daily articles for founders

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

To raise or not to raise  

Joe Stump, founder of SimpleGeo, has written a pretty solid article examining whether people should raise capital or not. It's a balanced view that looks at both angles instead of dismissing or praising fund-raising outright, and mostly matches with my views on raising investment:

I look at capital, whether it comes from an angel, a VC, or a traditional bank loan, as an accelerant. It's like gas. Sometimes your fire is burning nice and bright. You're warm and have plenty of heat so why pour more gas on the fire? Sometimes, however, you'd like to start another fire, or maybe you'd like to burn down a house, or, possibly, you'd like your little glowing embers to be a fire more quickly than is otherwise naturally possible. These are all great reasons to reach for the can of gas.

Joe lists a number of good reasons to raise or not to raise. Reasons to raise:

  • Your business is capital-intensive.
  • You're at an inflection point and the capital will help you grow 10x faster.
  • You want to get some money out. (I find this one dubious - just pay yourself a better salary!)
  • You can't afford to keep working on your startup. (I disagree with this one, that's using investment as a cushion)
  • It'll give you access to a lucrative partnership.

Reasons not to raise:

  • It's hugely distracting.
  • If you raise too much, you might get hurt in later rounds.
  • If you raise at too high a valuation, you'll be taking early exit options off the table.
  • You give up control of your company.
  • Even after raising, investors are a huge distraction.
  • You may not get the attention you want or need from your investors.

Finally, Joe offers some tips about do's and don'ts of fund-raising, but you should really just go read the article to find them out.

Soapboxes not optional in the startup business  

Patrick McKenzie of Bingo Card Creator has a problem: his AdWords keep being flagged up as gambling-related (due to the word "bingo") and since Google has extremely unresponsive customer service, it considerably slows down his ability to tweak his Ads, and thus scale up his spending.

So what does he do? He posts an article complaining about this, on his popular blog, and right now it's got 172 points on Hacker News, and has been near the top of the front page for the last 12 hours.

Whether it will get the attention of someone at Google or not is undetermined at this point, but one thing, which Patrick mentions in the HN comments, is certainly true:

Strategically speaking, if I were a startup totally dependent on the Googles (I mostly am, but hypothetically speaking), and I knew that having a soap box was the only effective method of conflict resolution with Google, then I would make it a high priority to have a soap box. It certainly isn't the only reason to have a soap box. It isn't nearly the best reason to have a soap box. But you should have a soap box.

(Incidentally, it isn't as hard as you think. I know, we have it excessively easy in central Japan thanks to the well-known Ogaki tech mafia and the unending fascination of the tech press with elementary school teaching activities, but even without these huge built-in advantages you could proceed to Plan B and write interesting stuff while trying to help people.)

What's your plan to build yourself a soapbox to defend your business?

How to get actionable data from Google Analytics  

Another good post by Kristi Hines from the prolific KissMetrics blog. This one explains practically and in some detail how to set up Google Analytics goals and funnels and use them to learn about your website's conversion. This is quite an unexpected blog post, considering that KissMetrics sells a competing analytics solution, but the article is solid, clear and easy to follow. If you were thinking of adding funnel analysis to your Google Analytics but didn't know how, read this.

Why most VCs give bad advice  

Kamal Hassan:

To sum up, venture capitalists:

  • know less about the business than the entrepreneur
  • often have limited experience in the industry and in running businesses
  • often feel that they know better (their environment encourages it)
  • can fire the entrepreneur, so their ‘advice' carries too much weight
  • have a different share class so have different incentives
  • are on a fixed timeline that may impose looming deadlines
  • are biased to take action if things seem to be going poorly

Advice is a dangerous beast. Advice from the wrong context pushed overly forcefully can easily damage or even destroy your business.

As an entrepreneur, it is your responsibiity to:

1) understand the context that the advice is being given from; is that context actually relevant to the advice being given? 2) translate it to your own context; how much of the advice can reasonably translate to your potentially very different context? 3) decide how and whether to apply the advice, if any is useful at all.

It's your business and your life. Only you can make the call on whether the advice makes sense. Any situation where you have no choice but to disable your critical thinking and take someone's advice anyway should be avoided like the plague - whether or not you're going down the funded vs bootstrapped route.

I've heard some pretty horrendous advice given to startup founders by people who sounded like they knew what they were talking about. One startup I advised recently was being told by one of their "advisors" that a transactional business model, for what they were doing, was impossible, so they were going for a subscription model instead. I know several businesses using transactional models in similar contexts, so I was able to undo that bad advice, but ultimately there's only one defence against bad advice: think and make up your own mind.

The mid-size market  

My first startup targeted the impossible market of "small businesses online". This was a disaster, since such a wide market presents a couple of insurmountable challenges. First, it's so wide that it doesn't have any specific needs. The problem with that is that the only way to get a new product out on a low budget is to focus on a clearly defined niche and be very specific and therefore better than the generic solutions out there. The second problem was one of marketing: it's impossible to target such a wide market.

Jason Cohen describes another mythical, unattainable market: that of companies with 50-500 employees, or the "mid-size market".

They're not "small enough to be nimble," because at fifty employees they've already established much of the lumbering process and bureaucracy of companies a hundred times their size. Shackled by budgets and internal politics, technology changes require expensive coordination and retraining, and fear of change trumps potential rewards of improvement.

All this makes for an arduous sales process just like with big companies. But although they have the process and controls of a large company, they don't have the budgets to match; there's no large reward for successfully navigating the painful, Herculean sales adventure.

His conclusion:

So my immediate reaction to anyone "selling to middle" is the same: Yuck. If you're going to do it anyway, I hope you have some nice, extenuating circumstances that truly makes you the exception to the rule.

Jason also rightly points out that "50 people" can mean very different things in different industries. As Peter Drucker points out in some of his books on management, a 500-people factory is a relatively small factory with fairly straightforward operations (this was back in the days when there was less automation, mind you), while a 500-people consulting firm is a very large and complex firm.

Is it possible to crack the 50-500 market with some kind of innovative sales process? I'm not sure. If it is, I certainly don't know how.

Entreporn: learning vs doing vs wasting time

One comment thread on my Mixergy Premium article yesterday made a number of interesting (if flawed, in my opinion) points.

One of the key points was an attack on the practice of sitting around watching screencasts, reading articles, and doing basically anything except building a business, and hoping to somehow attain success by that method. The point is interesting enough to deserve a brief article.

Entreporn: mental masturbation

There is a category of advice articles, and a way of consuming those articles (as well as better ones) which is wholly unproductive. We all know it. We've all been there, and we've done it over and over again because, well, it's addictive. It gives you the buzz of learning stuff, absorbing new information, adding to your growing skill set. It's a bit like grinding in MMOs - killing wild boar after wild boar, accumulating XP until you're finally ready to make it to the next level.

Unfortunately, the real world doesn't work like that. There's no speed limit. There's not even a speed meter. There's no destination, there are no road markers, there is just purposeful movement vs going round in circle. There is no levelling system in the real world, and no one in the entire universe is going to give a shit whether you read a million startup advice articles, ever. Probably not even you.

Reading business books and articles, watching screencasts and interviews, is utterly useless beyond the first few weeks where you're actually learning a rough map of what stuff there is available for you to draw from. If you know nothing about startups, spending a week randomly reading all sorts of articles in the Founder's Library makes sense. It's like an accelerated brainwashing programme to fill your mind with the awareness of what's there for you to draw from.

But beyond that initial sip on the firehose, the rest is mental masturbation. Unless you have something practical that you need to do, reading about startups, business, and so on, is a waste of time.

Learning and doing

However, there is a context within which "startup advice" articles and other materials (to categorise them with this giant brush) are priceless and invaluable: that's when you actually have something specific that you want to do.

If you want to figure out how to advertise on Facebook successfully, reading articles about the topic, by people who have done it successfully, is so immensely valuable that anyone who doesn't do it must be an idiot.

If you want to fix your business's broken customer service process, watching an interview of an expert who has seen your issues a hundred times and explains exactly what works to fix them is great use of your time. It has concrete and obvious value to you.

In short, if you have a specific problem to solve or opportunity to address, and you want to acquire a specific skill to address that opportunity or problem, then spending time learning rather than just jumping into doing is a no-brainer.

Another way to look at it: if you would consider paying someone to solve this problem for you, then learning about the problem is valuable. You wouldn't pay someone to talk to you about startups in general, so don't waste your time on it.

Qualifying my advice

Daniel B Markham rightly criticised the world of entreporn. That stuff is a waste of time. And I deserve some criticism for not specifying this in my article. Here, then, is the correction, or addition:

If you don't have specific problems that you're trying to solve, don't sign up to Mixergy Premium - or, in fact, any kind of source of "startup advice".

Instead, stop reading this article (it's a waste of your time too), get out of your chair, and go and find some concrete problems and opportunities to measure yourself against.

Once you've found them, then you can go back and make use of the treasure trove of advice on this site, on Mixergy, on HN, and on many other sites that I've linked to here.

You'll no doubt discover that masturbation simply isn't as good as the real thing. Go forth and do stuff, for real.

Start-up vs consulting vs corporate vs all three  

One of the great fallacies of the corporate world is that you must have a corporate job to have any kind of security in life. The corporate world is exceedingly good at brainwashing people who work there into believing that, to the extent that most people are (quite rightly) terrified of what will happen once they step out of the jumbo-jet of corporate life into what they perceive to be as free fall.

The natural reaction, once you realise that most of us are born with a solid pair of wings that will allow us to fly around the consulting and/or small business universe without anywhere near the level of risk that corporates thought was there, is to oppose the original lie. And there's some truth in that opposition. Flying in a plane is itself terrifying, because if something goes wrong with the plane, you'll be dead quickly, horrifyingly, and with no control over your destiny. Having your own wings (running your own business/consultancy) is far preferable from that point of view: you have control over your own fate. If you run out of money, it's your own fault, and was entirely predictable months in advance.

But, as I've mentioned before, one should not go too far in this direction either. The sensible, wise perspective is, as usual, in the middle. In large corporations, you can rise high up in the ranks if you work hard, are lucky, and play the careers game right. And so with startups or small businesses: if you work hard, are lucky, and play the game right, you can build something solid and rewarding. Which one you pick is really a matter of personal preferences.

So, in that context, here's an inspiring article by Vlad Lokshin, who refuses to settle for the accepted wisdom of either crowd, and carefully balances all three options. He arrives at his own conclusions of what the best fit is for him: a combination of a steady, 40 hours a week corporate (but independent) job with time on the side spent either consulting or working on his own ideas, as he sees fit. It's an appealing goal (though not so easy to achieve). Have a read for his full thinking.

I'll finish with one final piece of advice, which goes slightly contrary to one of Vlad's points:

No matter where you are, make sure you're always growing on a personal level. Never sacrifice your personal growth for some "I'll make it if I only throw everything into it" martyrdom delusion. Successful people start successful businesses, and successful people are always growing.

How designers and developers can work together  

Matt Gemmell has written two excellent articles recently, aiming to help developers and designers to work together:

Both are solid and worth reading. The key points for developers:

  • Know what you want
  • Examples are helpful
  • Trust your designer
  • A sketch goes a long way
  • Consider sample data
  • Present all the work up-front
  • Remember design constraints
  • Be responsive
  • Don't assume it's easy
  • Don't micro-manage
  • Use the same tools
  • Speak the same language
  • Allow use as a portfolio piece
  • Pay on time
  • Don't condone spec work
  • Understand the model
  • Source code is extra

And the key points for designers:

  • Use an intelligent method of version control
  • Keep your layers
  • Name all your layers meaningfully
  • Use groups, and do so sensibly
  • Prune unneeded layers
  • Use Layer Comps
  • Keep everything as vectors, and scaleable effects
  • Learn how to preserve rounded corners while resizing
  • Design at 72 ppi
  • Snap to whole pixels
  • Always use RGB mode
  • Asset-preparation is part of your job
  • Be careful with fonts
  • Mimic the platform's text-rendering (where possible)
  • Be sure of design dimensions
  • Use the platform's idioms
  • Design once for landscape, then design again for portrait
  • Design for each major screen-size, and their contexts
  • Use genuine or at least realistic content
  • Consider localisation
  • Respect the global light source
  • Make navigational or organisational constructs explicit
  • Export cut-ups without compression
  • Ask about shadows
  • Understand how buttons are constructed

Read, bookmark, and remember.

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.

Why pitches fail  

Here's a great article from a few years back, by Eric Ries. It breaks down pitches into several types, and examines the key questions that need to be answered by each type of pitch. Worth reading alongside this article, posted a couple of weeks, ago, about startup itch archetypes.

Eric outlines the following pitch types with their relevant "key questions":

  1. Printing money
  2. Promising results
  3. Micro-scale results
  4. Working product
  5. Prototype product
  6. Breakthrough technology
  7. All-star team
  8. Good product idea