The birth of a startup

The birth of a startup is a fun but painful state to be for the entrepreneur.

I am a mentor at MIT's Venture Mentor Service, and I also hear from lot of you from this blog, so I do think about a lot about startups.

I came into that state recently when I interviewed Tony Conrad of Sphere for StartupStories. It was about an early stage startup from a passionate entrepreneur, whose passion for his startup just lingers on and I cannot stop thinking about it, I dream about the growth of that startup, think about challenges and fun options and begin analyzing that startup as if I were part of it. Would they take up this idea, what are some of the execution challenges, is this a real direction, can they monetize this way .. Oh the crazy mind of an entrepreneur!

I went through that with Coola, my first startup. My co-founder had another finance idea better developed, and we took it to Fidelity. Its still a viable idea even today, which we thought we were not well equipped to scale then and did not pursue. More important, I did not feel the passion to give me the adrenal required for the crazy hours.

Entrepreneurs can go through a lot of cycles to find that new idea.

The funny thing is that this stage is the awakening of the entrepreneur in you! You would do this if you woke up with an idea and went to check it out. There are two simultaneous path to pursue, one is to validate the idea, the technology behind it and find people who know the technology or space to bounce off the size of the idea. Other is to check frantically whether someone else if solving the same problem. I heard an investor say that if its a real problem, chances are that 2 more people are trying to solve it in the world and its validation of the idea.

Life gets crazy when the entrepreneur in you is woken up and you don't own one idea but have several new ideas. The challenge is to focus, its easier said than done. You still have to chase multiple paths and check the viability and find the team that can help scale the idea, but figure out which is the one for you and own it, dream it and nurture it with your whole heart, mind and soul.

Personally for me, I iterate between these modes, but my real startup is born when I have a team, then its real for me. Its a commitment of my time and my partner. That makes me look at all the ideas on the table in different stages to focus and put my entire energy into one. If you have done it before you know its people not ideas that matter.

Its scary to see many new entrepreneurs today, with lot of tech ideas, but wasting their energy by dissipating it among a bunch of ideas. None get to the next level. Worse is if they muddle up all the ideas and try to bring them to one startup. I am not kidding, I've myself attempted it once. In some sense I see that as an early stage of the growth of an entrepreneur.

We can dream up ideas, can try to figure out what is viable, chat with friends and dream up options. Some take it further to validate an idea with who they believe are customers or market experts. Many loop at this stage because they ask too many questions too soon and theorize on having all answers.

Real entrepreneurs grow up to the next level when they learn to focus, and push their execution plans to their limits and dare to find people who can complement their skills and make the plunge to execute and find the real answers - thats when viable startups are born.

StartupStories - Real Stories. Real Inspiration.

I have been writing my own startup experience here. I am amazed by the number of brilliant smart entrepreneurs who contact me and wish there were more honest information out there for people starting up.

The biggest challenge new entrepreneurs face is to insert themselves into the startup ecosystem. If is no different from moving to a new school, job, church or city, you have to be in it to become part of it.

I've talking to some of you about how to expand this to bring in real experience of more entreprenuers beyond me.

I've partnered with a friend and begun writing real, inspiring stories of entrepreneurs at StartupStories.com Our real success would be when people get inspired and become entrepreneurs. We decided to keep it a clean layout and not even ask users to post it on reddit or digg. We want real market feedback.

I've been an Internet geek and entrepreneur since the early boom of the web. I've worked in Marketing in large companies and have used the latest tools and techniques for reaching customers and users.

Still, it never ever ceases to amaze me when I sense a new user's excitement on the net, accepting value that I've worked to build for them!

On thursday, a user posted our first story from StartupStories.com to Reddit.com.Today's consumers know their power and quickly users voted up our article to 238 points and we were on the front page and got tons of users, comments and lots of subscriptions with the hope that we'll offer more such stories.

We've built a pipeline of more stories and I am having fun meeting interesting people. We are focusing on real stories of people on how they got started from an idea and their values in growing their startups, finding business models and their exits and on the early funding cycle.

Is there any person's story or specific startup topic you'd like to see from someone's experience? You know, I'd be sure to get it for you.

Web Innovators - Energy of entrepreneurs

I attended Web innovators group in Cambridge, MA last night along with 150 other entrepreneurs, couple VCs and a leverage buyout firm person.

David Beisel of Masthead Ventures heads the group and is organically growing it like an entrepreneur. It was good to see David after so many years as I last saw him during my second round funding cycle for Coola in 2001.

What I like about Web Innovators Group:

• Well planned, name tags ready from the wiki RSVP.
• Structure of the evening was 2 startups get 6 min each, and there wer e5 or 6 other startups (called side dish) with their tables on either side of the room.
• Rest of the evening was open for networking, and the energy of the room was amazing.
• No vendors peddling any ware.
• No one asking you to signup or pick any brochures.
• The presentations were real people, honest comments. Where else would you hear an entrepreneur say to a crowd that they have maybe 4 business models.
• Quality of crowd was good, everyone as eager to network and moved around a lot, which offered better randomness of meeting an interesting new person within 5 minutes.

What can be improved:

• People can write what they are looking for specifically in the wiki during RSVP or in a separate section. Some were looking for a specific type of developers, there were developers looking for cool startups.
• Could promote more Q&A of each presentation to help the presenting company and also to help us understand the company/market evolution of players better.

Summary of presentations:

Grazr - Mike Kowalchik - real honest conversation, has cool potential. Was honest about their options for different business model. Company worth watching.

Calabash Music - Brad Powell - very canned presentation, maybe he was tense. But wonderful product and site. It surely has potential to become the next big music site.

“Side Dish” companies, who gave informal demos during the socializing portion following the structured presentations:
FineTune - Mykel Ruvola
Startup Business School - Richard Banfield - I believe that entrepreneurs are all brilliant in their areas of ideas and many need help in building out the business. Richard seems to mean well, but I heard from many in the room wondering why an entrepreneur would trust and pay for canned startup knowledge.
radeo.net - Paul Cosway (founder) and Darryl Pomicter (bizdev guy)- Cool URL. Web 2.0 has some trends and some anti-trends. They were clear not to call it an audio search engine. Worth checking out.
Citysquares - Ben Saren, our local search engine building all of local stores info for us. They have the usual users vs business customers, need one to get other dilemma. The team seemed upbeat and may attract some investor soon.
Offertrax - Ron Pruett and Ben Carcio


Some interesting new people/startups I met:
Dharmesh Shah of Onstartups.com, an amazing mind, he articulates ideas as well as he writes his blog.
Coach Wei founder of Nexaweb, an amazing entrepreneur who survived the bust of 2000 and has built a beautiful enterprise web 2.0 company.
Josh Schanker of Sconex, the high school online site.
Anna Denton of "Boston Where" with a cool new startup idea.

It was flattering to meet couple readers of this blog. Thanks folks :-))

All in all, an evening well spent. It validates my belief that there are growing number of entrepreneurs looking to find each other for support and all entrepreneur networking is not to raise money.

New Entrepreneurs lead markets by making them

I came across an old web entrepreneur who is doing all the right things, is passionate about his idea, has tons of experience but somehow sounds boring compared to a young web 2.0 company who is in his space. I feel sorry for him, but got the Aha about something fundamental about being an entrepreneur.

Real entrepreneurs are not the ones who use the latest jargons but ones who personify the latest trends in their thinking and execution plans.

What is fundamental for any startup is the passion of an entrepreneur. If the passion can be left raw, and the entrepreneur allowed to take risks to follow their heart, assuming the basics of a smart team are in place, we can see a successful startup evolve.

The passion sadly get skewed as the 30 sec pitch is practised multiple times by the time it gets in front of people it matter. When you talk in detail to an entrepreneur, their fundamental belief systems and way of operation comes through no-matter how much it is camaflouged in the latest trends and jargons.

All startups operate in an ecosystem of other entrepreneurs, existing companies in their space, investors, influencers and media folks. Media chases the latest big thing. Investors huddle in trusted circles and look for new trends to understand where innovation may happen next.

I am not for force-fitting your startup into the latest trend. I want to go deeper to tune to market trends to build your operational plan around it. Being an entrepreneur is about adapting change and enjoying and capitalizing opportunity it presents.

For example, when we hosted Coola, we paid $700 to Digex, which merged into Worldcom and collapsed and we moved to a hosting company at $175 ( we hosted 1 million users) and thought we got a deal, while today hosting costs start at $10 monthly and the variables of the options are also different. With my last startup Moomli, we build a whole ecommerce platform and store front with opensource software.

More important is the trend change with relation to hiring, retaining talent and marketing.
There are so many sources online to build your logo, to outsource components of work, to find smart people not by looking at resumes but by looking at their work and their place on the web.

As for marketing, I hate to admit new entrepreneurs carry less baggage if they did not know about linkexchanges from the past, or even focused too much on Search Engine Optimizations because history has told us that real brands on the web including the latest big brand of Google was build by passion with lot of PR and not real marketing dollars. So marketers need to understand how to generate loyalty in their customers and tie their brands with the passion of the startups and let it fly, for which they need to know the navigation in today's web and brands.

The best way, or the only way I know to do it is immersion, just start a site or get deeply involved into startups and be critical of your own experience that you are doing the right thing for the scenario involved, and not because it worked for you in the past.

Enjoy the ride, the fun is in the change and how we adapt and stay young in it.

BarCamp Manchester - review of event June 18th 2006

I attended BarCamp Manchester at the incubator ABI along with 60 other people.

True to its adhoc nature, we could post stickies on what topic we wanted to talk about and pick one of the 4 available meeting rooms.

Attendees: Loved the quality of the crowd, wish I had more time to chat with few people in smaller breakout sessions - Lots of entrepreneurial geeks, real people who love technology, a VC who offered funding for people who can develop the local economy of Mt.Washington valley, lots of open honest conversations.

Talks:
10.30am: I spoke on "building the business side of a business". The google spreadsheet of the business components I discussed is here. I enjoyed the audience and the followups. Its amazing to see how many entrepreneurs are around us all.

11.15am: I attended "3D Animation in a Small Studio" by Kelly Muir. This was a presentation by their company "Hatchling". It was interesting to hear their down to earth story of how they are growing, finding customers and the challenge of the rigid market structure of how broadcast videos are done by ad agencies and web videos are done by new players and customers find it hard to understand the same company can offer both preserving the style of content. They do sales videos for Reebok and I am curious to see their Charmin ads at their NY sponsored bathrooms. Talk of a revolutionary medium to reach people :-)

I liked the real people, the real startup story and learnt something about animation industry, cost of making an animation on the web etc and left inspired by the optimism of the Hatchling team.

Lunch: Thanks to the sponsor ABI who did not pedal any ware and were supportive to the spirit of BarCamp. Thanks to Ian and Kelly Nuir for the painstaking details of all food including veg and vegan food and all the soda and candies. Can't ask for more!

12.45pm: Open Source for Public Radio by Brendan Greeley, Blogger-in-chied of Public Radio. Interesting request, he wants to request public radio supporters to donate time and build open source software that he needs. Will write more about this later. Honest coversations.

12.45pm: Blogging 101 by Ian Muir, I couldn't attend as I thought I knew the topic, but talked to Ian later about Blogging tools to stitch a blog into the blogosphere. Hi susggestion is to use just a few - Flickr plugin, magnolia, digg or reddit and delicious, not clutter with a lot of options.
He has promised to post his slides on the wiki.

1.30: Second Life by Jason Rand. This was an awesome presentation. Jason started out saying he had not planned to present this, maybe there will be interest. I'll write a review of this in detail. But I just loved it! It was interesting to see so many people from the audience talk about their second lives. There was agirl who hung around in a star trek group practising swords. Jason told us the technology of second life, the scripting optins available and we discussed how American Apparels must have gone about building their site in second life. Jason's avatar is "raybock" and he is part of the Giveme Liberty Bar. I enjoyed the discussions about how to build audio (concerts) and video on second life.

2.15 Drop your pants by Ian and Kelly Muir was a session where everyone got 1 min to share their idea and the crowd gave feedback for 3 minutes. I'll write again in detail about the ideas and comments. Worth every minute!

3pm: Ruby on Rails - had rave reviews, I missed it but attended "Startup Strategies" by Ray Deck which was my favorite. He gave us a framework to work for startups to find their real paying customers. I plan to write a separate review on this one. Ray has this magic to bring some interesting audience discussions.

3.45pm: Am Empire of Geeks by Shimon Rura and Aaron Amstel
Nothing like what I expected, a very interactive, interesting discussion about whether geeks can get together and coolaborate and build a company diversifying seevral tech ideas to make money for the group. It had some idealism about openness and fairness, but brought very smart honest discussions about the feasibility of such a group. In this world of open source successfully run by geeks, it should be very possible, so we planned to continue the discussion further later past BarCamp.
For me personally, I keep remembering the conversations as I see news of some early stage web 2.0 companies folding (like irows) and others (like kiko) selling on ebay. There seems a need for some collaboration among geeks, hope Shimon and Aaron can make it happen.

We drove back to Boston, pondering lot of ideas. Since then, I've had interesting followups and can't wait for the next BarCamp.

Business side of a business - preview of presentation due at BarCamp Manchester

Yeah, I hear it myself, the title sounds funny! But I've heard from two different startups, one from east and one from west coast, both with initial funding, asking for me to help build the business side of their business. Yeah, both calls came from their investors.

So, what is the business side of a business? Here is my summary, I plan to present this at BarCamp Manchester June 18th.

Lets sync up on fundamentals. A business is a set of people with a great product that solves the problem for some set of people or companies who are willing and able to pay for it.

Realistically, in the startup world, its simply a product being built by a team targeting customers who will pay for it. Since I operate in the world of tech startups, this means a tech idea thats funded to being built out for some customer.

I am writing this because I had two different experience with each startup. Both are technology companies with some tech software engine in different areas, with no real customer. The founder was a technologist or a creative content person and thought business side was marketing. One simplified marketing to PR and buzz. The investors each had a vision of a larger than life segment of customer who would pay, but no one had talked to the customer or knew how to get there. One of them dreams of a consumer play with lot of jargons, all sounding cool, unless your money is in it.

As perfect timing, I attended the Sales and Marketing breakfast meeting of Boston Startup Meetup organized by Ray Deck of Element 55 and met a bunch of grounded entreprenuers, with one thing in common - all are focused on their customers and cared to learn and share how to better reach their customers and scale their business.

I see three building blocks to building the business side of the business.

One: Business Operations

Legal, Development environment, Office setup, Accounting, payroll

Two: Marketing

Real marketing is all about communicating to different constituencies of your business in a measurable fashion and based on the metrics revise your communication.

The basic assumption is that you know your customer.
(more on this piece later)

Three: Sales Infrastructure

I've put together a spreadsheet (it keeps growing each day) online at google spreadsheets of all the business components.

Dancing with Giants

I have written about how I had a deal from Intuit (offer) and Infospace (revenue partnership deal) before I closed my first round of funding.

I had two advisors who had both sold their companys to large companies and adviced that it was a better strategy for a first-time entrepreneur to partner with some large player who could become a potential buyer, but I did not listen. Ok, I hadn't got started fully and wanted the taste of building the company, scaling team, building customer base ...
We later worked with large companies on strategic alliances - TIBCO, Palm, GE, New York Times ..

I want to write about two things here - Decisions points about going into such an alliance with a large player and more important the reality of what competencies need to be developed to make it happen.

I hear many entreprenuers talk about some big player "interested" in them. With Infospace, VCs loved us because we had the signed deal. So, interest needs to be built into a deal agreement for entreprenuers to really dream on it.

Decisions points of building strategic alliance with big companies:

We hear media stories of some large company buying some startup and its painted cool, mostly by the dollar value of the deal. ( I don't want to talk about the purchase path, which is a totally different dance).

1. A big name partner can become a buyer later down the road. This means you build relationship, understand the internal landscape and demonstrate clear value of your startup to the company.
2. A big name company can serve as validation to the VCs about the viability of your startup.
3. Its definitely helpful in building brand, getting media stories and in attracting future customers.
4. Its important to remember a big name company deal should make economic sense for your startup, only then it can scale into all your dreams.
5. A startup culture is so different from any large company department, so opposites attract easily, but they do not neccessarily operate in the same frequency. So its important to make sure your team stays excited about the value of your business and not get carried away into empty noises.

Competencies to build a large company partnership

Many founders think of this as a business development skill to be hired. Its a dance at multiple levels of the large firm to be played by same or different people in the startup.

One of my famous statements from my early Coola days are "We are big, we happen to be small right now". I cannot believe I actually said it but I believed it, so, it didn't seem hard then.

1. Its a very unique competency to build a large company partnership from a small company. The founders with their passion can do this best and can look for people who have done it before.
I had done partnership deals for clients from BBN and Harcourt, and believed I knew how this was done. But when you set out as a startup, all bets are on YOU! I was surprised that I had to prove that my startup will stay viable well past the deal and we were here to stay. Later I learnt that all that can be satisfied by some contract clauses, but the most important thing is to convince the people of the large company that your company was worth betting their career on.

In our case, people got excited about our technology and it helped to build irrational trust on us.

2. It takes time, so the important thing is to stay engaged.
A big company is several departments, so it takes time. But everytime, its a relationship game involving clear communication of what value we add.
Startups typically have people who want to get results and work their tail off for it. So, remember, it is better to test the waters with the first intro meeting. Gather information about the company, their language, culture, people and adapt your presentation to them with subsequent meetings. I remember many times where we went into meetings with a plan and walked out with no results, with the door almost closing on us. Just remember, you can negotiate and find a common ground only as long as you keep the negotitation process alive. So, it is better to pretend that you are not at the negotiation table, but exploring options and validating it with buy-ins from different stakeholders and keep the process alive till you really see a deal materializing.

3. Be prepared for the intimidation factor.
I took a friend entrepreneur to a large financial firm in Boston and he presented his tech idea and he came home and closed his shop. This is a real story.
Most large companies look at new technologies and usually say, we have something like that in the works in a different department. If their pain was real, it was possible they discussed some high level solutions that may sound like yours, but remember big companies need startups for the execution. If you go back to them after 6 months, it may still be in the same stage.
I also think, it will help not to go in with the attitude that you are small and they are big. If there is a real deal in the end, it means that both party have value to offer to each other.

4. Money speaks better than words.
Its common for a large company to say lets try it for free and you may walk out of a deal with some integration work but no real money. I see many entreprenuers float happily at the prospect of a big brand name partner and dream of future money. I have been one of them. If you give in, large companies will say, free for us, charge others using us as reference.
Remember, everything costs you money - your time, your team efforts, the delay of starting over with another partner. So, be polite but firm and bring in a paid deal.
You can agree to give the core product for free as a pilot for 3 months and charge a setup fee that will cover your costs, making it sound reasonable and fair. Your team will be excited at the real validation of their product and work.

5. Know when to pull back, but keep the engagement

I had a big company who said, you have something really cool here, so you are going to offer it for cheap for us and grow at our expense and later we'll be dependent on you. Its possible. All relationship power structure change over time. But make sure you communicate your intent to treat your customers as partners. Walk away from the deal as it could be a matter of some particular person, but keep the relationship alive. I walked away from one such deal who refused us a branded play but updated them and brought them into our folds after we had partners they respected.

6. Scaling of your company is morphed by the partners demands

Many of us do not foresee how the first big customer/partner changes our startup. You'll need more people to manage that account and may have to hire fast. Some in your team may start identifying their jobs with this partner and bring in biases towards them.

Once you sign the first large customer/partner, your startup is in very dynamic turf. It is better not to fight it but accept change and do the right thing for your company. Its possible that you may have to keep the person who worked on this deal dedicated to that account and it maybe good to scale revenues off that account. Or its possible you may want to pull the main person out to scale more of such accounts. You have to decide and take the change in attitude and demands that come with it.

Unfortunately for some founders, I find that their excitement of their startup goes down as they lack operational experience to scale the team around executing on a partner or scaling business development teams. This may be the right time for them to bring in some experienced person who brings this competency.

Just remember, the beauty of a startup environment is that its never static -- first the uncertainity of the concept validation, raising money, finding the right team, and this signing the first customer is more profound where you execute on your promise to your investors, team and the promise of your concept.

Remember, you chose to dance with giants, keep your pace to the big steps, as you are now on your path to become big.

Tune to the market to find your exit options

I am part of the unconfernece movement, which brings tech entreprenuers together at BarCamps.

I spoke on"Business to Concept"at BarCamp Boston in June 2006. It was about taking a business concept and how to validate your idea and build in into a business with market development and money . Thanks to Chris Penn of Financial Aid Network for the podcast.

I am so excited today to hear the news of one of our Boston BarCamp companies Reddit's successful exit by its aquisition into Wired Digital.

Reddit is a great product, was always second fiddle to Digg from a brand perspective. So, apart from my personal feelings, I think there is a lesson to entreprenuers here.

- They raised just $100K in summer 2005.
- They executed on their product, site, launched, offered a clean user experience online
- They formed an optimistic team and networked like crazy.
- They exited into a bigger company where they can execute on their vision accepting market conditions, instead of fighting a marketing game and losing focus to raise more money for the same.

The last part excites me because they tuned to the market to understand their exit options. They focused on what their core competency was in the team and enjoyed executing on it (It showed when you met any of the team members).

So entreprenuers can have great exit plans which they tout when they raise money. The reality is to be aware of your options and decide based on what your team really enjoys and wants to continue to do as part of the passion of the business.

BTW, BarCamp Manchester is round the corner on November 18th. I plan to go. Hope to see you there.

Learning your way up the business through networking

I have chased lot of my well-meant advisors in my early days and thinking back I am thankful for their time and patience with me. Do we need to meet new advisors after early stage money?

The singlemost success factor of a startup I believe is the ability of the founder to discern the good people from the rest - be it team, investors, advisors, customers. Who is really good for your business, and how to take what they can offer to really build your business?

I come across several new entreprenuers, with passionate ideas. I see a typical cycle for this early entreprenuer, that I was in once. They network like crazy and clean up their pitch and raise their first angel money in the range of $250 to $500K. The angels mean well and offer a bunch of contacts. The entreprenuer visits all of them. They offer more contacts and he meets more of them. Every meeting is about planning and strategizing and enjoying how great this idea is. Some teams build some validation of their technology in this time, but stop short of productizing or contacting particular customers.

It scares me to see the cozy comfort nest the entreprenuer operates inside the network of these advisors which blind sights them from seeing the real market.

Most entreprenuers think money is the most valuable component needed to build their business. Thats not true! Its time. You will have passion for only so long if you do not build to the next stage. The market will wait only for so long even if you are way ahead of competition.

This spinning wheel comes from lack of execution focus. They collect advice and more advice. What makes an entrepreneur is their passion, which I would like to define as the ability to take risk with a smile. So, don't forget who you were before your raised that money. Your risk appetite is more than that of your angel, thats why you are the one building the company.

In my early days, I knew how to build out a web division inside a company, but did not know how it was done as a stand-alone business. I went networking but maintained a list called "what I know that I don't know". The famous management cliche "what you cannot manage you cannot measure" holds good for entreprenuers in early years more than anyone else. One piece of advice from my advisor Piyush Patel, then chairman and CEO of Cabletron was "stay paranoid" and "keep a tentative timeline with milestones for yourself".

So, when you meet advisors or their contacts, heres what you can do:

1. Check their background and see where they can help and ask for it.

2. Respect your time. Make sure your meeting gets you something. In the web world, I found fellow web company entreprenuers met often and did partnership deals with each other. But in the end it didn't get anything for either parties, except some garnish for their web sites, partners section. It mislead the team to work towards some integration and referrals that did not get customers.

3. Make a list of all that your business needs - people to fill certain positions, money, contact into customers, processes to scale business, etc. and update this list often. Make sure you take some action item out of each new person you meet.

4. Learn to say 'No" to well-meant people who would like to meet you and just chat about your business when you think its not the right time or because they came from your angels or best friend's referral.

5. Most entreprenuers say they want to start on their own to be their own bosses. "Be your own boss!". It takes clear conviction. Do not go about meeting people or trying all ideas to prove your capabilties to your investors. Do it only when you believe it will build your business.

6. Don't be afraid to fail. You hear a great idea, say a new channel for your business. Validate it by calling up some potentials. Or better still see if you can get this advisor to help you validate it. Then decide if it makes business sense or drop it.

Making new people work for you is an aquired skill and this maybe the best time to practise building it. People will work for you, meaning do stuff to help you if you motivate them by sheer excitement (sometimes) or sell whats in it for them.

It truly pains me to see entreprenuers change their pitch and expand their dreams into more markets without executing on a single product with focus, or signing a single vertical of customers, just talking and dreaming more and more.

7. Lead your team to focus. Focus clearly on your goals, centered on your customers and let all your actions speak towards it.

In both my startups I started with a consumer focus and soon found business customers up the food chain. At Coola, we had a typical startup office with a LED sign showing the number of users we signedup. That was exciting for the team to track and communicated to them that was the most important metric. We got close to 1Million Palm users, who did not pay us. It took me time to realize that I was not communicating the urgency of number of customers launched, as the key metric for success.

I've written about how the early days are unstructured. Its beautiful chaos like random walk, with lot of room for creativity to build what you want, like a puzzle, but if you don't focus your time and energy towards one short-term goal at a time, it will disintegrate into real disorder.

So, next time you decide to meet someone for advice, make a list, and come back from the meeting and build one more block towards building your customer base and execute on it.

Are failures really stepping stones to success?

A reader asked me this question: “I have failed in my first startup and worked for another startup and that too failed. I know in my heart that perhaps I can really make it but luck has not smiled on me as yet. How can I regain the confidence to start again? How do I know if I have got the entrepreneurial skills to succeed? When is it time to give up and get a job?”

It promoted me to write my Oct Startup Diary column- full article here

We hear about the "learning" from failures, should it not really be from successes? Is it because the winners are busy celebrating, that we don't hear their learnings? I went through a lot of introspection before I dared to start again!

I hung on to my startup as my dear life, before I would accept defeat which I would like to believe is out of sheer will power; when I was in the moods of the reader who asked me about daring to start again, I thought I had stayed on out of denial. Maybe it was a combination of both :-)

I have written earlier how we started Coola as a service company offering hosted solution for mobility to Web companies and written about our upward growth, supported by Palm User groups and customers.

Now you want to hear the gory details of how we actually changed direction to an enterprise software and hung on as the dot coms crashed around us?

We had boston.com, cio.com, IDG (conference division), mostly publishers as customers and what we saw as a promising list of B level sales pipeline. Our customers payed a monthly fee to use our hosted solution co-branded with their look and feel, based on a tiered pricing based on number of users. Those were the days when web deals were made based on sharing eye-balls between players, saying it increased stickyness and user loyalty.

Before the dot com crash, we faced companies like cityspace, infospace, which were big branded web properties who could not tell us a clear story of their own revenues for us to show justification of how they would earn real money out of our sales by extending their services to mobile users using Coola. Ok, I had a smart team. We realized that the web world had lots of free eyeballs, but no real money. So we decided we would move to the enterprise market as pure software play.

I would be lying if I said that my team just rolled up their sleeve and went to work packaging our server as a software. There was lot of work to do - find the new market, identify who was the customer, rebuild the software product, productize it with sales support documents etc. It sounds a lot like the early days of starting up before the funding.

Yeah, the only difference is that I was a running company of 30 people and that meant real people, their dreams, agendas, fears and inertia to change. Added to that, we were in the middle of our second round funding cycle and bulk of my time was spent visiting VCs and then the dot com crash began - slowly at first. So, we had work like early stages and very less money, but with a running payroll to pay.

The first thing I did was to communicate to my team. We reduced salaries and made a plan to work to build the new software product. I raised a bridge round of $500K and we plugged along. Then the crash deepened around us and VCs started stalling deals.

I decided to focus on my new customers. We looked into the 1 million users we had as consumers of our software and found people from large companies. My current sales VP was great for web companies, but he had not done enterprise sales. Neither had I. But it was my company, so I cold-called and found GE medical as my first customer.

We shipped our first CD to them. Then we got NIH, Albany Medical etc. They setup Coola as a server inside their firewall and loved the idea of sending their mobile workforce out into the field with a palm pilot and a small application that can access their inventory, update their workorders and connect back to their backend systems.

A real business is happy with two things - customers and their money to keep paying bills. We now had a pipeline of positive customers. Still the energy in the team was mixed. We had set out to raise money and customer money was not cash flow. A simple accounting lesson, I learnt the hard way.

I got a VC term sheet for $5mil and that VC began visiting us and ate a lot of our time. I started a bridge round contingent on closing this round and started getting some checks. But as VCs started stalling deals with the dot com crash and with the announcement (we were built upon the Palm economy) that Palm would split as hardware and software company, the VC decided to stall and added more horrendous terms. I decided the VC deal didn't make sense for my team and that we won't close it. I cannot tell who was more scare at that meeting - the VC or me. I called my bridging angels and returned their checks.

I spent 3 months looking for buyers and found dummy deals or honest comments that in the crashing market, nobody was going to announce an aquisition and attract attention to their shares. That was the time to close and exit.

We had a cool office in Woburn, with a ping-pong table for reception and great gizmos and a LED sign tracking the number of Coola users. I decided my first layoffs and called fellow enterprenuer friends who had large office leases and were stuck with them after layoffs. Couple offered to share their space and give us a ready setup for the couple people I would bring. We auctioned our furnitures and ping pong table, and raised whatever money we could and moved in to our new shared office space.

I called my customers and found that their budgets were shrinking for wireless space. I decided to keep Coola alive till my core team could find jobs. Then I would hang in there with the trickling customer monies and scale back when market went up again.
If I had a real business, customers would have to pay for it and I was going to put my best fight and try it out. Try I did for a year! I got amazing advice "to declare victory" - lots of dummy deals to sell the company.

Then, at my investors request, I took the hardest path to close the firm - not declaring bankruptcy, but paying all my suppliers and selling all assets and closing my company. I will have to write about the one-year of my survival separately. Its touching to hear your customers cry.

I thought it was one journey, but later realized its the beginning. We all have some passion, we execute any idea that comes our way in certain ways based on our passion built upong our experience base.

Coola was my passion to give mobility to everyone for all kinds of information with a dream to seamlessly integrate a mobile experience with existing systems - web sites, enterprise systems, all making life easy for people on the go. Its cool when people can use the power of the web from a small mobile device, without stopping to think about the technology behind it with clean user experience. Businesses can save a lot of money from the increased productivity of integrating systems and accessing them on the go.

As I started my second startup, I realized I had a core passion to solve problems and a clear execution style, that was my success from my first startup. I believe we were too early for our times, but we faced real customer scenarios we could not have envisioned without executing what we did.

I love building out innovative products and getting them to customers and the energy of building teams to make it happen and thats what I'll keep doing as long as I can find problems I can solve and customers waiting for my marketing to reach them :-)

To ask a girl out, just ask her!

I began writing today's blog because I want to share some learnings for entreprenuers today to develop their bizdev plans more efficiently than I did :-)

We have experienced and heard horror stories from the dot com bust about how large companies did dummy deals. With my startup Coola, we started with Web businesses as our customers.

I market validated and found the first few potentials even before raising money. Then we signed our first few customers and I hired a VP Sales from the Web world, who was great to get us to such customers. But, before the web world started tanking, we realized something was wrong because for large $$$ deals, we had to justify how the customer would recover the cost paid to us and we found that the large web businesses themselves did not have clear revenues. We switched to Enterprise customers with a clean software lisencing fee, which is a separate story.

All our meetings were around increasing stickyness or increasing customer loyalty, while the site customers (consumers mainly) did not pay.

Web business with consumers as customer:
ok, targeting consumers and building web businesses is in vogue again today after the success of social networking sites. I agree fundamentally there are several problems waiting to be solved for consumers so we need those sites. But remember, web consumers are spoilt- Web consumers don't pay. For any product, you can give away some freebies and get a set of early adopters to pay, that cannot build out your business.

I have two options for consumer businesses -
a) Look up the food chain. Find some existing business targeting the same consumer and make them your customer. Own all of them. For example, if you want to sell to Moms, goto P&G. Its like going to the parents to sell stuff to kids.

b) Find non-web channels to the same customers. Once you reach them, supplement with web revenues.

Web Business Targeting other businesses:
If you are all about going to Google to entice them to buy you, you don't have a b-model. I don't want to talk to you.

If you have some technology that will help large businesses, I suggest starting with validating your dreams TODAY! Is there a real need? Will they pay for it? Once you meet them, they may require your product to be built fundamentally differently because they cater to their customers who they know best.

I cannot list the number of times, I find smart, really smart entreprenuers painting beautiful scenarios about how specific companies will buy their technologies and postponing actually contacting them. They think its like asking out a girl you really like and worrying about what if she rejects. ok, its a little like that. But, with large companies, it takes a looooooong time, even if they are interested.

I think the fundamental problem is entreprenuers like to stay in their comfort zones, so the tech guys build technologies, the operations guys focus on production and operations, so customers are out there not knowing you have a solution for them.

I recently heard from an entreprenuer talking about a potential big client and how he heard they had problems *exactly* in the area he is working and he will have his solution for them in a year. Today is the time to present them your solution. Maybe they will build something else, however inferior to yours and you will have a whol team of morons to fight once you contact them with the perfect solution.

Another problem is thoerizing about all aspects of a potential deal with this large potential customer. All deals start with building relationships, which can start because you are ready to understand their problem, listen to their suggestions and have a smart team to work with them. Nitty gritty of the deals will be worked out during the contract stage, which may happen 1 year down the line if you start now, or never if you postpone contacting the customer today.

So, you want a cool date, just ask and ask now!

Location, Location, Location for your startup

Just this week, I came across across startups all in the same space - offering a platform to host consumer videos on the web (yeah like youtube and Google video) namely metacafe, videoegg and iflim but whats fascinating is one more aspect they have in common.

metacast moved from Tel Aviv and Videoegg moved from CT, both to silicon valley where iflim and youtube are already based.

I decided to start my startup from Boston suburbs which was home for me and I had the comfort level to know the hiring market and believed I had my network.

I traveled through my first 140 days and raised most of my money from Silicon Valley. After I scaled my company to 10 people, I spent bulk of my time traveling to the valley as we were a Palm based company and Palm was located there.

Does location matter to a startup? Heres my take on it:

Bootstrap where you are most comforable:

You should startup where you believe your chances of success are high, in terms of your comfort level to build the core team, market validate and raise initial capital.
Boston is great for starting up because of the local colleges, most of which have a program to encourage interns with startups.

Disperse across geographies in today's global world?

In todays global world of technology, people are less tethered to their offices. We did hire coupel people from silicon valley and let them work from there. But I believe in the early stages, a cohesive team thats proud of a common vision is what really makes a company. Its common to build an offshore facility in India or Israel, but adding each location does add its overhead and there are the people aspect of communication and identities which comes right after say 8 people.

Build where it makes sense for the business:

Team: A company should be built where you can hire the core development team, and where you are closer to your customers.

Customers: So, if your customers are large financial firms, Boston or NY may make sense. Especially for large companies, its a relationship game of nurturing relation between the actual people working on the implementation in the company and the startup people.

Also, you can get a pool of talent with experience in that space if there are more companies in finance space nearby.

Funding: I find startups moving to silicon valley because there is more liquid money there. I think it makes sense to move there only if customers and hiring also makes sense. Yeah, some investors invest only locally, which is more true for early stages. I raised my second round $5million from west coast again. Yesh, I did meet VCs in Boston, NY and only those I had referrals into out of West coast. But I believe, geography of company should not be based only on investors.

To that argument, did metacafe raise $14million only because of their silicon valley move? Did videoegg move only to escape the noreasters? I believe they have moved to where they will be closer to their customers - large media companies, large web properties and ability to hire people from them.

As a kid, I have been fascinated by a narrow congested street in Chennai, India called "Ritchie street" which is full of small shops all selling electronic parts, circuits, chips etc. I got my dream to become an entreprenuer one-day as I walked Ritchie street looking to buy circuit kits to make a calling bell or a radio or the latest voice synthesizer chip to make a circuit. There is no difference between any two store there, but every seller is very optimistic. If a store didn't have what you wanted, they'd send a boy running to another store to buy it and bring it to sell to you -to own you as their customer. All of them being in the same place created a market, so we knew the one place to got for such items.

Maybe silicon valley has created that for net startups, and now videos, the fastest growing content on the web!

Raising Money

I write a regular column called "Startup Diary" for India New England paper.

I have been focusing on raising money in the last 3 issues, which I thought might be an interesting add here. I seem to have barely scratched the surface and plan to add more in my next columns.

As usual, your comments are welcome :-))


Issue: June 16 to 30, 2006: Know your basics before raising money

July 15 to 31, 2006: Validate your idea before plunging into business world

August 16 to 31, 2006: Give investors enough reason to believe in your idea

What makes entreprenuers in a market

I was traveling in India on vacation during summer and saw a buzz of entreprenuership.

It makes me wonder what makes entreprenuers? Are they always there? Is there a market condition that creates them? Well, I believe it will help us as entreprenuers to understand that to find and nourish the entreprenuer in us.

I have written before that I always thought of myself as an entreprenuer even as I worked in big companies.

I still believe in an entreprenurial personality - ready to take the risk, self-motivated to push oneself to limits of our capabilities, ambitious but methodical and ready to work hard to reach that new vision or dream.

I saw and made friends with fellow- entreprenuers as the web boom took off in 95 in US. Then, I believed they came to solve problems, as we could see new ways to solve problems with the advent of the web. So they created businesses cutting through inefficient business layers producing valuable savings for customers.

Now, I can't say that for India. Problems were waiting to be solved always. I know of many entreprenurial personalities all around me even in earlier times.

What dawned to me as new is the liquidity of money and free markets. I write about it here because I see the distinction between the time we wakeup with an idea to when we start calling our ideas as a "business". I have had many ideas. I have even built web systems and launched to users for fun, and never took it to the next step many years before my startup Coola.

I don't want to sound touchy-feely, but I think the main difference is in the confidence of the entreprenuer that he or she can raise money to make it a business. That confidence creates the market full of businesses. Liquidity of money, rather our access to us, makes us the entrepreneur we are all born and waiting to become.

This explains the recent boom of startups with VCs creating liquidity for their monies which was waiting through the slow downtimes of 2001-2003.

Does this mean that there is a good market timing to start companies, well, I believe the best time for you is when you are ready.

Building a business vs business savvy

I had been on the business side in big companies, successfully negotiating revenue generating contracts and building out web solutions, understanding the business needs from BBN/GTE Internetworking.

I had first moved from Engg to build the Web Group of BGS Systems (now BMC Software) in 96, by understanding their business pain of shipping tapes for each beta release and setup digital download of software with reporting to allow customers to install new releases and report bugs and tied field services to engineering reducing sales cycles.

In fact, I took pride in the fact that I understood technology and business well.

But, the real truth was that I seriously lacked business experience as an enterpreneur when I started with Coola after all this! Well, I didn't know it right away, I market validated and learnt on the job, the hard way.

Building a business from concept takes a different kind of business skill than what is required in a job. In an existing company, you know the customers, marketing channels are in place to reach the customers, you are in a position of power to negotiate contracts in large companies.

When you take a concept to build a business, you are alone, face it, all alone! Its a matter of perspective whether you sweat about it or think you have something unique and feel great about it.

For tech companies, technology and the business problem solved are so intertwined. If you have experience in a particular vertical and see a problem and dream a technology solution to it, you have crossed the first hurdle. My friend Sandeep Shah built Skyscape like that and its is a triving success story today.

But for the most part, I see tech enterpreneurs come up with a technology and think it will solve a problem for some particular segment, which may or may not be true. In fact,enterpreneurs believe too strongly on the viability of consumer ideas thinking of themselves as customers. I have repeated this error more than once.

I have come to believe that web consumers are too spoilt to pay. Even for acompelling business where they would pay, its too expensive (like Amazon) to build a brand and reach them.

So, the best way to find your customer potential is to insert your business into the existing ecosystem of businesses. Find an existing segment of business who would pay. Please, please, do not read this enterprise market instead of consumer.

Its practically executable for you the enterpreneur to reach an existing business and make it easy for the business by getting them the rare segment of consmers they cannot reach or by optimizing some business process by which they can skip a middleman and save money and pay you instead.

Having said that, how can one develop that skill? I am a big believer of learning anything at any age if you have the burning desire and the right attitude.

One way is to go about practising it before you need it. We all go through life wanting to become an enterpreneur for some time before we hit about the idea and have the life support to make it happen. So practice on everything you see around you.

I grewup in a household of CPAs who would look at any vendor and try to guess what his business breakeven point is. So, we can practise the same for every business we see around us or dream up imaginary ones and practise.

For example, you give your shirt for drycleaning. Look at the drycleaner with enterpreneurial eyes. If it were your business, how would you bring in customers, does he/she have a specific profile of customers, where do you see their major costs are ....

I saw a friend move and collected diaper boxes from everyone saying its perfect for packing. I see that as an opportunity to evaluate an hypothetical business viability. Can you make a business collecting a bunch of diaper boxes which seems around in many households and rent it out for a fee to movers. You can start small and spread the word to build customers. Ah! looks like a great business as you can reuse the same boxes if you collect them back after each move.
But wait, the more you think about it, it becomes clear, the real cost is in accumulating the boxes for sale and spreading the word around to people to give it to you. No business here!

Most of us dream up the potetential of sales and see the demand so easily for our ideas that we forget that we need to start from the cost of getting the customers and their real pain to come to us.

Secrets to contact strangers and ask for funding

I spoke to 120 people in 40 days during my initial funding and thought I should share some secrets as I hear from smart people wondering how to get started asking strangers for money.

First, yes, YOU can do it, its better if you haven't done it before.

The first step of waking the entrepreneur in you is to be able to communicate your passion about your idea to others. Its like a first time newborns parents who can talk excitedly about their baby to strangers. It will come naturally if you don't stop to think about it.

Ok, you have stopped to think about it, so lets get a plan in place.

1. Start with people who you think you can trust and pitch your idea. Hear their comments, as best as possible without taking all criticism to heart.
This should help you through the process of validating whether you have a unique idea. Try this on as many people who are willing to hear it. This is also your practice session to get to explain the idea in simple words in less than a minute such that it explains the uniqueness of your idea and your passion.

2. First focus on validating whether the problem your idea solves really exists. In other words, market validate the solution for an existing problem in a vertical. Its easy to focus on how cool your technology will be, especially for tech ideas. Remember, you are out to build a business, and make money so focus on the problem you are solving for customers.

3. You may soon pitch your idea to get advisors, investors, hire the best talents and to companies to become your customers and partners. So, don't worry about investors yet. Everyone of them is a person. So practice your pitch on everyone who will listen. Its your lesson in gauging people's interest, their nuances in giving you feedback, your persuasiveness in getting them to see the vision you are painting.
The real success of an entrepreneur finally lies in being able to discern people - separating the good from the bad, separating good intensions from real capabilities, separating people who just want to talk from those who want to do.

4. Go to networking events; share your idea with several people. Meeting fellow entrepreneurs will help benchmark how far you are in the process, learn the good and bad you have to do and avoid. It will build friendships that will help with referrals and validations later.

5. I see a lot of entrepreneurs seeking investors and trying to smooze with them and trying to befriend them. This is painfully obvious in a panel, where the usual format is to see an entrepreneur flanked between two VCs. I don't know a single case of a VC funding an entrepreneur simply for sucking up to them.

Investors are real people. They are seasoned at spotting an entrepreneur who has a real money making proposition and shows the confidence to execute on it. Your confidence will show when you get there.

So, first focus on finding your first customer.

These people will also be at networking events. You can find referrals to companies at events from fellow entrepreneurs. Don't hesitate to call or email them. I spent bulk of my early days talking to potential customers to market validate my idea. They may surprise you and respond more favorably than you think. You'll never know till you try. This will also help you understand what is doable and what is futuristic.

6. Pitching to customers is a different game. Till now, you have been talking about your idea from your perspective. Now you need to pitch it from this particular customer view point of 'Whats in it for them".
In early Coola days, we pitched to several segments and always made a screen shot of what it would look like on their web site to use Coola. We setup demos specifically applying to their type of data and mobility problem.
This helped me understand the problem better and talk from their point of view.

7. I'd suggest never to stop talking to customers from this point on. Find the segment that easy to penetrate for YOU, the ones where you can get started.
I called pure strangers and found customer prospects before funding. But after funding one of my advisors told me an obvious truth, kept as a well-guarded secret by entrepreneurs.

“Your first paying customer is not going to be a stranger. It has to be someone who is ready to bet their job to trust you personally to go up to his/her boss to justify spending real money on a non-existent or brand new company that has no guarantees of survival next year".

In a software play, there are contractual ways to get around it by offering exit and merger clauses offer source code in case your company closed down.

Just remembering that you are dealing with real people, with real jobs will give you perspective in getting ready to network and sell your idea to your first customer.

One option is to go about the rounds getting validation that the need is real and they could be a potential customer before your funding cycle. Another option is to work hard to get a paid pilot deal with your first customer, which can serve as validation and get your seed money too.

8. Find advisors along the way who can guide you through the process. These can be strangers. Successful entrepreneurs who have sold their companies and are working in a large company are ideal people who are likely to understand your position and will help you.

I've written before about why you need advisors and compensation etc.

You just need that one person who you can trust. If you truly believe you have this great idea to change the world, be proud of asking people to be part of it.

One common question new entrepreneurs have is "how can I just ask someone to be my advisor? What does it mean? What am I offering?".

When you find the right person you can ask them to be your advisor. Find out the best mode of communication that works for them and stay in touch. Take their advice and move ahead on next steps and keep them posted on your learning and progress.

If your personalities do not work out, tell them politely and drop them. Its common to learn after your networking round that this advisor was not the best advisor for the long-term. So, don't make commitments of payments or add their names to your business plan too soon. Treat them as a new friend and keep them posted and take it from there.

9. Finally you get to the investors. Early on, find investors and ask for their advice and see what objections they raise. Do your homework on the investor that fits your type of business and stage of company and get a referral through their trusted network when you are ready. Before that as you network, setup meeting with investors to showcase your idea and get advice. They bring years of experience making comparables to business ideas being pitched to them.
At best, you'll learn a lot about potential blind spots, companies that sound like your competition just by the way you pitch your idea.

Later on, media will judge you the same way as investors by quickly trying to place you in the overall market. So, at best, your investor meetings should give you feedback on your pitch (wordings, tone, style and succinct meaning) and feedback on your business model and customer pain. You can gain valuable insight into execution details of scaling your business into your vertical.

But, remember, investors are real people. I heard from an honest VC from Fidelity Ventures who told me early on during my "meet me for advice" rounds, that he is doing a job. Will my company offer the level of comfort for him to go to his other partners and stage his career to bet that we will survive and guarantee the return on investment that the VC fund has promised its investors?
It sounds the same as the concern of the first customer right?
That’s why VCs prefer entrepreneurs who have successfully built and exited out of companies. They follow others in their network who are betting on some new technology. They like some fundamental technology which appears at worse as a potential candidate that can easily be sold to several companies, e.g., tool players.

10. The only caveat at a VC meeting is that they do not know if you are winning guy or girl as much as they do not know that you are likely to fail.

So, in the initial rounds, I'd suggest not meeting VCs in their offices. Meet them as real people at breakfast and ask for advice. Be open to hear the advice and take it in perspective and see what you need to fix to make your business plan reduce risk towards success.

I used to be available to meet investors at 30 minute notice locally and next day anywhere in America. I used to send a follow-up up email that night (however late). I made sure I got something out of my meeting with every person I met.

If you like the investor, follow-up after you have made fixes be it rounding off team or customer validation. Do not loop around just adding more features to your product. Think of your job as being to pitch to investors and get the money and hire the team who will build the product.

After this stage, nobody will look like a stranger, everyone will look like a potential person who can help your company grow :-)

Getting that first meeting in your networking rounds

I made this list as I wrote My secrets to Contact Strangers and Ask for Funding"

Heres what I did to make those initial contacts:

a) Attend networking events where you know your potential candidate is likely to be present.

b) Ask around, ask anyone. You'll be surprised when you put your mind to it, how many people you really know and how many know investors and advisors who can help.

c) Be persistent. Call or email people. Do not leave repeat voicemails for people. Try them till you get them. When you do, be courteous of whatever is keeping them busy and ask for a convenient time to call them back.

d)Follow-up diligently. Focus on the points they liked and what you are ready to change. Give them credit for ideas and they are likely to take ownership for it and support it. For example, if someone suggests that you try a new vertical, update them on progress of your calls to customers in that segment. They are likely to suggest more referrals and take you around.

I 've made it a habit to update people who helped me. I ry to send emails closer to when I believe they are likely to read it. So, if the person reads on a blackberry, send a meaningful short subject and 1 liner. If its a west coast person, write it in east coast morning so they get it as one of the first emails. Always remember them as busy people.

e) Do your homework. Today it’s easy to Google people and find their interest and background more than when I raised money in 99. You can read people's blog and know more of the real person. Then find the people you think who can help your business.

The first advisor I met was a famous, busy CEO. You'll be surprised how many CEOs read their own emails. I emailed him and he said he was too busy to meet me. I found he was speaking at a conference out of town and emailed again with the header "I'll drive you to the airport". I actually had thought through a working plan in case he agreed to it. Of course I met him at work next day. He is my inspiration to find time to help entrepreneurs today.

f) Understand the ecosystem of your business - who are the players - competitors, substitutes, who can easy move into your space, who are potential buyers, who are influential people in media, on boards of companies, current investors, famous people working in those companies etc.

Your business has the best chance of success if you are positioned well in that ecosystem. That’s one reason you see web companies offering APIs for others to build upon them and many small companies tout their large partners names.

Remember, everyone is a real person. Find them and reach them as real people. I have tracked where people spoke and followed up instead of random networking events. Many may not be as helpful or knowledgeable as you may assume, but you'll never know if you don't try.

g) I recently heard a VC mention at BarCamp Boston refering to entrepreneurs of web 1.0 companies as "scarred and having learnt capital efficiencies". He made a positive reference to such enterpreneuers. It made me realize this important point. When you meet investors, whatever you outcome, remember its a person, do not take an attitude of us vc them. It will help neither the investor nor you. I think serial enterpreneurs have experience, but its the attitude that always counts.

So, keep an open attitude , remember Colin Powel's quote " Don't carry your job too close to yourself to make it part of your identity". For enterpreneurs, its important not to get their companies so close to heart to become negative about the experience of meeting all sorts of people during the networking rounds.

h) Learn to project your contagious enthusiasim about your business details and everyone will want to talk to you.

Just remember, if you have a real solution to a real problem for a set of people who have money to pay for it, you have great potential. Every idea in the hands of different entrepreneurs makes different companies based on how they execute.

So, go about your networking with a clear plan, with respect and clear accountability for your time and you'll see yourself grow to a great entrepreneur.

Funding as way of life

For an entreprenuer funding is not a one time or 2-time process. Most first time entreprenuers think of funding as a one-time distruption in their dreams to their startups. It will help to think of a business as a separate entity with clear goals and funding as a resource you feed in to create more value. Then, we can see it as an ongoing process to scale the company even after you are cash-flow positive with paying customers.

I was introduced to VCs and funding first, during my corporate life at $2 billion Harcourt, the Education Publishing company where I was a Director who built out Harcourt.com in early 99 just before I started my first startup.

I had built the initial harcourt.com by integrating 27 business units, and we were brainstorming about making a new online business targeting families of kids giving them education content from Harcourts divisions and planned to make our parent company a minority stakeholder and bring in local VCs for investment. It is common for corporate entreprenuers, especially in east coast to bring in VCs for investments to spinoff a business unit.

Later, at my startup Coola, I raised Series A as a first time entrepreneur and later Series B as an existing startup.

My friend Hemang Dave a true serial entrepreneur, started several companies for CMGI, the famous incubator of early 90s. He specialized in raising capital. So, he always started a technology company, then raised venture capital money to buy a related business and put them together to scale his company to a new business. He grew by aquisitions and sold his compainies to a large buyer. He is a VC now, his last company started out as training net that become THINQ, the learning platform company, which he sold to Saba systems

This is a good strategy to scale a startup during second round funding, only when it makes business sense for YOU!

Coola was compared with Syncplicity from the company Cognitive Roots, the file scraping software company, when we launched "Right-Click" to help create Coolets of information to sync to Palm apps using Coola. We were an early stage company with 6 or 10 people and Syncplicity was two guys out of NY.

Some investors suggested that we "acquire" Syncplicity and that would make a good story to show how we would use our funding money and can raise our Series B funding.

Well, I visited Syncplicity founder, a spirited, self-funded entreprenuer and decided we were complementary businesses and we could work well together as they agreed to integrate Coola API in their next release . We did not distract ourself with any merger. I had learnt from my infospace deal and VC fundng story from my Series A.

Nate, the Cognitive Roots founder's comments when we closed Coola, echos my belief that your integrity as a person matters most, and will come around to you in this same ecosystem of startup world.

Money is money right? No, bad money stings!

I have been talking to people recently, following Barcamp Boston, about my initial days of first round of funding. So its time to talk about my bad money experience :-)

When enterpreneurs start out the first time, they see all money as good money. Some stop to think whether they want to raise angel money vs VC money. In all these, there is good money and bad money.

My first round money was good money, infact great money, Second round was bad money.

Good Money is:
- Money from investors with a strategic fit to your business. This means money from people who can help grow your business, people who have experience and contacts in certain verticals that can help your business.
I got some money from a Director from Amazon, GM of Intuit, Director from Exodus, who were all good people who were excited about my company and willing to help me.

-Money from people who will guide you as advisors to grow your company.
All my select angel investors were true angels who guided me. Again, its not about their brandname, but your mutual respect to work together.

-Money from geographical areas that help your business.
My lead VC was from west coast while we were based out of east coast. So that helped reach companies for partnerships and lead to VCs at next round.

- You do not want small change from several wealthy angels who do not understand your business.
I had some money from a financial planner. When things went south he was the first to be worried. In all fairness, I had to spend time to keep him updated on my decisions. Think of "being your own boss"! I have a friend who raised $2 million from an angel group of 30 wealthy doctors etc and spent a day every month updating them.
In fact there are several consultants who would get you your first $250K within a week, but its all $10K etc from people unrelated to your business. I have seen this work for another friend who got his first $250K, then went on to raise VC money.

-As best as possible you should raise money from a group of investors who can work well together, be it two VCs or set of angels and VCs.
After I closed on my first $1million, I met Howard Anderson and he said he wanted to invest $1millin more and asked to increase my round and I declined because there was no fit with my led investors. Howard's money would have been good as the lead money.

- Finally comes the terms of the money. What is the catch?
I had a local Boston area VC who looked me in the eye during my second round funding and asked if I would step down as CEO beause he would bring his own guy as CEO. The relationship was not at any stage of respect, I declined to him, was hurt at th anti-feminist sentiments, but I honestly fretted about what I should do purely in the interest of the company. Of course, it was a bait and not real followup so it didn't get me money.

There are some inherent market valuations and percentages that VCs get for different stages of a business. In 2000, companies got 30 and 50 million valuations easily. So, I made the mistake of building product, launching it, building user base (palm users in our case) and initial paying customers, and thought I'd raise next round money to scale the sales team to grow the business. So I went to VCs asking for $15million and got the same polite reasons of grow some more, this or that is missing. Then, I came across a honest VC who said, asking for $15 million implies a valuation of $30 million as a Series B would give VCs 50% of the company. This was early 2001 and since the bust was beginning, VCs were getting cautious of high valuations.

Finally we got our Series B from West coast for $5 pre at 20mill valuation. It was the worst terms possible.

Our terms were such that our VCs get everything if we sell the company within 2 years. Specifically in our business, mobile and wireless were crashing ahead of rest of IT as soon as Palm split as two companies. So it was not sensible to believe we could survive towards an IPO without even finding a buyer for 2 years.

The terms could get more money to the second round of investors while leaving the first round of investors in the same terms as founders. Most VCs act in trusted cirlces and won't let this happen but during the bust times, this was common in the terms.

Again the basics of dealing with real people towards a common vision at the closing of the round is important just to keep it fun through the process and bearable when things get tough.

BarCamp Boston - a conference with enterpreneurial energy

Loved BarCamp Boston, learnt a lot from several sessions, but best of all was the enterpreneurial energy!

Monster Lab, the sponsors, were great, and true to the unconference, they did not market their wares but helped a lot with food, organization and friendly smiles.

I'll write about the various enterpreneuers and what I liked in the coming days.

I loved Ray Deck's talk about bootstrapping and want to write about it here.

Ray is a modest serial enterprenuer since 97 on his 4th startup element55.com

Bootstrapping means putting ones one money to get a startup funded for most people. I remember my early days after college when I was involved in Bootstrapping OS, particularly, in Sequoia systems with fault tolerant proprietary OS.

Many enterpreneurs I speak to on a daily basis have one thing in common - for them bootstapping is to get started, but they have nowhere to pass the funding of their startups to. So they loop for a long time spending their own monies building their business looking for funding to scale it to next level.

I like two things about Ray's presentation:
1. Very logical layout of a business in terms of its components with practical advice for the new enterpreneuer
2. Very positive presentation focusing on answers
3. Clearly brought out the opportunity cost of the founders time which most enterpreneurs forget.

More on these later.

Transition to Startup Life

I find more people dreaming to be enterpreneurs not taking the plunge as they are worried about the transition.

I had worked in large companies for 10 years before my first startup, Coola. I believe I was enterprenurial in my jobs as I worked to bring in web technology and created web organizations in companies I worked. Still it was a job with its own structure and it requires a different competency to evangelize and get buy-ins across different groups working with a team of corporate people hired into a company. I was worried if I could survive on my own as an enterprenuer.

I got a great advice from my best mentor when I was fretting about it, almost ready but not sure whether I could do it. He said "Take a week of vacation, pretend you are already on your own, get up in the morning and do what you would as an enteprenuer, see if you like it, otherwise, forget about it and get back to work in a week". I did just that.

I started planning for this week, began thinking about what I would do during the week and scheduled my time to attend some networking events (ok ok, I thought it was all about networking only and didn't know about the rest of execution), then I took the week off. By the end of the week, I had a taste for what life would be to be on my own.

During the course, I have learnt that you need discipline and planning to manage your time.

All this applies to the very early stages. Once you have your team in place and are building your startup, its a fast pace ride. To quote Jerry Kaplan from Startup "Its like a fast ride on a car down the hill without any brakes on your car".

Its funny, I have driven up I93 into Boston or 101 in CA, rushing to meeting investors and clients and always remember this quote, and can validate the feeling is true whether things are looking up or down.

Entrepreneurs self managed online community

I am a big fan of online communities.

I founded Web-net, a user group with monthly meetings at Sloan school in 96, in the early days of the web where we invited startups to market validate their ideas. I've been part of an online chat community along with Richard Seltzer with weekly online chats to understand business trends of the web. We've resurrected this as a blogchat with the same interactive netizens.

I talk to about 10 people per month about startup ideas and help make the next step as a followup to this blog. In most cases, I am not the expert, I just think creatively and find the source or contact to help them move ahead.

I am wondering what do people think of building an entreprenuer community online, one that can help each other based on past experience. I recently discovered Gobignetwork.com which is an online community of registered users who can post any question or article.

There are several mailing lists I am part of like Harvard startups, which are very active and have a wealth of accumulated knowledge from the past which is called upon and shared on a daily basis. Like that for entreprenuers, but an online presence!

I am thinking more in the lines of a wiki where its a self managed community.
Let me know your thoughts on this and if you'd like to participate in such a community online.

Finding the right business model for your technology business

I love this aspect of the early formation stage of any business - finding the right market and b-model for your business.

Is there any steps we can followup?

First, there are lot people who are stragtegists who can come with lot of possibilities. Its a kind of thinking, also coupled with years of experience looking at different business models that worked or failed for other companies in the past. VCs usually do this well, mostly in pointing a parallel business and how a particular b-model failed for someone.

My friend Richard Seltzer is a genius in this, he was an Internet Evangelist (actually that was his title) at Digital when they came up with Altavista. He later wrote the book on "The Altavista Search Revolution". He gets charged about any web idea and can brainstorm wild possibilities.

I've come across many strategists during my early startup days, who were all consultants.

If you look closer, you'll find most of these consultants have certain type of business and b-models that they deep down believe, maybe because it worked for some other client or because of their background.

For example, when we came up with Coola technology as being capable of allowing mobility of granular information between a web based system (over HTTP) and any application on the Palm, coming from a software background, building web applications, I first thought of web businesses as our customers and the optimum deployment as a hosted ASP solution. My partner and CTO has extensive experience in databases and loves integration with different systems in a corporate world. So he build a robust server with its own APIs to integrate into several different type of technologies on the backend.

We came across a VC who had experience in emails who suggested that we offer Coola over email so one can add a Coola signature and get addresses synced into a Palm over Coola. We were driven on an execution spree and managed to implement all of it.

I strongly believe that any business should insert itself into the existing eco-system of players to build some sustainability. So, we partnered with every possible player in the mobile space. We launched an API for our Palm client and worked with every single player to integrate it with their Palm application, eg Palm readers, Palm image viewers, Palm Database Apps all could talk to Coola client on the Palm.

On a sad note, when we closed Coola after 3 years, everyone of them had to release a new version of their software removing Coola client calls :-(

I have seen several clients from BBN Planet/GTE Internetworking where we used to brainstorm with every player who wants to build a web site for their business like Time Warner's American Lawyer Media, Starwood Hotel group, Cabletron etc. Then we built the site, launched, measured results and adviced on keeping on changing the b-model.

So, I have come to appreciate a new way of coming up with business models for new idea which marries strategy with execution.

Here is my first attempt at building a list of consideration to find business models for tech ideas.

1. Ask yourself "what is my fixed and what is my variable" in my business. This will help to understand what is the core part of your business that you want to build as your core IP and competitive advantage in the long run.
For example, if we look at a photo site like shutterfly.com, is their fixed the technology for sharing, operations of printing quality pictures, or the community they built with loyalty to come back as repeat customers.
If they decide the community is their fixed, that will help decide to be a destination site, add the burden of customer aquisitions, and help plan activities around building loyalty to such a community (this part shutterfly hasn't done). If on the other hand they decide their technology and fulfillment is their fixed, they'd work on the UI to lock in visitors (which they've done a beautiful job) and can go about signing partnerships with the portals to do co-branded deals to bring in customers and can even partner with Google groups to allow existing groups to use their site for sharing photos within their community etc.

2. Insert yourself into the existing eco-system. Find partnerships, technology integrations, co-marketing deals, but make sure its all revenue generating for both parties, otherwise it won't stay for long.

If you look closely at the news, you can see how Google became famous because Yahoo chose them as their search engine when Yahoo didn't have one. Today Yahoo and Google are competing for AOL and every other key players partnership to tie themselves some sustainability into the web eco-system.

Beware of revenue sharing deals when you cannot clearly calculate where the revenue is coming from. We had signed for Coola with Boston.com and spent a lot of time with web business who wanted to do rev-share deals when either couldn't see where real money came from.

Its easy to get carried away by examples of large players and how they have grown with revenue share deals, but think critically about the customer paying you, for your small business to you or your partner and why.

3. Every idea given to different teams will make different businesses. It depends on what core competencies exist in your team. Where is your strength? Are you server or client side people? Do you have competency in awesome content play? You can always hire people with other skills, but where is the core of the top guy who is going to drive all this?

4. VCs always ask for a rounded team and beam if you have team and advisors from the vertical you are targeting.
You will have to know the nuances of the vertical you are targeting, so experience in that segment will go a long way. So, even if several verticals are possible when you brainstorm and do a blue-sky scenarios, focus on the one where you have real experience in your team and can execute.

5. If you know your fixed, its great to dream, don't let it hamper your fast executon in the near past.

I love this quote:
" Every morning in the jungle a lion and a gazzelle wake up and start running. The lion will survive only when it runs faster than the slowest gazzelle,a gazzelle will survive only when it can run faster than the fastest lion"

In the startup world, its not the greatest idea that wins, its the one who runs the fastest.

My partner Shirish likes to add puns and extends the quote "Every morning a vulture sleeps late knowing whether the lion or gazzelle survives, it will have some food to eat".

I am yet to see a startup example to see where a business can become a sleeping vulture :-)

Selling startups - who can help

Selling a startup is a HUGE topic. Lets talk about initial planning steps for selling a startup.

I volunteer as an expert at allexperts.com and answer questions in the VC and Entrepreneur section. Since I answered this same question twice in different context this week, I'd thought I'd share some broker companies I know.

These are companies who have brokers with relationship with buyers and can sell your startup for a fee.

1. CA based Business Team
2. Boston based Boutique firm, specializing in Internet businesses ebizbroker

I recently spoke to a passionate entrepreneur who has a cool startup. He was so focused in his space that, what I saw as potential buyers were not in his radar and he valued his firm much lesser thinking of potential buyers from his industry only.

I'd suggest talking to one of these firms just to check the exit option of your startup. Some can sell technologies from as less as $100K to couple millions $$$.

It may help to see the perspective of some potential buyers. You may be able to get strategic directions to scale your company to increase your valuation by talking to some of these brokers.

Like everything in the startup world, its about relationships. So, meeting a broker before you need one will make them call you with lucrative options when you are not looking, which puts you in the best position to negotiate and get the best offer when you are ready.