daily articles for founders

Here are 10 quality posts from the Founder's Library:

Using advisors to raise money  

Very interesting article by VC Nic Brisbourne, examining the usefulness of advisors in raising startup money. Some interesting numbers:

Advisors are typically small partnerships, or individuals, who help startups raise money from venture capitalists. They usually charge some form of retainer, and then a success fee of a percentage of funds raised and perhaps some options. Retainers normally range from £5,000 to £10,000 a month, the percentage of funds raised between three and five per cent, and options up to 0.5 per cent of the business.

These retainers sound expensive, but, as Nic later points out, if using an advisor is right for you, and you're dealing with an experienced advisor with a close-to-100% success rate, this can certainly be worth the money.

Nic also advises startups who are considering this route not to bother with unknown advisors:

If you are going to use an advisor, then for heaven's sake go for one who is well respected, well known, and has a wide network. Otherwise you might as well email the VCs yourself.

More in the article.

Every entrepreneur should write  

Jason L Baptiste makes a great case for why every entrepreneur should write. I agree with this - in fact, I believe that writing is one of those essential skills that you should somehow recruit on any early startup team, because of all the opportunities it opens up.

All the initial points really boil down to the last one:

It Is A Rapid Accelerator Of Serendipity

Startups are certainly impacted by luck, but I believe they are impacted just as much by serendipity. You never know who knows who or who you may run into at an event. By putting yourself out there and making yourself open to meeting as many people as possible, serendipity is much more likely to happen. Once you have even a minor audience, you are now likely to experience the effects of serendipity. One article might reach 500 or 50,000 people in a short span of time. Remember that we live in a world where content/information travels faster than ever before. Out of those 50,000 people, you never know who might be reading, who might reach out to you, or who might leave a comment. I can tell you this: The majority of good things that have happened to me in business can be traced back to my writing

Writing is a great way to create opportunities for yourself and your startup.

Jason also provides some tips about how to get started:

  • Keep it simple, worry about the aesthetics later on
  • Define a specific audience to write to
  • Set a regular routine
  • Don't force it
  • Initially share with close entrepreneurial friends
  • Watch your analytics
  • Avoid rambling
  • No linkbait, just thoughtbait
  • Make yourself easy to reach

All great points. If you're an entrepreneur and hesitating to get started, read the article. If you're worried about your writing skills, read this first.

Management is a support function  

Here's a great article from Joel Spolsky, which makes the point that management is not about command and control, but about providing support:

Thus, the upside-down pyramid. Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization.

The "management team" isn't the "decision making" team. It's a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

While there is certainly plenty of decision-making required at the "top" (mostly about strategic direction and key hires), the decisions on what to do to react to specific daily business situations should be driven by those closest to those decisions.

The sad thing is, management gurus like Peter Drucker have banged on that drum since the 50's, and yet many businesses still operate as if centralised decision making was viable to build large businesses. It's not. As Spolsky (and, a few decades ago, Drucker) point out, centralised decision-making is simply not scalable.

That being said, of course, "building a large business" is not everyone's aim. If you don't want your business to get big anyway, you can probably sustain centralised decision-making until your business gets to a few people or so.

Are startups 10x cheaper than ten years ago?

This article was posted last week, and spurred an interesting discussion on Hacker News. At key is the question of whether startups are really cheaper than they used to be.

This is, of course, relevant because the idea that startups are cheaper than ever to launch is often brandied about to support this or that argument, whether it's about the increased number of tech startups, or the investment climate, or the reasoning about why you should start a startup right away, or the disruption to the VC industry, and so on.

Thesis and antithesis

One side of the debate claims that actually, startups are no cheaper than they used to be. In the late 1990s, it was possible to launch a startup on the cheap, on a shared hosting package, for puny amounts of money, and wait until it picked up before investing in more expensive infrastructure (just like it is today).

Hiring has not gotten cheaper, and infrastructure costs on the low end are just as low as they used to be, and so, the argument goes, it isn't cheaper to start up today than it was ten years ago.

The other side of the debate points out that many startups in the late 90s spent a lot of money buying overpriced Oracle licences, hiring rare and expensive specialists to deal with all this pricy technology, and that this was part of the cost of doing business. Today, MySQL (free) has replaced Oracle, and there are a lot of free hosting packages, and there are hyper-productive technologies like Ruby on Rails which allow you to build an entire web business with a handful of people and dollars.

Hiring costs may not be cheaper, this side claims, but technologies are more productive and deliver better results.

To this, the first side replies that you didn't need to buy Oracle in the 90s any more than you do now, and that this was just an inflated cost caused by too much VC investment in unsound startups. And, ten years ago, a tiny team of hotshot programmer could build a business out of nothing just as well as they can today.

And so the endless Saṃsāra of arguments goes on. If you have a few hours to kill, you may wish to join in!

The reality

As with every unsolvable debate, the truth lies... on both sides.

It was indeed just as possible to start a startup on the cheap ten years ago as it is today. Many people did then, and many people do today. If you're scrappy, smart and determined, you can start a tech startup for pennies. That's as true now as it was then.

But not all startups are started at the very cheapest end. Some businesses do require investment of some sort before they're viable businesses, or even require it as growth money. And this amount of money has been going down, at least as far as the technical expenses is concerned, because both the technologies (Rails as well as others), the infrastructure (AWS, Heroku, but also the vast number of supporting apps that make it easier to do things like accounting, support, or user testing more efficiently), and even the available knowledge and mentoring (via movements like the Lean Startup, or even communities like Hacker News), have been getting better.

AWS may not be the cheapest, but as a "standard option" for the scale-minded startup, it's a damn sight cheaper than spending thousands of dollars a month for a bunch of dedicated Rackspace servers, or buying up colocation space, physical servers and sys-admin time for a similar amount, as you might have in 2001.

It is possible to get further with less money than it was ten years ago.

And that's the crux of the matter. As with Parkinson's Law and time budgets, startups will expand to take up the funding available. But they will get much further with the same amount of money than they typically did ten years ago. Of course it was possible to start up on the cheap ten years ago. But:

  • today's cheap startup will get further than yesterday's cheap startup;
  • today's mid-range startup will get further than yesterday's mid-range startup;
  • today's expensive startup will get further than yesterday's expensive startup.

Startup opportunities

Perhaps more importantly, there's another factor at play: the opportunity-space.

Thanks to the blossoming of internet users, countless web technologies, open APIs, and other web companies, there are more opportunities to build startups today than there were ten years ago.

This seems counter-intuitive at first - surely, back then there were so many more things left to do. If you think about it, however, you will see that many opportunities depend on other things being in place. You couldn't have started Twitter or Groupon in 2001. Not enough people would have understood either of these platforms. You couldn't have started any of the companies, like Instagram, Foursquare, or Bump, that thrive on the iOS ecosystem - it didn't exist. You couldn't have started DropBox, Heroku or Mint back in 2001 - the infrastructure wasn't there to support them.

The fact that there are so many opportunities to build something useful and monetisable is, in my opinion, a bigger factor in the rise of web startups than how cheaply a scrappy founder can launch a product.

And as far as this particular trend is concerned, I'm pretty certain we are still at the beginning of the tsunami. Cheap or not, expect many more startups in the next ten years than in the last.

Update: Someone pointed out that I didn't answer the question in the title, which is clearly very bad form and I apologise for this faux-pas. The proper answer to that question is: you can't compare startups directly. What you can do with a certain amount of money depends directly on when you start doing it, and what you're trying to do.

What you can reasonably say is that the scope of what you could do 10 years ago with $X is about the same as what you can do today with $X/N, where N is larger than 1 (but perhaps not as big as 10), because of the improved opportunities, technologies, and supporting infrastructure.

Avoid over-design  

Great article from Smashing Magazine's Alex Komarov, about a common mistake in iOS apps: over-design.

Probably the oldest, yet extremely popular design problem is overdesign. Designers of iPhone applications often tend to disregard common design and usability conventions by offering users slick and shiny user interface designs that go way beyond their standard look and also way beyond their claimed functionality.

Why make things look, feel and work complicated and why do designers like to re-invent the wheel? The answer is simple: they want the application to be different; look different and stand out from the crowd. Unfortunately, a different look isn't necessarily helpful for application's usability and functionality.

One of the best things about iOS, from a user point of view, is that there is a standard "look and feel" that is very clear, clean, aesthetic, and useable. Redesigning it is a lot of work, and you're unlikely to do as good a job as Apple did.

As Alex points out, standard input fields can be styled in ways that respect your application's branding without reducing the application's functionality.

Does the same apply to Android apps? Web apps? Desktop apps?

Yes, to a more limited extent. On Android, there is less of a "standard look" (which I would argue is a flaw of the platform), so unique-looking apps will not look out of place. On iOS, they stand out like a sore thumb.

On the web, again, there is less of a "standard". That said, there are still standard web controls, forms, patterns, etc, and straying too far away from them will confuse and therefore lose users.

Finally, on the desktop, it really depends on which OS you're talking about. Mac OS has as much design integrity as iOS. Windows is a hodge-podge of different style (even Microsoft can't keep it straight). Linux is a complete free-for-all, with themeability rated higher than usability.

Perils of founder fighting  

Mark Suster advises us to bring in third party counselling/coaching when there are founder issues:

If you struggle through similar issues - which means nearly all of you - please consider how and when to bring in help, to embrace mediation. It's hard to be open with your co-founders without somebody helping to broker the conversation. In many cases it's easier if this person isn't a board member or VC unless you have an extremely close or trusting relationship with them. You want to be able to be open without your board members losing confidence in your future.

My suggested approach is to do this much sooner. By the time previously hidden (or previously nonexistent) major founder disagreements come out in the open, it's too late to bring in the doctor. It helps, for sure, and if you can find a good mediator, trusted by both parties, then definitely bring them in. But the time to act is now when there are no problems.

Quoting my own article on the topic:

There are a number of subjects which seem almost embarrassing to discuss when things are going well. For example, "What if one of us decides to pull out?" Your first reaction to this topic might be "What? We're barely getting started, and already we're talking about what happens if one of us pulls out?"

The reality is that people's life circumstances change through time. They get married, or decide to leave the country, or get engrossed in a different pursuit, etc. Many things can get in between a founder and his start-up. Similarly, many things can go very wrong with a start-up. When those things do go wrong, or when one of the founders decides to pull out, is not the time to discuss these things. You need to discuss them with a clear head when no one is thinking of pulling out and the business looks healthy and hopeful.

Discuss those things early, following the steps in my article. It's easy, if slightly odd, at the beginning. Then you won't have to start thinking about bringing in a mediator when the shit hits the fan.

Government grants  

Renowned VC Fred Wilson dismisses government grants:

The application process is usually long, involved, and distracting. And sometimes the grants come with strings attached; you can't move, you have to use it for a specific purpose, you have to hire a certain number of people with it, etc, etc.


I'm not a fan of this form of financing. First, in principle I think that government ought to stay out of the business of picking winners and let the market do that. But more practically, I've never seen an entrepreneur change the outcome of their startup with government money. It is never enough to really move the needle and the strings that are attached usually make it uninteresting to me.

Given that, these days, I spend most of my time getting tech companies government money, I can't quite agree with Fred here. Perhaps things are different in the US (in fact, they almost certainly are), but here's the situation in the UK:

Tax Credits

The first mechanism that the UK government has to help tech companies is a tax break. It can be quite complicated to apply for, and so many companies that should be getting that tax break don't apply for it. If you're spending at least £50k a year on developing your own software products, you can get a chunk of that reimbursed by the government.

It's easy to dismiss the amount (you might get about £10k back on a £50k expense, for example), as Fred does, but actually, several companies in our portfolio would argue differently. One of them was in the middle of raising funding when the tax credit (over £40k in their case) came in, and it gave them that extra couple of months of runway that allowed them to negotiate themselves a good funding deal.

In their own words, they were "on the floor, laughing" when they saw the money come into their account at that critical time. So much for not moving the needle.

How much work did it take them to get this money? None at all. We handled all the filing for them. It cost them money, but that money was a "success fee" - in other words, it was money they wouldn't have had anyway if it wasn't for our help.

But enough about these unsexy tax matters. What about grants? Are they really that hard to file for?

UK Government Grants

Currently, GrantTree specialises in one of those grants, the Grants for R&D, which comes in the form of match funding with very few strings attached.

Are they hard to file? Yes, absolutely. The application form adds up to about 10 pages of very dense writing. It takes a lot of effort, great writing, persuasion, and technical skills, and of course experience in going through the process, to do this well, and it really does need your full attention for at least a few days to just get it done.

I certainly agree that in most cases, it's absolutely not worth it for tech founders, who already have their hands full with building their business, to dedicate a week or two of their mind-space to learning about the grant and preparing the application.

But here again, they can get help. And here again, the work is done mostly on a success fee, so that the cost is basically coming out of money which they wouldn't have had without the grant anyway. So it works out, once again, as free money.

Moving the needle

Can these things move the needle for entrepreneurs? Absolutely.

One entrepreneur I spoke to over a startup-themed dinner a few months ago claimed to have raised over £2m of government grants for his business, over the space of a few years. The Grants for R&D mentioned earlier can effectively extend your runway by 45% to 60% depending on the grant you apply for. Some UK-based companies can and do claim hundreds of thousands of pounds of tax credits every year. Even for a decently sized, mature company, that makes a difference. Money can clearly "move the needle". If it didn't, then why would people give up precious equity in exchange for it?

The same entrepreneur who had raised £2m of government funding made a great point that night. He said that the US, and in particular Silicon Valley, had a huge advantage in the density of VCs and hyperactive investment culture. In the UK, where VCs are scarcer and more risk-averse, the advantage that we have is that the government is willing to directly support small, innovative technology businesses.

If you want to learn more...

I don't want to turn this article into a pitch for my company's services, but if you're a UK company and you want to learn more, do get in touch. There's no guarantee that we can get you money (many startups are just too small and scrappy and don't qualify for either grants or tax credits), but we're always happy to discuss your options.

How Jason screwed up his Google acquisition  

After that the communication fell silent. I resisted contacting Jonathan or David because I didn't want to appear too eager and I figured I was in a fairly strong position since they needed what I had and there didn't appear to be any other serious competitors in the space.


While on the phone I took the opportunity to ask him the burning question of why I had never heard back from them in regards to the acquisition of Preezo. I had developed my own theory which was that since Google acquisitions were known to be primarily about talent and not technology, a one-man show like Preezo would represent distinctly less value and ultimately more risk for them than if it was, for example, a team of five engineers. However, according to Jonathan that wasn't the reason as at all. It was simply that they were so busy during that time that the deal just fell through the cracks.

I gave a presentation recently at an HNLondon meetup. One of the key lessons I tried to get across is "don't be afraid to follow up".

People who do important things are almost always very busy. Everyone wants their attention, and even with the best will they don't have the time to keep track of every interaction they're involved in. In my experience, such people never get annoyed at you for following up - in fact, they almost expect it of you. The fear that "people will get annoyed at me for following up" is unfounded.

So never be afraid to follow up. The worst thing that might happen is that your email is ignored. The best thing that might happen is that you get what you want, or even more.

Cheap startup advertising  

Rob Walling, following on an earlier article about the half-life of traffic sources (go read it if you haven't yet), describes some concrete ways to use paid advertising to get some bursts of usage that (if your site is sticky enough) will then hopefully result in some customers or at least some validated learning. He covers:

  • Niche Advertising
  • Google AdWords
  • Facebook
  • StumbleUpon
  • Reddit

Each is broken down and detailed. Definitely worth a read if you're considering using paid advertising to drive some initial traffic to your site. As Rob points out:

To conclude, I want to reiterate what I said early in this article: unless you have deep pockets think of advertising not as a long-term traffic strategy, but as a testing tool to improve your website and find out more about your ideal visitor. Few bootstrapped startups can withstand the cash outlay required to turn advertising into a marketing activity with a positive ROI, but that shouldn't keep you from testing the waters to find out for yourself.

What's the most important question?  

A very short piece to end the day. I'm told that the question that Jewish mothers ask of their children each day is, "what's the most important question you've asked today?"

Whether that's true or not (I couldn't find a reference for it), it leads to a very interesting self-awareness tool for startups. If working smarter is about devoting time to meta-work, then this might be a good starting point:

What's the most important question you've asked about your business today?