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

Product vs Business vs Company   ✶

Fred Wilson makes an interesting point about the distinction between products, businesses and companies:

...most of our portfolio companies build the product first, then the business, then the company. And building a company is often difficult for founders because they are so focused on the product.

Roelof Botha, a leading VC with Sequoia, once gave me a great piece of advice in helping founders start to focus on company building. He said founders should think of their company as a product and build it and shape it with the same passion and care. I've taken that to heart and passed it on a few times.

It's worth restating the distinction.

A product is something that you can build and sell, directly or indirectly. It is the "thing" (though it can be a service) that you could make money from via a business. By itself, though, it won't make money, typically.

A business is a set of people, processes and tools that have been structured around a product to enable it to make money. Ideally, a business is profitable, but it may not be. Ideally, a business doesn't depend on any one specific person being a part of it (including the founders), but it may rely on some exceptional people.

A company is an organisation of people that's designed to run one or more businesses successfully, and to create new businesses to respond to opportunities in the marketplace. This must be, ultimately, independent of any specific employee, since companies, unlike products and businesses, are (or should be) built to last for decades.

A business is worth much more than the product that it sells. A company is worth much more than the business that keeps it alive.

This is one good rationale for why some startups (e.g. Facebook, Twitter), operating in environments where it's easy to raise money, have bypassed the "build a business" step to go straight to building a company. The danger with that is that if you don't first build a business, you might end up building a company that's incapable of building new businesses - and that's not worth a whole lot.

Conversely, entrepreneurs operating in conditions where there is much less cash to be raised (e.g. Europe) tend to focus on building a business first - even, in some cases, before building a product.

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.

Why VCs do what they do   ✶

Dan Shapiro uncovers some of the reasons why VCs act as they do:

VC behavior sometimes looks insane, but generally it's just sound economics. It's crazy but true: if you know how a VC gets paid, you can pretty much read their mind.

Key points covered:

  • VCs don't want to take any risk
  • They want you to take more money
  • They raise big funds even though smaller ones perform better
  • They're not interested in quick, profitable exits
  • They'll block profitable sales
  • They invest gregariously

Worth a good read to understand the economic incentives of (most) VC firms.

Getting users for your new startup   ✶

Philip Kaplan, founder of quite a few companies that you've heard of (FuckedCompany, AdBrite, and others), shares some advice about how to get those initial users:

The best sites seem to take of magically by themselves. Truth is, every site needs a little kickstart to get to its first 10,000 to 100,000 users. Consider this a list of kickstarters. But keep in mind the saying, "nothing kills a bad product faster than good marketing." You have been warned.

The techniques covered include starting controversies, using viral tricks, affiliate programs, SEO, press, celebrity endorsements, business development deals, and offline events. None of the tips are covered in too much depth, but Philip does give examples (some based on his own experience) of how each of them has worked in practice, and so this article is certainly worth a good read.

The cost of funding may be your freedom   ✶

This article by Kirill Zubovsky underlines the point I made on Monday about the difference between Entrepreneurs and Startup Founders.

I was free; free to think, free to learn, free to do whatever I wanted, as long as it didn't require money. Sure, there was a question of what would happen when I ran out of money, but that question was for the future, and I didn't concern myself much with the answer. Life was simple and life was good!

Then Kirill raised money.

The way I see it, I am now responsible for the dreams of my team, and that's not something that should be taken lightly. I don't mind the pressure, I love it, actually. But No one tells you about the long tail, when you start a side project, dreaming of it to become the next big success story. Keep in mind that starting is easy, but you will need to have the energy and the dedication to keep going. If you start a company, be ready to commit to the lifestyle.

And the money line:

I promised our team that we will solve certain problems together, that they will get to work in an environment we've created, and as much as achieving these goals is everyone's responsibility, I have promised and I cannot fail. This is my strongest motivator to wake up in the morning.

Taking funding (which, once again, I think is valid for some businesses) makes a big change to your attitude, to your life. From freedom to commitment, from profit to promises, from responsibility to yourself, to responsibility to others.

If one of the things you want out of running a business is the independence of making your own decisions rather than being beheld to someone else's opinion (and I know a fair few serial entrepreneurs who are fiercely independent in this way) don't take funding.

Building international relationships   ✶

Irina Dzhambazova shares how Bulgarian startups deal with obscurity, and succeed building international relationships:

Serendipity and true partnerships

"Investing time in getting to know an organisation or a person, without looking for the immediate quid pro quo is the way to go. Just get to know people, interact with them in the manner you do with friends and leave the rest to chance." - Vesselina Tasheva

Good partners understand each others goals and can act proactively on each other's behalf. This type of relationship is much easier when you can relate this way at a personal level. Vesselina's advice is to start here - the deal's come more easily later.

She's the former partnerships manager for a large, multi-national IT company, and now runs community for the largest accelerator in Southeast Europe, so has seen this work in both contexts.

Getting in the door, with research

Max Gurvits, an internationally-connected investor, emphasises the value of a little research. He encourages startups to invest a few hours in a list of 100 desired connections.

He wants them to do the mental exercise and leap to realize just how many people are hidden in Linkedin, Crunchbase, or alumni groups. All they have to do is look rather than rely on the obvious choices. Probabilistically, this larger amount of people also increases the chances of a connection actually happening and being helpful.

A list of 100 might seem daunting at first, but it's easier if you break it down into categories:

  • ideal customers
  • distribution partners
  • investors
  • analogs (companies who've done something similiar and can share benchmarks and advice)
  • compeititors
  • antilogs (comppanies who've tried something similar and failed)
  • domain experts, including press

Aim for a minimum of 10 per category, and you'll probably start finding a lot more low-hanging fruit.

Being equal

Boyan Benev, learned the importance of equal terms early on in his real estate career. He now has a few startups behind him and is a national TV personality. "If you put yourself as an inferior, you effectively are saying ‘Hey I am different from you.' People are very good at sensing that and, with the neediness that you exude, they would subconsciously judge you more harshly. We are in fact all the same, entrepreneurs, investors and venture capitalists and we should feel equal with each other all the time."

Lino Velev, director of Obecto, a software development company, starts on the outskirts of a certain social groups. For him, getting to the core through the weaker connections is more practical than going straight for the big fish.

Lino relies on story-telling to be memorable. I also happen to know he parties a lot too!

All of these are viable, authentic, and easy approaches to building your international network. Sofia, Bulgaria now has a growing startup scene, but it happened because of founders like these, hustling their way up from the remote, Southeast corner of Europe.

You have to be prepared; it takes a while for your network to build. But it usually pays off faster than you expected. No reason to let your current obscurity stop you.

Beware the Maximum Viable Product   ✶

Roger Ehrenberg:

...beware the maximum viable product. Ease of adoption, clarity of the value proposition and lots of feedback far outweigh the risk of people saying "Is this it?" IMHO. Don't be afraid. There is nothing like seeing your product out in the wild. Go for it.

The key point is nothing new, but worth repeating: launch early and iterate once you have customer feedback. No matter how convinced you might be that you know that your product is worthwhile, without feedback from real customers you are steering your ship with neither compass nor map.

Roger makes another point which I don't quite agree with:

Leaving aside the enterprise (which I believe has a fundamentally higher bar for release than consumer), the biggest mistake I've seen has been to delay getting a product out in the wild and over-engineering it in the lab.

Enterprise products are no different. If anything, customer feedback can be obtained even sooner in the enterprise world, by pitching a product which has not been built at all yet, and trying to obtain letters of intent or even conditional purchase orders.

If you can't sell the promise, you most likely won't be able to sell the product either.

How to talk about the competition   ✶

This article by Mark Suster gives us two methods to describe the competition to potential investors.

One involves a feature comparison with Harvey Balls, where it is important not to mark yourself as better than the competition in every category (or investors won't believe you). The other method suggested is to draw a consulting-style two-by-two matrix/graph, on which you chart your competitors to show how your company stands out.

Pitfalls to avoid include claiming that you have "no competition" (generally only novices say this), or claiming that the competition just sucks (if they've been in the market for half a decade longer than you, they're probably doing something right).

Startup or travelling lifestyle?   ✶

Paras Chopra, founder of Wingify, which includes, in its products, the excellent Visual Website Optimiser, asks the question whether the best way to use your 20s and 30s is to spend hundreds of hours a week working on a startup, or take up an itinerant lifestyle, living and working from the beaches of Thailand or other places.

Startup requires a lot of sacrifices from you. You have to work extremely hard (think 100+ hours per week) for several years. All this hard work is justified in hope of an eventual big pay-off which may happen in a year, five years or may not happen ever. That big-payoff has potential to make you financially independent and then you can go travel the world (or explore other exotic interests such as taking a stab at string theory). But the big question is what if that eventual pay-off never happens?

The response on Hacker News is of interest, with many pointing out that you could do both at the same time, since living on a beach in Thailand is extremely cheap.

However, it really depends on what kind of company you're looking to build. If you're in it to build yourself a lifestyle, then a web product and/or freelancing will enable you to do so easily. There are a number of blogs about the topic, try this or this. It can definitely be done, and you don't need to build the next Google to do it. And this is the crux of it. Not only you don't need to build the next Google, but you almost certainly won't.

Building some muses to sustain a travelling lifestyle is an altogether different endeavour from building a startup that will change the world. Building a startup requires building connections to the right people, making deals, developing your business in a direct, hands-on way, hiring talented employees, and so on. This is still something that can largely be done only "in person, on site". It's not just about the product.

With every year, it becomes easier to build a completely distributed business (from a beach or from the middle of London), but we are not quite there yet.

What is your brand?   ✶

Chris Savage:

Your brand is not your logo or color scheme, it's how people think about you. It's the way that you represent yourself.

Your brand is how people perceive you. The visual component is just one part of it. Are you fresh, reliable, exciting, reactive, aggressive, friendly, simple, powerful, flexible?

You can't be everything at the same time, so pick a set of values that you can really stand by, and make sure those come across consistently.

How to pick the right values? There are not really any right choices (though of course, there are negative values that you should probably avoid), so make sure you pick core brand values that you believe in, and which aren't exactly the same as everyone else in your industry (otherwise, how will you differentiate yourself?).

It's a worthwhile exercise to put together a "branding document", informal or formal.

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