The sold out Business for Geeks tutorial at OSCON was quite good. Marc Hedlund is an excellent teacher/speaker and the absence of Jason Fried from 37 Signals was hardly missed. Below are my notes from the session which will have to suffice until the slides are put online.
The Idea
- Don’t obsess about the idea
- The name of your company and your idea will not appeal to everyone
- Go with the idea that won’t leave you alone — the one so compelling that you have to do it just so it will stop bothering you.
The Format
- Side job/Night time (keep your day job to pay your expenses, but be very careful to never work on your project at your employer or using their equipment!)
- Boot strap. Use your own money or an existing source of revenue (i.e. consulting) to build your business.
- Grants. Many federal and state/local governments have strategic objectives that they give out grants for.
- Funded company (i.e. VC money)
The Business View
- Business people don’t care about your idea/technology
- They care about customers/market/competitors/team
- When presenting your company, the best way is to compare it to a similar company (i.e. we expect to our market to be 1/10th the size of Widget Co’s)
- Distinguish your company from a small set of competitors (i.e. don’t say “we don’t have any competition” and don’t try to compare yourself to the 20 companies which barely touch your market)
Market Research
- Pick. Up. The. Phone.
- Ask everyone you can what they think. Discuss the problem you are trying to solve.
- Worry more about misunderstanding the market than secrecy.
- Go to Google and search! Look through the SEC filings of companies in your market.
Taking the Plunge
- Do you want to work on this for the next 10 years? (Don’t expect an easy/quick exit)
- Are you thinking about this night and day?
- Do you have a financial cushion (4-6 months of living expenses)?
- Are you more excited than afraid?
Team
- Start small and only grow when absolutely necessary
- Choose people who can perform many different types of jobs
- Ensure you agree on the idea, expected outcome, work expectations and roles
- Most co-founders end-up hating eachother, no matter what the outcome
- Having support and someone else “in the boat” is enormously helpful
Funding Anti-Patterns
- too few people (overworked)
- too many people (cannot agree)
- too close (i.e. friends, spouse, etc)
- too far (every decision takes forever)
- too similar (skillset, i.e. 3 engineers and no “phone guy”)
- too different (motivations, expectations)
Fundraising
- Selling yourself (team) and your company to get an investment
- Rule #1: VC’s don’t start new companies (they help grow existing companies from a small number of customers to many customers).
- Some sources of initial funding are: customers, consulting, angel investors, bank loans, government grants, yourself/your family
Rule #2: Focus on the business first, not on the funding
- Build the product
- Get users
- Make money and don’t spend it!
- Get to break-even
- Only then think about your growth plan/VC funding
What does VC money get you?
- Money, for awhile
- Maybe credibility
- Maybe good guidance and review
- Maybe some introductions … Always ask VC’s what customers they can introduce you to.
- Advocates for your company (since they have some skin in the game)
The trick to getting VC funding is not to need it.
When do you need VC funding?
- When you have high (millions $) development costs
- When your competitors are VC backed (and then only sometimes)
- When you need big partners
Rule #3: No means maybe; Yes means maybe
- Don’t wait for a better round, if any of the VC’s are ready go for it. If you’re waiting for a bigger/better VC and they pass, the other VC’s will find out and pull out of the deal.
- Go with the VC who’s honest and scares you, as opposed to the one who lies to you to make you feel good (since they’ll get rid of you as soon as the deal closes).
Rule #4: Funding is a full-time job (takes 4-12 months).
- Rule #5: VC is a business too:
- funders != founders / investors != inventors
- August and December they all go on vacation, so no deals then.
- VC’s have annual funding quotas so the best time to get meetings are in September/October.
- Have a PPT of 10/15 slides, an executive summary of 2-3 pages and an introduction to a VC.
The First Release
- The simplest thing that could possibly work
- Make it easy to measure results and then make changes based on those results
Marketing
- The best way to get better business ideas is to understand more about business in general.
- Read the Product Marketing Handbook for Software (link below)
Success or Failure
- Success is a sustainable business (except for funded companies)
- For funded companies the bar is higher as VC’s want an exit strategy, such as IPO or acquisition
- Failure is tough: laying people off, personal financial peril, home stress, loss of investors’ money, etc.
Case Study
- GripeJuice: a collaborative bargaining site for customers who experience bad customer service
- Customers can learn how others have successfully resolved their issues
- “For quality purposes this call may be monitored” – Skype plug-in so that people can record their customer service calls to corporations
- Unfortunately, there is a very high manual labor cost to the customer (i.e. recording their phone conversations, entering their issue progress online, etc)
- Perhaps this can be used as a freebie to drive traffic to a larger/related business
Learning More
- The Ten Day MBA
- What the Numbers Say
- The Product Marketing Handbook for Software
- The Art of the Start
- Growing a Business
Marc also mentioned that the folks at O’Reilly are thinking of holding StartCon, a two-day conference on starting your own business. If you’d be interested in something like this you should contact Marc and let him know who you’d like to hear speak, what you’d be willing to pay and what you expect to get out of it. TAGS: OSCON OSCON2005 Business Startup Entrepreneurship