Tuesday, January 31, 2006

VC and Dating Advice

To my brothers and fellow entrepreneurs,

1. Ask out as many girls/VCs as you can. Ask out so many that when someone says no that you don't even care. Ask out so many that when someone says yes your not surprised and geek out.

2. When you go on your date/meeting be thoughtful. No expensive dinners/presentations, but take a shower, be on time, be prepared and most of all listen more than you talk.

3. When the date is over, read the situation. Body language is key. If a VC/Girl takes extra time, that is a good sign. Don't abuse it, but ask if they would like to continue or if there is someplace they need to be.

4. Do what you say you will do. Follow up. If you say you will call, call. I read this somewhere, "Reputation is your currency, spend it wisely."

5. Play the field. Don't settle down too early with one VC/Girl. Try a few out. See what fits and then take it to the next level.

Monday, January 30, 2006

Startup Feedback

Starting a new company requires good feedback.
  1. Let's start with the idea for the new company. Develop a trusted set of two to three people that you can bounce the idea off. From when I first started to conceptualize Hubpages, to where it is now is a complete transformation. This is a good process. Find the holes and tweak. Once it is solid, move to step two. .
  2. Make a list of the few people that you would consider to start a company with. The list I made for Hubpages was entirely made up of the best developers I knew that could not only produce code, but manage a development team as the project scaled. Discuss the idea with them. Top people won't join you unless they believe in the concept. If you can't get great people, that is a sign that the idea needs further tweaking. Once you have them, and start developing, expect the product to change, and for each of them to point out stuff the product doesn't need and stuff it does.
  3. VC's as feedback. VC's have lots of experience with several companies and can be a great source of insight for early companies. The VC's that I want to pitch the most on Hubpages are ones that have had successful runs with companies that are as close as second cousins because of the feedback and guidance they can offer. You have to be careful of pitching VC's that already have a portfolio company in the same space, but if I had a startup that was building a marketplace for online leads, I'd like to talk with VC's that had invested in LowerMyBills. Give two VC's the same pitch and ask for feedback. See what it is and then tweak.
Pretend that you have $1mil dollars to invest. You can invest it in any company. Tweak your idea, team and plan until you think it is the best place for your investment. Investors have a lot of choices to put their money into, and they want the best ideas, team and execution.

Thursday, January 26, 2006

Boot Strapping Web 2.0 Style

Guy Kawasaki wrote about boot strapping and this morning I had a conversation with Silicon Valley Bank about funding. So, I thought some insight on how we are boot strapping Hubpages might help.
  1. No Salaries. Each of us committed to work with out a salary for 3 months. After that time, we all have agreed to take salaries that are far below our market worth or at least much less thant what MS used to pay us.
  2. Start with the right team. Web 2.0 is based on building stuff quickly. Start with a team that can make a product. And start making it. Each person should contribute. Only start with A+ developers. Each developer should be like 3. It lays the foundation of an excellent development team as well as great developers like to work with great developers. This will make growing the team easier in the future. The Meebo founder had a good comment about their team of three. He said, he went to all the meetings before funding, but left the 2 developers so they could keep improving the product. Good advice. If you have a team of all business types, it makes writing code and making progress difficult.
  3. It's easier to save money than make it. So Hubpages monthly expenses look like this:
    • Rent: $700.
    • Hosting: $120 (We have one managed server. We didn't set up a huge infrastructure based on the traffic we believe will come. If it grows quickly, we will probably feel some pain, but it will be good pain.)
    • Misc: less than $200.
    • Total: Under $1,000 a month.
  4. Start in a garage. Card tables for desks. Splurge on Monitors. No offices. Lot's of coffee.
  5. Have a plan. It creates integrity. Ours is build a beta. Get customers. Raise minimal capital. Refine. Improve. Refine. Add a couple great people.

Wednesday, January 25, 2006

Painting Curbs and Pricing

When I was 10, I started my first business. I saw Cal Poly kids putting up signs to paint curbs in the neighborhood. They charged $12 to paint a curb. Disposable income was very limited in my family growing up and I thought, wow, I can do that, and for less. $12 seemed outrageous to me.

I headed to the local hobby store and bought stencils for numbers, I picked up 2 cans of spray paint at the local hardware store, and a big card board box. I cut a hole in the bottom of the box to the dimensions of our curb painting, I could press my feet against the box and spray the rectangle to create the background. Then with a little tape we would put the numbers over the rectangle and add the numbers. It worked well.

I started as a one man show. I knocked on doors and offered to paint their curb for $3. It worked and I was off. My brother, cousin, and friend saw the success and wanted in. So we tuned the operation. My brother Mark and friend Brandon painted the curbs and my cousin David and I sold. We knocked on doors and put tags on the curbs we sold. Brandon and Mark would come along and paint them.

We started with a low price that made us all money. As we had success, I said to David, let's raise our price. We did. First $4, then $5 and before long we were at $8. I was scared to go higher. I couldn't imagine people paying us more. But, we raised them to $10, and then $12.

The BIG LESSON here is start with a price that is low enough that it ensures demand. With new products, many customer segments will trade off experience, reputation for a lower price. As you do a good job, improve your product and grow your reputation, then raise prices. I've seen too many products do the opposite. They start with with a price matched to established competitors. Their product has little success. Morale drops, prices get lowered and the quality spirals down. Do the opposite. Start low, improve quality, and raise rates.

Tuesday, January 24, 2006

A Web 2.0 VC Please

Death Taxes and Series A is a good read for people new to fund raising. Lot's of rules, which I like as benchmarks from informed sources. However, I felt it was a difficult fit for Web 2.0.

Web 2.0 needs a new type of Series A investor.
  • Web 2.0 needs smaller investments. This doens't fit with the current large funds because of the amount of money they need to put to work and the time constraints on partners.
  • Web 2.0 needs more investments. Compounding on the problem of the amount of money a VC wants to put to work and limitations of partners time, the Web 2.0 community needs to have many more companies getting funded to keep innovation racing.
  • Web 2.0 deals need to move faster. Getting funded as a 1 man demo machine is a long shot. While making quick progress on building a product with a small team is absolutely doable. Hubpages is doing it. However, 3-6 months without pay is skin in the game to make the beta. An additional several months of raising money will squash many viable startups that fly under the radar of VCs and not well enough connected to Angels.
Help me create a list of investors that want to invest $500K - $1.5M in Web 2.0 companies. Send me a message through the Hubpages message box.

Bloggers and Web 2.0

Michael Arrington from Techcrunch wrote about tello and how bloggers don't matter much to them. Which makes me think about the haves and have nots of the start up world. It appears Tello has money to spend on generating PR. Most boot strapped startups don't.

If you don't have money for PR, and want the "tell it like it is" feedback that you need to make a product that people want and use, then you have to reach out to the blogosphere.

There is risk when it comes to bloggers. Group think, egos, and perhaps less representative of target audiences you want to reach. However, it is definately worth reaching out to them.

Here is the Hubpages strategy with working with the blogosphere.
  1. Research bloggers and get to know their body of work. Create a list of bloggers that you would like to get their feedback from. Select no more than 5 to start with. You want to limit it so you have time to take the best feedback from each of them and put it in the product.
    1. Techcrunch
    2. Om Malik
    3. Siliconbeat.com
    4. http://www.softwareandtools.com/ - tejas patel
    5. Alec Saunders
  1. Invite them at the earliest point you can to demo the product. Do this before it is publicly available. It is kind of like giving them a scoop, but at the same time many other startups do the same thing and your likely to get great comments like this feature would be better if is was more like "insert comparison to companies feature".
  2. Don't expect bloggers to love your product. There was a great post about pitching VC's (I'd link to it if I could remember where I read it) and to be prepared for negative feedback. Like many things in life it is how you handle the feedback that is important. Be open to it. Understand it. Use it. Otherwise, your growth is limited. Jack Canfield will tell you if you read his Success Principles, to ask 1 question. How do you see us limiting ourselves?
  3. List them in your news section or get a beatdown on Techcrunch.

Monday, January 23, 2006

Hubpages - The First Few Weeks

Since we aren't rich, it's important to save money, and be as productive as possible in building the product. If your thinking of starting a company, here is a quick list of what we have done.

Sacrifice. Each of us has sacrificed to build hubpages on a tiny budget. I left my wife and kids in San Luis Obispo and Jay and Paul left fiances in Seattle. We pay $700 a month in rent and live frugally. None of us take a salary.

Since we live together, we wake up about 8am and work until about 12 or 1am. We get a lot done in the garage and few decisions take more than a couple of minutes.

Legal stuff. We interviewed law firms and chose Don Keller at Orrick to represent us. If you don't know this, many law firms will help you with your incorporation and filings. They will let you acrue some fees that you pay when you are funded. It's best to get a referal to increase your chances of getting this type of arrangement. If you get funding, you pay them if you don't, you don't. It's good to get incorporated and set up properly from the beginning. This makes everything clear between founders. If you wait too long, there could be potential problems. When you setup there are a few key decisions.

  1. Vesting Period - We chose to vest monthly with no cliff since none of us are taking a salary. We thought that was fair. We also chose for our founders stock to vest over 3.5 years. Somewhere between 3 and 4 years is typical.
  2. In the event that one of us is fired, we agreed on 6 months of additional vesting. We have trust in eachother and this is more of protection if we raise money and the board gets rid of one of us.
  3. Double trigger vesting and percentage. We setup with a double trigger. Meaning we have to be acquired and then fired to get the vesting. We also agreed on 100% vesting in this case. Some people feel that it shouldn't be 100%, but we agreed that it was best for the companies protection.
  4. Board seats. We put 2 of us on the board in anticipation of adding people to the board in the future. We hope to maintain 2 board seats through the life of the company. We didn't put all 3 of us on the board because it is a likely scenario that we wouldn't retain all 3 spots in the future and it might be more difficult to have to remove 1 of us, vs. taking care of it now.
  5. We are a Delaware Corp.

We are less than 30 days until the beta.

Founding Hubpages Background Information

The concept of Hubpages has been formulating for the past year. In December of 2005, several things came together. First, Paul Deeds and Jay Reitz agreed to join Hubpages. We worked together at MongoMusic and Microsoft for over 5 years. Jay was the development manager of MSN Entertainment, Paul a developer, and I was the group product manager. From that time together, I learned we had a common vein grounded in praticality, frugality, and the willingness to take risks.

So in January of 2006, with a key agreement completed with one major parter, the 3 of us moved into a house in Berkeley CA and have begun work on hubpages.com. None of us take a salary and each of us works around the clock day and night to make hubpages a reality. Our goal is to ship the product, and then decide on ongoing funding options.

Welcome to Paul Edmondson Blogs

You can expect a few things from my blog. First, my posts will be short. Second, I'll write about web businesses, my business, relationships and many random things.