The Bullshitting CTO – advice for non-technical founders

Posted: June 2nd, 2010 | Author: | Filed under: posts | Tags: , , , , | 1 Comment »

I was chatting with another startup founder recently who was talking a conversation he had with his CTO and what the CTO had told him about a recent issue with their site. Some data had been lost from the site and the CTO apparently immediately started putting blame on some unknown “user error” as the cause of the unknown glitch. This is despite the fact that there didn’t seem to be any relevant connection between any of the functionality on the admin backend and the data loss that had occurred. Fortunately, there were backups and the data was able to be restored, so no real harm done (aside from frustration and lost time). However, what was more interesting was that the situation was apparently only one instance of many similar conversation – strange technology issues occur and the CTO has no clear explanation for what happened.

Startup founders, especially those with no technology background, if this happens to you – stop. Stop letting your CTO get away with providing vague explanations for what happened. Stop letting the CTO off the hook. Everyone who uses a computer knows that technology doesn’t always work right. Startups are, more often than not, dealing with a combination of bleeding edge platforms, compressed time schedules, and lack of sleep – a cocktail that can be exciting, but results in a higher than average percentage of software bugs.

The issue is not the bugs. They are expected. Any founder who expects a system to be bug free is dreaming. The issue is a CTO who can’t explain the issues that occurred, or, more likely, doesn’t want to take responsibility for the issues. And even more importantly, the implications that this has for the technology side of your business.

Founders with no technical experience are in a difficult position in startup world. So much of a startup’s life is centered around the technology. As the company moves from customer development to product development, for someone who doesn’t understand the tech, the startup world becomes a wild roller-coaster ride with the CTO in the drivers’ seat. Make no mistake – you are more or less at the mercy of your tech co-founder if you don’t understand the tech, so you had better pick a good one.

A good way to look at this is what if your CTO walks away – do you know how to access the code, how the architecture is setup, how to get into the various administration tools, how to access the backups? Ideally, the question is yes to all of the above, but startup world is chaotic. New systems are being added, servers are reconfigured – change is ever present. Are you up to speed on stuff?

So, what’s the point? The point is – if your CTO can’t take responsibility for a tech issue that occurs, if she won’t walk you through what caused the issue, if he doesn’t do a root cause assessment and explain the results – then you are living on the edge. If your CTO can’t own up to one issue, how much other stuff is going on that you have no idea about?

Let’s be very clear – if you are in this situation, then you have a relationship with your CTO where the balance of power is skewed and the wellbeing of your company is at risk. You need to get clarity into what’s going on over on the tech side and restore the balance of power, and more importantly, rebalance your relationship where you’re getting truthful explanations from your CTO. Or find a new one. Heed the warning signs and protect the company.


Why I Left IBM

Posted: May 31st, 2010 | Author: | Filed under: posts | Tags: , , | 2 Comments »

I was recently having a conversation with an aspiring entrepreneur and the topic of why I left IBM came up. It’s been just over a year since I left the consulting world and joined Three Screen Games full-time to lead the product team – I left May 1, 2009 – so I have a bit of perspective on the decision now.

Why did I leave IBM?

First, let me say why I didn’t leave: I didn’t leave because I hated the company, the work, or the people. Almost without exception, I loved the people that I worked with. If you want to get to know your co-workers really well, go into a high-travel consulting job where you spend each and every week with your co-workers in a strange city. Where you eat more meals with them than you eat with your family. Where you sleep in a hotel room down the hall from them. You get to know them better than pretty much anyone else. I really enjoyed the people that I was working alongside – hugely talented, driven to do the right thing. I have a great respect for IBM in its ability to amass a formidable talent pool. As for the work and the lifestyle, I loved the consulting life – seeing different companies, each with its own culture and unique challenges.

So, why did I leave? In short, I’ve known for a long time that I wanted to be involved with a startup. After doing independent consulting during high school and college, I knew that I had the entrepreneurial bug. I initially went to IBM to see how the “big guys” solved all of the consulting issues that I ran into when I was working with clients independently. Finding that many of the issues were the same, just multiplied by millions of dollars, gave me a lot of confidence in my abilities.

While the people were great and I enjoyed the lifestyle, I was frightened of becoming complacent. I was afraid of getting to the point where I became used to the salary and the lifestyle. Flying around in first class, working on high profile projects, earning a nice salary, stock options, etc. – it’s all really easy to get used to. I knew that once I became used to it all, I would reach the point where I wasn’t able to take the 100% paycut to join an early stage startup. And so, I was afraid of somehow missing the ability to pursue one of my goals – helping to create a company from the ground up.

James Kwak does a really great job of describing what I was afraid of in his recent post Why Do Harvard Kids Head to Wall Street?: “…[O]nce you’re in the door, the seduction begins….Your expenses grow to match your income. As the decades pass and you realize that no, you’re not going to save the world, the money becomes a more and more important part of the justification. And when you have kids, you’re stuck; it’s much easier to deprive yourself of money (and what it buys) than to deprive your children of money.”

I think often we know what we should do, but it’s hard to actually go and do it. It certainly doesn’t get any easier with time, and in many cases, things just get harder. It wasn’t exactly an easy decision to make, to decide to leave my position last spring, with the economy still uncertain, and still getting a lot of experience and having a lot of mileage left in my career at IBM. But I knew that it was one of the few opportunities I’d ever have to take the leap, and I’m very happy that I did.

Part of this is the self-awareness that I believe is needed to be effective as an entrepreneur and wrote about earlier. In this context, do you know what you need to feel confident enough to make that kind of a jump? Is it a strong team, some validation of your concept, an early customer? Figuring that out will help you recognize when you’ve made enough progress to make the move. For me, some of that was having a business partner and a team that I was confident could hold up their end of the bargain, and having a top notch group of advisers through DreamIt Ventures. (Having people in my life that supported the decision and encouraged me was a big part of it, as well.)

Who knows where things will take me next, but I consider myself fortunate to have had the courage to take advantage of an opportunity and accomplish one of my goals for myself.

….

Back to the anecdote that inspired this post – the aspiring entrepreneur that I was talking with was unhappy with the ‘big company’ internship that he had for the summer. It wasn’t going to give him the experience that he was hoping for and would be essentially worthless busy work day after day. He had pretty much already made up his mind before talking to me, but perhaps some of these thoughts helped him feel less crazy for walking away from a “perfectly good job”. In my mind, as I discussed with him, if you’re not getting the experience you want, especially when you’re young, there are few reasons why you should stick it out and so many reasons why you should take the leap to follow your dreams. After all, you may not get another chance.

I have a quote from Steve Jobs on my personal home page that I think speaks really well to this point:

“We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, you know? So this is what we’ve chosen to do with our life. We could be sitting in a monastery somewhere in Japan. We could be out sailing. Some of the [executive team] could be playing golf. They could be running other companies. And we’ve all chosen to do this with our lives. So it better be damn good. It better be worth it. And we think it is.”

This is your life. Make sure you’re getting what you want out of it.


A Different Way to Look At Group Projects – Who Makes You Successful?

Posted: May 24th, 2010 | Author: | Filed under: posts | Tags: , , | 6 Comments »

A fruitful behavioral interview question is to ask about a time when the interviewee was working in a group and they had to deal with someone who wasn’t cutting it. I say it’s fruitful because it usually is always asked and therefore, since candidates know it’s coming, they have a thought out answer for it. The question usually attempts to get at how the person dealt with the issue – did they work with the student to resolve it, did they work with the professor, etc.

It can certainly be interesting to know how people handle themselves in difficult situations. However, I think for entrepreneurs, there is a different, more telling way to look at this theme. You want to get at what did the person learn about who makes them successful.

As I’m finding out, entrepreneurship is everything you expect from hearing about it – it’s fun and rewarding, it’s also confusing and downright tough sometimes. And it’s a constant roller coaster from good days to not so good. There’s some debate about whether you need a co-founder in this modern age of startups, but the plain truth is that it’s hard to succeed, in general, with startups and being alone doesn’t add much to your chances. I’m with Paul Graham on this one (see #6). The point of the Business Insider article is that you have slim odds of finding a co-founder that you align well with.

So, steering back on topic – figuring out who makes you successful.

In most groups in school, students are lumped together in groups, usually at random. But when it’s over, did they figure out who they worked well with any why? Did they distill that thought nugget down, so that the next time they get to pick who they’re going to work with, they know what traits they should be looking for?

Each person usually has specific types of people that they work well with. Maybe a visionary works well with an organizer. Or an organizer works well with a someone who’s very driven and motivates the team. Regardless of the specifics, I think its highly important for people to figure out who those types of people are for themselves and to do so as early as possible. Then, as you meet folks and make connections, you can seek to build relationships with those that align with the type you’d work well with.

This is a critical concept for entrepreneurs. The team is everything – it’s one of the three critical legs of the stool. If you know more concretely who you would work well with, that should go a long way towards helping you to figure out who you want to co-found a startup with.

As I started to discuss in my post on the first two steps to encouraging entrepreneurship, I think a big part of learning to be an entrepreneur is learning to be cognizant of things that most people notice, but don’t take note of or take action on. In much the same way as you need to train yourself to recognize the market “pains” that product opportunities create, you need to train yourself to note who you work best with, what personalities are most compatible. It’s almost like an entrepreneurial variation of Situational Awareness, perhaps a combination of the three levels. Regardless, being able to make those observations and and pushing to distill them down into something more actionable is key and if you can figure that out, you just increased your startup’s odds.

So, focus on who makes you successful.


Can We All Succeed?

Posted: May 17th, 2010 | Author: | Filed under: posts | Tags: , , , , | 7 Comments »
There's more than one route to success

The list of startup accelerators I’ve been cataloging has grown larger than I expected. We’re now up to 93 programs, in many corners of the world.

I think it’s fantastic that there are many people working to encourage entrepreneurship. It’s wonderful for the aspiring entrepreneurs and an extremely positive development for the innovation that drives our economy.

There’s another aspect to this growth that I’ve been discussing with several accelerator alumni and other entrepreneurs recently, though. That is: I wonder, though, if aspiring entrepreneurs are getting the right message about what ‘success’ is, as people rush to inspire and motivate these business moguls of tomorrow.

There seems to be an unstated message that success for entrepreneurs in today’s world is to raise a six figure VC round and scale your business to millions and millions of users. Funding = validation and its build a massively scalable business or fail fast. As a culture, we’re captivated by the outlier success stories – it clouds our visions. Really difficult challenges become simplified in our minds to make the impossible seem within reach. Things like: “After all, it’s only a matter of fine tuning your user acquisition formula and then just dumping gallons of virality fuel on the fire…” (Simple, right? — Because money burns really well!)

Seeking validation from investors by way of filling the bank account with other peoples’ money becomes the goal. Right from the get-go, entrepreneurs are planning how they can go from 0 to 1,000,000 rather than 0 to 1,000. My friend, DJ Stephan, Chief Marketing Officer for Notehall.com, likes to say “It’s like setting off to build the next Empire State Building when you haven’t even even looked at the construction plans for a one-story house.”

Now, to be fair, no entrepreneurship professor, speaker or mentor I know or have heard of has ever stood up and defined success like that. But just look at the headlines that are being featured. These are the role models that entrepreneurs are watching.

$2m to Newsy in series A round. $3.6m to HelloWallet in series A round. $6m to WordStream in series B round. $7m to Critero in series C round. $23m to Invidi in series D round. And that was just in one week.

Building a so-called “lifestyle business” is a dirty word, apparently. (So much so that Josh Kopelman put out a call for a new term.) I’ll use sustainable business.

I get it. Building a business that doesn’t sell for hundreds of millions of dollars to Google isn’t as sexy as one that does. It isn’t the splashy news that TechCrunch wants to feature. It isn’t as cool a story to tell your friends.

Is that ok?

A sustainable business that brings in more modest revenue is still a driver of innovation and economic development. It still can beget the entrepreneur life-changing money. Perhaps more importantly, it gives them experience and a success to someday parlay into another venture. It keeps them in the entrepreneurship game, rather than putting it all on the line, burning out, and not giving it another go.

And the probability of success is higher. It is likely easier to figure out how to create a useful business for your 40,000 fellow students than 400,000,000 Facebook users. And once you figure out how to make modest money from one market, it doesn’t necessitate putting all your chips on the table to see if you can turn on virality faucet.

It’s not that it’s wrong to aim for the stars. But after evaluating that option and finding that it might not be fully baked, it should be ok to aim for something more reasonable and to have that success celebrated.

There are only 600-some venture capital deals per year in the US.1 Assume that a percentage of this activity is series B/C/D financing, leaving only a portion of these deals for seed-stage / series A investments. Let’s assume 50% are seed/series A, to be generous — so, 300 VC deals for new ventures. Now, I realize that not all of the 93 accelerators on the list are in the US nor are all companies in the accelerators VC-fundable and not all of these VC deals go to accelerator-launched startups, but if they were, that would be ~3.22 deals per program. Assume each program has ~10 startups. So, on average, that’s 7 startups that aren’t getting funded, per program. The real number is actually much, much bigger. Are these entrepreneurs just going to give up and go home? If they define success as raising money, they might as well. Even if you include angel deals, there is not enough dealflow for each company to define success as finding follow-on funding.

Sometimes I feel like with the age of tech startup businesses, the focus is exclusively on building a product that people want. Entrepreneurs forget first and foremost that they are setting out to build a business. As in something that generates money. With not enough “Other Peoples’ Money” to go around, some of these companies are going to have to push the envelope and actually create businesses that generate revenue from day one.

Fortunately, there is more than one way to build a company than to focus on raising VC funding. Let your startup evolve and see where it goes. If VC funding is the right way to go, great. But just because you don’t build a company that fits with the pattern VCs are funding, it doesn’t make you any less of an entrepreneur. Let’s make sure we define success appropriately.

Entrepreneurs know in the back of their heads that raising funding is unlikely. Still, the temptation is there to keep telling yourself that the metrics don’t apply to you. With the number of accelerated companies seeking follow-on funding, the writing is becoming more plain on the wall. If entrepreneurs knew up front that building a VC-funded rocket ship wasn’t feasible, would they still think it was worth the long hours, the lack of pay, the risk, to build a successful business that is a bit smaller? Enough to get started?

I hope so. And I hope that the mentors in the 93 startup accelerators around our world are conveying that message. The message that explosive growth powered by VC rocket-fuel or smoldering ruin aren’t the only two options in entrepreneurship. After all, we can’t all be in the first group – another direction is perfectly ok, too.

  1. Number of software-only VC deals in 2009 based on the PwC MoneyTree Q4/full-year report was 619.

Steve Blank mentions the Startup Accelerator List!

Posted: May 14th, 2010 | Author: | Filed under: posts | Tags: , | 1 Comment »

Wow – when someone who has changed the thinking of entrepreneurs around the world mentions your work, it’s incredible. When they do it in a venue like the Startup Lessons Learned conference, it’s humbling.

Steve Blank’s Four Steps to the Epiphany has truly transformed the early-stage startup world. My co-founder and I both recently read the book and it changed the way we look at the process of building an early-stage startup. At the DreamIt Ventures kickoff event for this year’s cohort of startups, it was incredible to see the number of companies that are starting off the right way – with customer development first.

Imagine my surprise when my co-founder passed along Sean Murphy’s recap of Steve Blank’s SLL Conference talk with a note “Steve Blank mentioned your blog!!!!!!”. :)

Sure enough, on slide 13 of Steve’s deck, is a reference to the list of startup accelerator programs that I kicked off my return to blogging with back in January. I had been through the deck and would have missed the reference without my co-founder’s sharp eyes and Sean Murphy giving it some extra emphasis.

Wow! Thanks, Steve! It is exciting to see the ideas from your book – the better way to build a startup – clearly taking hold in the early-stage startup world. And it is encouraging to see so many entrepreneurs using a better process for changing the world. I’m happy that you found my post helpful for a part of your message!

(See slide 13 :) )

If you haven’t seen Steve Blank’s presentation from the Startup Lessons Learned conference, I highly recommend it. And if you haven’t read the book, go right now and buy a copy – it’s required reading for startups.


Three lessons learned from my early days of releasing software

Posted: May 7th, 2010 | Author: | Filed under: posts | Tags: , , , , , , | 1 Comment »

The other day, I received a call from a user of one of the software products I developed, back when I was running my own web development consulting firm, Shedd Technologies International. In addition to doing pure client work, there were several products that I packaged up and made available for use – some as freeware, some as commercial software. It’s been many years now since the products were actively developed and I was impressed to hear that they’re still proving to be useful.

The call provoked some thought about what I learned from the process of developing and supporting a set of packaged software products. This is a fairly long post – it’s part reflection for me, though I would think it would be also be potentially useful to any other young entrepreneurs looking at building software products.

We all have so many different experiences in our professional and personal lives. It’s really only after these are over and after you look back that you start to see what you learned from the experiences. There’s certainly a lot of value that you can get out of taking a look back, though, and this is a process that I’m going to try to do fairly regularly going forward. Especially with startups, the day-to-day is so crazy, I think it will be useful to take a step back every 6 months or so to reflect on what we’ve learned, what worked well, and what we can improve upon. But for now, here are some reflections and lessons learned from the start of my career with technology on the web”¦


 

Background

First, the background:

Not long after starting consulting work, some client project work led to several pieces of software being developed, which lent themselves to release as packaged products. For a site needing a photo gallery, I developed the code that became a simple script called PhotoGal. Another client needed an affiliate management system and this was extended into Affiliate Manager, which was because a commercial product that I sold under a consulting model ““ base license fees + fees to install and adapt it to your individual business. There were also two products other products developed, as well, which were not extensions of consulting work. Support Services Manager was created as a helpdesk tool for internal use, but was released and really only used by external users. DLMan, a digital product delivery system, was perhaps my most concerted attempt to develop a packaged product.

There are a lot of lessons that I can pull from this work. As a whole, my software products were moderately successful, depending on your metrics. While it’s hard to estimate the actual installed base, Support Services Manager (SSM) was widely downloaded with more than 20,000 downloads, in addition to being packaged into the Fantastico web-hosting control panel tool. PhotoGal probably had around 5,000 downloads. For the commercial products, it’s much easier to gauge, because of sales figures. Affiliate Manager had a small user base, seeing use with a handful of clients. DLMan was more successful, at least in terms of revenue.

DLMan took about a week of development effort to build out for the first release and went on sale for $45/license + additional charges for installation and extension modules. If I was billing the development time at what was my standard consulting rate, the product would have roughly broken even. DLMan did drum up a steady business in related consulting, modifying the product to suit a variety of purposes and industries and this business certainly helped make the product worthwhile.

Certainly, in terms of users or sales, I didn’t have any blockbuster successes. Still, the process of developing the software, supporting it, and learning what users really needed was most important, though, and gave me a number of lessons that I have pulled from as my career has progressed.

At a high level, developing the software gave me a better understanding of what it takes to write a system from scratch and made me a better consultant with this ability to look at systems with a deeper perspective. Supporting the software also put me in touch with the people actually using the code and showed me a whole host of new considerations to take into account when building products, along with the value of actually speaking with customers. I also gained experience with pricing, discounts, sales, and numerous other important points. But perhaps most important was that I learned about what’s really critical in terms of releasing software.

 

Lesson Learned #1: Being Open

Being young and naïve, the products were all released under a fairly restrictive license that I wrote myself. I wanted to keep people downloading the software through my site and was unsure what opening the code up under a full OSI-compatible license would have meant.

This is something that I still see today. There is this instinct, that because you built something, you want to hold on to it and try to find some way to benefit from it.

In retrospect, the better road would have been the open source road. While I was concerned about keeping control of the code and limiting modifications, this was counterproductive to what I should have focused on – increasing adoption and getting the code into the hands of users – building a community around the products. As mentioned above, much of the revenue generated from these businesses was actually in the consulting work and customization of the initial products. Not only would this not have been affected, it probably would have increased, because adoption would most likely have increased from having a less-restrictive license. As a result, being open probably would have had given a nice benefit to the bottom line, in addition to being the right way to do business.

 

Lesson Learned #2: Keep Updating

Looking back, the markets that I got into were good choices and the products were well timed. SSM came out about 6 months before PerlDesk (one of the most popular helpdesk scripts at the time) and its integration with forum packages was something that distinguished the product (and drew a userbase). DLMan didn’t really have many competitors upon release, though a SaaS-based offering was released soon after (which was before many of the digital-download enabled shopping card packages).

After the fun of building a product was over, though, and having lots of new ideas, I was usually ready to move onto another project. I would still actively work with users needing help through the forums, but in terms of new releases, they were very rare. Other offerings coming into the market combined with sporadic updates to my software was not a good combination and led to a declining userbase.

 

Lesson Learned #3: Remaining Focused

Following SSM’s release, I kept looking at new competitors that were emerging and their larger feature sets. The one SSM competitor that was really noticed was PerlDesk (as mentioned above). I’m not quite sure of the exact cause, but PerlDesk got a lot of attention following its release and gained a big following. The feature set was roughly the same at the outset, but PerlDesk kept releasing and adding new features. There was a lot of temptation on my part to match their additions at first, but then the gap got quite large and I lost my inspiration for the project.

Rather than suffering from feature-envy, I probably should have gone the other direction and kept SSM as a streamlined, optimized helpdesk tool. One aspect of 37 Signals’ Getting Real methodology that really resounded with me was the focus on getting something useful out to the users and keeping the feature set lean. Most of the features competitors had were nice, but not essential. Creating an effective core product that worked really well, and then working as hard as I could to listen to customers, would have been far more effective than succumbing to trying to match competing products feature-for-feature.

 

Retrospectively, there were certainly many choices that I could have made differently which would have probably resulted in a more effective product strategy and increased adoption/success. Still, the work certainly proved its value in terms of building my core consulting business and also teaching me a lot about critical success factors for software products. My overall product strategy was decent, at least in terms of market timing, since I found real need in markets that heated up soon after I entered them. But the most valuable thing I got out of the experience was learning how to take a product from concept to functioning software, satisfy customer needs, and what worked/didn’t work in terms of making that product successful. For that, the experience was highly useful and I’m glad that I had the courage and foresight at the time to take advantage of it as much as I did.