“It’s a Feature, Not a Company” – Build a Company

This is a line that was pretty common in Silicon Valley until recently. Steve Jobs even (ab)used that line on Dropbox when trying to buy them out of the market (They turned him down.)

Now that’s all changed, for the moment. The threshold for “company” status is very low, including the following list of minimum pieces at their lowest cost.

1) a url – $10     2) incorporation – $200      3) Internet – free      4) build a website – free      5) development tools – free     6) office space – free – home, starbucks, hipster coffee shop

In other word, the barriers have dropped if you’re willing to do most things yourself, which is a good thing. You still need an amazing idea , business model, some focus from a developer (critical!). You can create a single feature “disposable” company, nothing wrong with that, it’s a learning experience, fail fast, etc., it might even create some value and get acq-hired. And It’s a lot better than talking to folks for a year about an idea that never materializes.

But that’s not the way to create a company that can live and grow for years. In doing that you have to be honest with yourself, make some sacrifices and seek continuous enhancement of your entity. In the world of easy startups, everything is a startup, people drink their own koolaid too much.

Here are some great ways to maybe move into higher ground:

  1. Seek outside criticism and listen to it. Put on your flack jacket and let ’em rip you up. Be open to changes but don’t be a wimp either. You may see something nobody else does, but listen.
  2. Pay those you ask to help you – money, equity, trade services, something meaningful. Give them incentive to help you think straight. Make sure you pick the right mentors with track records. Never ask for something for nothing, you’ll get what you pay for and a bad reputation fast. Better yet, pay it forward. This is an area where strong developers actually have a lot to trade these days, but usually try to do everything themselves. Not likely to succeed.
  3. Diversify – get people difeerent than you involved as team members – different genders, races, ages, expertises. Here’s a great 3 minute talk on this by Stanford prof Kathy Eisenhardt  http://j.mp/UaVjky

So look for the opportunity to build a company, share the wealth, and seek higher ground.

follow me or DM me @tomnora

Is #NewYork the Next Startup Land of Oz?

A few things have happened recently to cause me to look a little closer at NY for the next amazing companies in Internet technology. First, a friend announced that they were moving their startup geo-lo based company from L.A. to New York; Second, I caught the recent live stream of the Disrupt NYC Hackathon; Third, A New York Times article about how NYC’s “allure” is increasing.

I know, it’s a very expensive place to live and do business, lots of traffic, etc. I’ve done it before. But if a Tipping Point could be created there it could over come the costs. Here are some of the factors:

(1) Amazing Engineering Skills – Let’s just start with the big one. There is a highly under-known fact in the software engineering world – many of the best developers and architects are not in Silicon Valley, but in the New York metro area. Between AT&T, the Financial houses and all the great local engineering schools they’re not only the best but there are a lot of them. C++ and Object Oriented design were invented at AT&T, and there are many more examples. New York developers have less attitude, more performance. They’re expensive , but a very large and strong group.

(2) Long Term Scalability – See #4 below – Over time, s a comapny tries to get into a rhythm of continuous growth, they need to develop a reliable growth model. To do this you need human resources beyond techo-nerds – sales, marketing, strategy, bus dev. These people abound in New York. You also need infrastructure and friendly government. Again, New York blows California away here.

(3) Mentor Network – Retired Fortune 500 executives, Harvard/Princeton/Yale scholars, Financial Industry experts, many successful entrepreneurs.

(4) Respect for BUSINESS – Sales, Marketing, Advertising, Strategy were all practically invented in NYC.

(5) Diversified Portfolio of Industries – The best startups draw from several disparate industries around them to be able to grow and learn and diversify. New York is the Fashion, Financial, Art, … (fill in the blank) capital of the world.

(6) Spirit – Nobody has has the same type of spirit as New Yorkers; you know this if you’ve ever been there, especially if you’ve done business there. It has some kind of magic in the air.

(7) Night Life – Many budding high technology centers aren’t the best in terms of top cultural options and the best restaurants. Well, New York… no need to explain.

I could go on, but the combination above is plenty for a startup tipping point. Just watch the Disrupt videos, they’ll give you a glimpse. I’vealways loved New York and doing business there, even though I’m a born and bred Californian. Now they’re heading toward my niche, very exciting. Maybe Zuckerberg should’ve put Facebook there instead of Silicon Valley. Maybe FB stock would be going up instead of down right now.

[Facebook Stock Could Fall Twice as Far Before It Hits Bottom]

@tomnora

CASH IS KING. Or is it?

Aurum Rex. Nummus Rex. Emptor Rex.

I.e. Cash Is King. An old sayings, but so true in the startup growth equation. Where does revenue fall here? Is it more or less important? What about Strategy? Revenue? Growth? Buzz? Profit? A “Right On” product?. Smart People? Ambition? Your position on the Bell Curve?

When a startup has none, cash seems like liquid gold that can flow over the business and cure all – salaries, resources, exposure, growth, success, new offices, marketing. But often entrepreneurs fool themselves into thinking that lack of cash is their only problem. I’ve been involved or almost involved in so many early stage companies that said “If only we had $XXX in cash, everything would be o.k. Sometimes they get the new cash but still can’t scale or survive. Cash is certainly required to play, but it has to be part of a larger system, purpose, goal.

Venture capitalists, controllers of cash, are always looking for mind blowing new things that can “change the world”; can step out in front of our regular world and catch fire, anticipate what the world needs that no one else has figured out yet. And they have cash, high risk cash, to take a shot at being part of these new phenomenons. They get in early and guess at the future, which means they could be often wrong. But that’s not a problem; they only have to be right once in a great while to win big. That’s the game they’re in. What an exciting job!

On the other side we have the yet-to-be-funded or need-more-funding startup. Whatever cash is in this company is less than enough to spark it to the next level quickly enough to meet the business goals, or often just to make the next few payrolls. Is this you?

So what about REVENUE? Revenue is close to cash in it’s power within a startup. It can solve so many problems, including cash issues. It attracts more cash investment, it creates profits, it legitimizes your business. Revenue has to be managed properly and leveraged wherever possible, but those are good problems to have. It’s eventually more important than cash, especially when it’s steadily and predictably growing. Growing revenues, not cash, create higher valuations.

Early on, most startups focus more on adoption, eyeballs, users, traffic, assuming these will infer and convert to future revenue (Twitter, Google, Zynga, Facebook).  The actual cash on hand and/or revenues don’t fully support the business, but no problem if major growth is apparent.

So is that it? User adoption? For Twitter it is, they’re currently at a valuation of 40X revenues, way high. But there’s no question that they’re permeating the globe, possibly with more longevity than Facebook.

The bottom line is value. What value, how many valuable things is your company providing. What’s better, cheaper, faster, unique, easier. Google is a great example of amazing and increasing value to user. It’s all of the above, mostly free, with an attitude of always wanting to provide more to its users while simultaneously simplifying use of everything digital.

Early on Google didn’t focus much on cash or revenue; they eschewed it, they had a higher goal – organize all the worlds information. Their goal and execution of it was most important to them. Of course they also happened to be a few blocks away from the highest concentration of venture capitalists on the planet, but they went 3 years without VC funding. Their first 2 years they had no revenues and received only $100K in funding, from Andy Bechtolsheim.  A year later they raised $25 million. Their great ideas and excellent execution came before any cash.

So maybe cash shouldn’t be #1 for an ambitious startup, rather amazingness should, true passion, even if it’s nights and weekends around your day job.

@tomnora   @cowlow   @norasocial