web today there was a post about how Tech firms are hiring Developers and Community Managers. This is a strong affirmation that the market SocialDreamium is going after is an important, emerging market with a need. If we can develop software that meets the needs and solves the problems that community managers are having we will be successful. But, we must also build the right team and focus on the right targets.

So far, so good.

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I watched the 37signals live show yesterday and Jason actually answered my questions about how they can justify the time they spend on writing books over the time they spend on developing new and improving existing software. He said they have certain individuals dedicated to dev and some to writing…simple.

I couldn’t repost the live show (if the embed code is out there please let me know!), so I decided to post this interview with Jason. With all that I’ve talked about this company recently you might think that I idolize the guy but I really just think that he and his company have very simple philosophies that drive a startup in the right direction. I want to strive to drive SocialDreamium in the same direction. I also like how he’s not really a techy guy but runs a web software development business. That’s what it’s all about baby!

I’ve struggled recently with where SocialDreamium will go. In it’s current state, less than 1 month old,  I’m still working on closing my first client for social web consulting, I realize already that eventually I will have a desire for it to grow far beyond it being solely services. For now, consulting is a very exciting source of revenue and probably the only space that I can add true value (for now). Not being a programmer I’m struggling with my inability to quickly build out an idea on the web. I’m learning (PHP, MySQL, API’s, etc) but I’m not patient enough for my learning to catch up with my ambition and ideas. So, where to go…

In constantly learning and looking for better ways to get going and better define which direction to go. I’ve found Mark Cuban’s blog to be an amazing resource. He talks about his experiences getting started, and more importantly the attitude he had to start successfully. That is exactly what motivates me to keep learning, keep growing, and keep dreaming.

In a recent post, Mark re-posted and older piece that he wrote on the importance and value of sweat equity:

The best businesses in recent entrepreneurial history are those that have been started with little or no money. Dell Computer, MicroSoft, Apple, HP and tens of thousands of others started in dorm rooms, tiny offices or garages. There weren’t 100 page long business plans. In all of my businesses, I started by putting together spreadsheets of my expenses, which allowed me to calculate how much revenue I needed to break even and keep the lights on in my office and my apartment. I wrote overviews of what I was selling, why I thought the business made sense, an overview of my competition and why my product and/or service would be important to my customers, and why they should buy or use it. All of it on a piece of yellow paper or in a word processing file, and none of it cost me more than the diet soda I was drinking while I was writing it up.

So, why is this encouraging ? Because right now I don’t have a lot of capital, I don’t have a lot of time to go hunt down VC’s or funding, but I do have the motivation to come home, every night from a full days work and continue, on MY work. I work on ActionsTalk to continue to build a reputation within the startup community. I blog here to educate myself and communicate with a vibrant and intelligent community of readers. And now, with the formation of SocialDreamium I’ll work to help clients utilize the social web to drive improvements in their customer relationships and their bottom line.

But I know that won’t be enough. I want to develop tools that businesses can use to make social media easier and more valuable. I want to be able to teach small businesses to utilize the social web using my tools. This web thing isn’t that tough but it does have to be taught and demystified for the masses, I want to lead that charge. The only problem; those tools aren’t developed (yet). So, if you have or know where I can find the resources to get those tools developed please let me know. I want to build this from the ground up. I want to utilize the free web and drive huge profit for clients. Will you help me do that?