Equity-Only CTO and Equity-Only Developers

I had a recent email dialog with the founder of a company looking for a CTO for their startup.   We had several emails back and forth where he provided basic details on the concept.  And I tried to evaluate the idea and figure out:

1. What did the founder really need here?  Was it a Startup Founder Developer Gap?  Was it a case of needing Homework?  Did they really need a Startup CTO or Developer or both?  Did they have a Weak Development Team?  And do I fit as a Part-Time CTO, Technology Advisor, CTO Founder, Acting CTO?
2. Understand where they were in terms of being able to pay or was this equity-only (sweat equity only).

I thought it was a pretty reasonable dialog with this founder and we quickly arrived at some answers.  He had a partially built product.  He needed some kind of CTO and as well Developers.  And he was still in the process of raising additional capital, so it was equity only.  However, when I told him that the level of engagement (number of hours) required from me and the fact that equity-only development was required that I couldn't take the engagement, he seemed to be a bit offended.  The very last email I got from him told me the following:

Thank you for your time Tony, I understand everyone wants a huge salary, no risk and a cut of the profits.

For some reason there’s a stigma around cash vs. equity conversation and it seems to offend some founders that people have limits for what they will do on an equity-only basis.

I would think that if you are trying to attract people on an equity-only basis you wouldn’t want to get too far into the conversation without raising the issue.  Otherwise, you’ll end up spending time with people who are not going to be interested.  And I personally thought the reaction above about me seemingly wanting a huge salary, no risk and a cut at the profits sounds a bit over the top when all I said is that the level of commitment would mean that I would need some cash compensation.

There are cases where I will do equity-only deals.  Normally it’s when I’m in an advisory role – a few hours per month.   In a few cases it’s where I’m a co-founder of the business.  For me to do either of these, I certainly need to really believe in the idea and it has to be something that won’t consume all of my time.  And let’s be honest, most employees, advisors, etc. who start with small equity percentages don’t end up making very much from startups.  Likely the effective hourly rate as an equity-only CTO Advisor is pretty low.

Once things get into more significant time commitments, i.e., a part-time CTO role, I need to work on some combination of cash and equity.  And certainly, if you are looking for Development, you can theoretically find equity-only developers and get things done, but that won’t be me trying to do that.  Consider  what Ryan Waggoner tells us How to Find a Technical Cofounder:

When I was doing freelance development, I had about one pitch per week for an equity-only opportunity. I fell for a couple, learned my lesson, but now I never accept these kinds of deals, even though a lot of the ideas and even teams seem solid. There are usually several reasons, but mostly it comes down to them not offering enough equity. These “startups” are almost always mostly-non-technical founders offering 1-2% premoney for a “lead developer” position. In my view, the very fact that they feel that the technical development of a web startup is only worth a couple percent speaks volumes.

That’s a pretty common experience.  Unless you are a co-founder of the startup, a developer is probably not going to do all that well working on sweat equity alone.  For me, that means that I would be burning bridges and losing relationships with developers that I brought on that way.  Of course, if you are a good developer looking for equity-only positions in very interesting startups, please drop me a note.  Bottom line, if there’s significant development, you need capital or a founder needs to go source the equity-only developers. 
I would caution any founder that finding and being successful with equity-only developers is tough.  It can be done, but it’s hard.  Here are a few perspectives on it:

Building a sweat equity team

You simply need to network. Go to user groups. Go to tech (or other relevant industry) events. Refine your elevator pitch. Eventually you'll catch the ear, the vision, of someone who would like to jump on board, and has something you need in return.

Brad Feld in Places to Find Developers in Exchange for Sweat Equity

While finding a developer to work for sweat equity is an option, I’d assert that you’d be better served by hunting for a technical co-founder that is passionate about creating the company you envision.  In my experience, it’s naive to think you can just “get developers to build the product” although it does sometimes work. Most of the great software startups that I’ve been involved in have at least one technical co-founder (and many have more than one.)

How To Find A Programmer To Build Your Startup Idea

Another option is sweat equity. It is important to realize that most people who are willing to work for sweat equity are not a) the best, b) in demand, and c) going to put their heart and soul into your project. Motivation to work for sweat equity is something else that founders tend to take for granted. Sweat equity is usually best applied in the case where you are working with someone you know who already trusts you and who you know will put up a solid effort. Sweat equity is also applicable for someone who is very interested in the subject that you are working on. What sweat equity is not good for is for people who you don’t know at all. You should avoid spending your time here and instead focus on finding a way to generate revenue or to attract investors so that you can afford to hire someone.

Recruiting Startup Engineers

Engineers are humans, we have bills to pay, families to take care of, friends that we want to spend time with, and on occasion indulge in the latest tech gadget.  Contrary to the way we carry ourselves we’re not robots (although I do enjoy being called a machine - but I’m not Summer Glau).  So before you ask someone to even spend an hour of their time writing code or reviewing specs make sure you can pay them in some form (coffee, dinner, laptop, etc.), and if you can’t then you better start thinking of ways to raise enough funds to be able to pay them something.  Don’t expect someone to work for nothing endlessly.

Bottom line: I’m willing to have a conversation with most any founder, just don’t get offended when I suggest that capital is required for me to be involved.

Thirty more articles related to this:

1. How To Calculate Sweat Equity- Get Venture: Venture Made Transparent, February 11, 2010
2. How Much Equity a Technical Cofounder Should Get - Nathan Hurst, July 19, 2010
3. When You Should Hire a Dev Shop (other than “never”)- Brad Hargreaves, March 7, 2010
4. Make Sure Sweat Equity Vests- Get Venture: Venture Made Transparent, February 18, 2010
5. Small Business Tip of the Week: Understand the Value of Sweat Equity- The StartUp Blog at PartnerUp, February 22, 2010
6. Places to Find Developers in Exchange for Sweat Equity
7. Top Startup Mistake 8: Misunderstanding Equity- Up and Running, February 5, 2010
8. Why Andreessen Horowitz Invested in Foursquare- Ben's Blog, June 29, 2010
9. Ten Tips for an Investment-Grade Business Plan- Startup Professionals Musings, April 22, 2010
10. Ten Common Arrogance Traps for Startups- Startup Professionals Musings, January 24, 2010
11. How To Find A Programmer To Build Your Startup Idea
12. Eight Questions Every Startup Hopes You Won’t Ask- Startup Professionals Musings, August 20, 2010
13. Bootstrapping a Lean Startup- Ash Maurya, March 23, 2010
14. Founder Agreements – Vesting, Vesting and more Vesting- High Contrast, April 25, 2010
15. Ten Tips for Business Traction to Attract Investors- Startup Professionals Musings, May 22, 2010
16. How to bootstrap a Startup with less than $10k
17. Finding a Technical Partner for Your Startup
18. Think Your Start-up Is Venture Worthy? Think Again
19. How to hire a programmer to make your ideas happen
20. How Much Stock to Ask For When Joining a Startup- Startup Professionals Musings, June 20, 2010
21. Guide to Evaluating Startup Ideas- Tony Wright dot com, May 27, 2010
22. Eight Tips To Successfully Bootstrap Your Business
23. Should Founders Be Allowed to Take Money off the Table?- Both Sides of the Table, September 2, 2009
24. Guide to Finding a Technical Co-Founder | Vinicius Vacanti- Vinicius Vacanti, September 7, 2010
25. Finding Your Co-Founders
26. Software Startup Myths Debunked
27. The 18 Mistakes That Kill Startups
28. Guy Kawasaki’s 10 Questions to Ask Before You Join a Startup
29. How to hire a programmer to make your ideas happen
30. From Nothing To Something. How To Get There

Caution 2.0

Just saw this tweet fly by:

Unfortunately, this CTO happens to be the CTO of a restaurant chain which was probably the reason that this was tweeted.

But the point is pretty simple. As a CTO, you need to always remember that you are a bit on stage and people notice what you do even when you don’t realize it. It’s important to bring a bit of caution to things as simple as going to the bathroom.

And with social media, your really need to think Caution 2.0. Anything you do can easily spread.

Oh, and if you want a bit more help on bathrooms for engineers, the following video probably will help (go to 2:32):

Goals Accountability and Social Support for Big Impact

Whoops - posted on the wrong blog. This is now on my eLearning Technology blog:

Goals Accountability and Social Support for Big Impact.

But I will highlight one thing from the post:

I believe that there’s a REALLY great business to be created around this.

Top 30 Startup Technology and Product Posts for September 2010

Great content again in September that meets at the intersection of startups, technology, product and being a Startup CTO.  This continues my series of posts:

• Top 40 Startup Posts for August 2010
• Top 30 Startup Posts for July 2010
• Top 30 Startup Posts in June 2010
• Top 29 Startup Posts May 2010
• Startup CTO Top 30 Posts for April
• 16 Great Startup Posts from March

Some great free resources listed this month that I thought were interesting.

1. Why Every Entrepreneur Should Write and 9 Tips To Get Started- OnStartups, September 27, 2010

   "The best part of blogging is the people you will meet"- Hugh MacLeod repeating wisdom from Loic Lemeur to me at the Big Pink at 2 am in South Beach after the Future of Web Apps 2008. If you asked me to tell you a list of three of the best decisions in my life, I can certainly tell you that regularly writing is one of them. Why You Should Write.

2. 10 Tips for Adding Game Mechanics to a Non-Gaming Service- ReadWriteStart, September 21, 2010

   Game mechanics have become a popular way of increasing user engagement and pushing user adoption, referral and retention, and many startups have sought ways to incorporate game mechanics into their sites. Your service: the game. Status / reputation. People want status. It's human nature," he writes. Gifting and reciprocation. Hybrid monetization.

3. If you’re aren’t getting rejected on a daily basis, your goals aren’t ambitious enough.- Chris Dixon, September 12, 2010

   My most useful career experience was about eight years ago when I was trying to break into the world of VC-backed startups. I applied to hundreds of jobs:  low-level VC roles, startups jobs, even to big tech companies. I got rejected from every single one. Big companies rejected me outright or gave me a courtesy interview before rejecting me.

4. Four Minutes In The Morning- Feld Thoughts, September 1, 2010

   Amy and I created a tradition about a decade ago we call “four minutes in the morning.&#  We try to – fully clothed – spend four minutes together every morning 100% focused on each other. Amy sleeps a little later (usually 6:30am). So – I often have around 90 minutes alone every morning, which I treasure.

5. Job Titles That Can Sink Your Startup- Steve Blank, September 13, 2010

   I had coffee with an ex student earlier in the week that reminded me yet again why startups burn through so many early VP’s. And And after 30 years of Venture investing we still have a hard time articulating why. Here’s one possible explanation – Job titles in a startup mean something different than titles in a large company.

6. The Right Way to Lay People Off- Ben's Blog, September 21, 2010

   “I’m tryin’ to right my wrongs, But it’s funny them same wrongs helped me write this song”. Kanye West. Shortly after we sold Opsware to Hewlett-Packard, I had a conversation with the legendary venture capitalist Doug Leone of Sequoia Capital. He wanted to hear the story of how we went from doomed in the eyes of the world to a $1.6B

7. Coworking Spaces- A VC : Venture Capital and Technology, September 2, 2010

   I've never been much of a fan of incubators. Some have made the model work. My favorite of the bunch is Betaworks , based here in NYC. Betaworks is more than an incubator, but they have shown that they can make the incubation model work with projects like bit.ly and chartbeat. The term for this kind of work setup is coworking.

8. Getting Your Startup Website Ready, Pre-Launch- ReadWriteStart, September 11, 2010

   Even if you're not quite ready to show the public your product, you can still create a good website and a solid online presence for your startup. want to sidestep the argument about whether or not it's good to be " stealth " or not, and work with the assumption that if you've purchased the domain name, you're going to put up some sort of website.

9. How-to get that guy as your mentor- Gabriel Weinberg, September 20, 2010

   Forming a couple of good mentor relationships can help bridge the gap between startup failure and success, especially for first-time entrepreneurs. But how do you actually get the right people to be your mentors? previously explained that it usually requires some equity, but here is some more step by step practical advice. Let's recap.

10. 23 Tweetable Startup Insights From Seth Godin- OnStartups, September 1, 2010

    Regular readers of this blog know that I’m a long-time admirer of Seth Godin. He’s one of those “big thinkers” that has the added talent of being able to articulate high-level concepts in an immensely approachable way. That’s a very rare, and dare are I say remarkable intersection of abilities. Enjoy. tweet]. tweet].

11. You Negotiate Commodities, But You Seize Opportunities- Steve Blank, September 16, 2010

    It took losing something important to understand the difference between a commodity and an opportunity. Along the way I also learned yet another way entrepreneurs see the world differently from their investors. Advisory Board. He was having too much fun at Sun and turned me down.). knew he would bring immense value to me and the company. Carpe Diem.

12. What Does a CEO Do, Anyway?- OnlyOnce, September 6, 2010

    What Does a CEO Do, Anyway? Fred has a great post up last week in his MBA Mondays series caled “ What a CEO Does. 8220;  His three things (worth reading his whole post anyway) are set vision/strategy and communicate broadly, recruit/hire/retain top talent, and make sure there’s enough cash in the bank. It’s great advice. 

13. The Office Matters- A VC : Venture Capital and Technology, September 18, 2010

    Eatsy at Etsy Originally uploaded by Etsy Labs. Our portflio company Etsy has a person who is focused on the office, company culture, and making the work space as comfortable as possible. They have a chef come in and cook a healthy lunch for everyone three times a week. They called that program Eatsy. took a photo and posted it to my tumblog.

14. Never Mind the Valley: Here's Paris- ReadWriteStart, September 3, 2010

    If you're capable of seeing past the old stones of Paris and the picturesque rural villages, you'll realize that France is every bit as technologically advanced as any other Western country - more so in some areas. Not only does the country have a higher percentage of homes with high-speed Internet than the U.S. Sponsor. Want to start up in France?

15. Sean Murphy on the first dozen enterprise customers- Gabriel Weinberg, September 8, 2010

    I recently did a Traction Book interview with Sean Murphy who runs a boutique cutomer development firm in Silicon Valley. We discussed (for ~1hr) how to approach getting the first set of enterprise customers. What follows is a slightly edited transcript of the full interview. yegg: Why don't you start by introducing yourself? My firm is SKMurphy.

16. Lessons Learned From StartupBootcamp 2010- OnStartups, September 14, 2010

    /*. This is the first article from Jason L. Baptiste , a new writer at OnStartups and local Boston entrepreneur. You should follow him on Twitter ( @jasonlbaptiste ) or say hi via email. Expect to hear a lot more from him in the future. He's awesome. The tagline for the event was actually "Starting a company is easier than you think." Listen.

17. Why Product Managers Wear Sneakers- Steve Blank, September 2, 2010

    I gave a talk last night to the Silicon Valley Product Management Association. It’s a San Francisco Bay Area forum for networking, jobs and education for over 500 Product Management professionals. The gist of the talk was to observe that: startups are not smaller versions of large companies. Except they won’t be called Product Managers.

18. 5 great viral marketing campaigns (and what small businesses can learn from them!)- crowdSPRING Blog, September 13, 2010

    At crowdSPRING we talk a great deal about how we can leverage our limited marketing resources to drive traffic and revenues and build strong community. Some of the traffic-tactics we use involve good old fashioned payola: paid search, banner ads, affiliate programs, etc. That crazy chicken. Burger King’s brave new world. Yes we can!

19. Top free resources for startups- StartupCFO, September 28, 2010

    It took me a while to warm up to it but I am loving Quora more and more. There is a wealth of information and connections on it. can’t believe how much time people devote to answering questions on it. How To Pick A Co-Founder , by Naval Ravikant (Venture Hacks). CompStudy 2008 Report on Equity and Cash Compensation at Technology Startups.

20. Why Your Startup Should Be Involved in Open Source- ReadWriteStart, September 15, 2010

    Oftentimes, when you hear the arguments for "Why open source?", they are aimed at convincing companies to use open source software. But the other piece of the argument is, of course, an argument for why your company should build open source - why it should develop its technology in a community-driven, open sourced way. Building a Better Product.

21. Consumer RSS: 1999-2010- Venture Chronicles, September 11, 2010

    paidContent made an interesting connection about Bloglines being shut down and the broader question of RSS in the age of Twitter. Today RSS is the enabling technology – the infrastructure, the delivery system. RSS is a means to an end, not a consumer experience in and of itself. The writing is on the wall.”. Simply put, there is no market for RSS.

22. Why You’re Going to Hire the Wrong Designer- Tony Wright dot com, September 14, 2010

    “We are not UI experts but do know when we see a good design.&#. saw this on a mailing list I occasionally read, in a post where a company was looking to hire their first design employee/contractor. The challenge, of course, partially lies in the definition of “good design&#. Good Design = Beautiful/Cool Design. It’s simple.

23. Collusion- A VC : Venture Capital and Technology, September 22, 2010

    Mike Arrington posted about a secret meeting of angels and super angels in San Francisco the other night. In the post he suggests that they are colluding to keep valuations down, terms intact, and traditional venture capital firms, such as ours, out of their deals. It's the kind of blog post that Mike has become famous for.

24. The segmentation of the venture industry- Chris Dixon, September 26, 2010

    Ford Motors dominated the auto market in the early 20th century with a single car model, the Model T. At the time, customers were seeking low-cost, functional cars, and were satisfied by an extremely standardized product (Ford famously quipped that “customers can choose it in any color, as long as it’s black&# ).

25. Oh, Noes! Not Another Ex-Insiders Thoughts On Nokia! (Part I)- ArcticStartup, September 26, 2010

    As you all know, it’s been an interesting few weeks at Nokia - a new CEO, top executives leaving, the company stock wallowing at absurdly low values. When Ville Vesterinen asked me what I thought of the changes and the cultural and organizational challenges Nokia has to deal with to move forward, I knew I had a lot to say. Google, and Facebook.

26. Using a Virtual Personal Assistant for Your Startup- ReadWriteStart, September 5, 2010

    ReadWriteWeb Co-Editor Marshall Kirkpatrick recently extolled the virtues of Amazon's Mechanical Turk for " rocking conference blogging." Sponsor. Lindsey Harper recently wrote about her experiences using Mechanical Turk to validate her startup idea. Her survey asked whether or not they'd use the service, example of how they might use it. How so?

27. DuckDuckGo implements HTTPS Everywhere- Gabriel Weinberg, September 25, 2010

    " HTTPS Everywhere is a Firefox extension produced as a collaboration between The Tor Project and the Electronic Frontier Foundation. It encrypts your communications with a number of major websites." DuckDuckGo is one of these websites. And now when you use the encrypted version , the same ruleset in HTTPS Everywhere is now applied to DDG links.

28. Ten Components of Startup Valuation For Investors- Startup Professionals Musings, September 6, 2010

    Once you have a potential investor excited about your team, your product, and your company, the investor will inevitably ask “What is your company’s valuation?” Many entrepreneurs stumble at this point, losing the deal or most of their ownership, by having no answer, playing coy, or quoting an exorbitant number. NewCo doesn’t have any of these yet.

29. Where Good Ideas Come From- A VC : Venture Capital and Technology, September 21, 2010

    I've been reading my friend Steven Johnson 's new book Where Good Ideas Come From. Steven gave me an advance copy of the book. It is available for pre-order at Amazon [ kindle here ] and it will be released on October 5th. hope Steven is not a stranger to any of you. He tells wonderful stories about science. Here it is.

30. Web services should be both federated and extensible- Chris Dixon, September 4, 2010

    One of the most important developments of the web 2.0 era is the proliferation of full featured, bidirectional APIs. APIs provide a way to “federate&#  web services from a single website to a distributed network of 3rd party sites. Another important web 2.0 development is the proliferation of web Apps (e.g. Facebook Apps).

Top 40 Startup Posts for August 2010

August was a slow month in terms of traffic and I was away for a lot of the month, but there were some really great posts at the intersection of startups, technology, product and being a Startup CTO.  This continues my series of posts:

• Top 30 Startup Posts for July 2010
• Top 30 Startup Posts in June 2010
• Top 29 Startup Posts May 2010
• Startup CTO Top 30 Posts for April
• 16 Great Startup Posts from March

Here they are:

1. How to Minimize Politics in Your Company- Ben's Blog, August 24, 2010

   “Who the f@#k you think you f$&kin’ with. m the f%*kin’ boss.”. Rick Ross. In all my years in business, I have yet to hear someone say: “I love corporate politics.” On the other hand, I meet plenty of people who complain bitterly about corporate politics—sometimes even in the companies they run. clearly didn’t cause this.” How it happens.

2. Pricing models, the freemium myth and why you may not be charging enough for your product- Seth Levine's VC Adventure, August 12, 2010

   I’ve been pulled into a number of product and pricing meetings recently (for reasons unknown I’ve become the Foundry pricing and productization guy). thought it would be helpful to put some of my thoughts into a blog post and hopefully spur some conversation in the comments and over email. More tiers = more complication = more confusion.

3. How To Pitch A Product- A VC : Venture Capital and Technology, August 4, 2010

   I've said a bunch of times on this blog that the perfect pitch is a very short intro to provide context followed immediately by a demo. Last night at the NY Tech Meetup, John Britton of our portfolio company Twilio showed how it is done. If you do a lot of pitches, spend the six minutes to watch this. Kudos to John for an excellent pitch.

4. How a startup should leverage a personal assistant- A Smart Bear: Startups and Marketing for Geeks, August 30, 2010

   Rob Walling generously allowed me to reprint this excerpt from his new book, "Start Small, Stay Small: A Developer's Guide to Launching a Startup" available in paperback and Kindle from Amazon and in PDF and ePub from StartupBook.net. He blogs to 10,000 web entrepreneurs at Software by Rob and co-hosts the podcast  Startups for the Rest of Us.

5. Product Friday: Monetizing Content is a Product Problem- This is going to be BIG., August 20, 2010

   They say people won't pay for content. They say that paywalls are stupid and that its just not monetizable. Remember when they said that people wouldn't pay for music? What Apple proved, and what I suspect is the issue with web content, is that monetization was a product problem. Because it was a tremendous pain in the ass. Same goes for television.

6. The bowling pin strategy- Chris Dixon, August 21, 2010

   A huge challenge for user-generated websites is overcoming the chicken-and-egg problem : attracting users and contributors when you are starting with zero content. One Facebook executed the bowling pin strategy brilliantly by starting at Harvard and then spreading out to other colleges and eventually the general public.

7. No, You CAN’T retire rich at 30 if you sell your startup- Tony Wright dot com, August 23, 2010

   I personally find the people who are in the software startup game just for the money to often be nearly delusional about their chances of success and the likely magnitude of it when it happens. Before I get into the details for founders, let me talk about options-hungry employees. Full stop. Do it because you love small teams. Congrats! Dying at 70?

8. Why MOST smart people are better at solving other people’s problems…- Life Beyond Code, August 10, 2010

   And, not their own problems. am sure you have seen them and may be you are one of them. Smart people who can solve other people’s problems very easily but they can’t solve their own problems. As my friend Stuart Scott would say, most people have brilliant “outsight&# and all they lack is some “insight.&#. Dec 26, 2009).

9. Productive Programming- Gabriel Weinberg, August 31, 2010

   BIG disclaimer: I'm not formally trained in computer science (aside from two classes at MIT in 2000) and I haven't worked closely with that many programmers or teams (maybe 10 or so). I've gotten to be a lot more productive as a programmer since I started casually 15+ years ago and seriously about 10 years ago. Say you want some code that does X.

10. Paul Graham on trends for the future- Business of Software Blog, August 25, 2010

    Paul Graham spoke at last year's Business of Software conference. I’m going to try to do something for you guys that I’ve always resisted doing. One of the big questions, probably the biggest questions that I get from reporters, is 'what trends do you see? What’s going to happen in the future?' We had to write a CRM to keep track of them all.

11. How I Think About Seed Investing As A VC- Feld Thoughts, August 2, 2010

    Last week saw an explosion of discussion around seed investing, including plenty of negative comments around VCs as seed investors. While I agree that many VCs are crummy seed investors, I think there are some that are excellent seed investors. They are: Fred Wilson: Lead Investors, Dipshit Companies, and Funding Every Entrepreneur.

12. Taking the Mystery out of Scaling a Company- Ben's Blog, August 2, 2010

    “What you got a dollar in your pocket. twenty in your wallet? See me I’m stacking money. Matter of fact, I’ll let you watch it. Get big. Get big. Get big. Get big”. Dorrough. If you want to build an important company, then at some point you have to scale. Often board members give entrepreneurs two bits of advice regarding scale: Get a mentor.

13. Has convertible debt won? And if it has, is that a good thing?- Seth Levine's VC Adventure, August 30, 2010

    Paul Graham, founder of Y-Combinator , sent out a tweet on Friday saying: “Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”. It’s an interesting data point on Y-Combinator companies, but is this truly a macro trend? Have convertible notes really won? equity debate.

14. Start-Up Chile: $40k to Live There and Start a Company- Ben Casnocha: The Blog, August 14, 2010

    Governments round the world are trying to stimulate entrepreneurship. The Chilean government recently announced a bold initiative that stands apart from the usual innovation and start-up handwaving. They are seeking two dozen entrepreneurs who want to move to Santiago for six months to get their company off the ground. But I like its underratedness.

15. Yes, but who said they'd actually BUY the damn thing?- A Smart Bear: Startups and Marketing for Geeks, August 9, 2010

    This is Part 3 of the series: 5 lessons from 150 startup pitches.? Of hundreds of startup pitches at Capital Factory , almost none had unearthed 10 people willing to say, "If you build this product, I'll give you $X.". all without identifying even ten measly people actually willing to pay for what they're peddling. Short-sighted, no? Fooey! 

16. Teach Like You’re the Student- Steve Blank, August 10, 2010

    “I never have let my schooling interfere with my education.”. Mark Twain. Every time I see my graduate students try to teach for the first time, it’s usually so painful I bite my lip. Then I remember the first day I stood up in front of a classroom. You Hired. Long back-story here.) The Dry Run. didn’t sleep that night. was scared and nervous.

17. We’re Living In The Dark Ages Of Social Media- rosskimbarovsky.com, August 9, 2010

    If you believe the media and social media “experts&# , we’re living in the Renaissance of social media. Novel and creative campaigns like the recent YouTube campaign from Old Spice purportedly demonstrate the power of social in marketing.

18. Rethinking “F@#$ You Money”- Tony Wright dot com, August 2, 2010

    Now that I’ve stepped down from RescueTime, I’m pondering my next thing (whether it’s a product role at a very early stage startup or spinning up my own for the 3rd time). figure it’s a good time to be introspective and consider my motivations. Why do startups? via Urban Dictionary ). Retirement Plans. Want to be Mercenary?

19. Video From Business Of Software 2009: Building Great Software Businesses- OnStartups, August 23, 2010

    Of the several conferences I attend or speak each at each year, my favorite is the Business of Software conference organized be Neil Davidson (of Red Gate ) and Joel Spolsky (of Fog Creek ). There are several reasons for this. The speakers are great and have enough stage time to really get into the topic they’re passionate about. No panels.

20. First-timer entrepreneur symptoms and cures- Gabriel Weinberg, August 12, 2010

    Previously I wrote about wannabe entrepreneur symptoms and cures. was once a wannabe entrepreneur, and then I was a first-timer. First-timers are not wannabes--they're actually out there doing stuff. And they can be successful their first time around. I've funded some myself. But it's not the norm. made all of these mistakes in my first companies.

21. Alarming IT data points- deal architect, August 25, 2010

    I am grateful for plenty of positive coverage my book has received. The coverage, though, has focused mostly on all the innovators I profile in the book. That’s not surprising because the vast majority of the book focuses on innovations

22. The Mac Won Me Over- Feld Thoughts, August 3, 2010

    On June 20th, I declared that I was going to try A Month of Mac. I took my Macbook Pro (an older model from about 18 months ago) up to Alaska, left my Lenovo x300 in Boulder, and went native Mac. I’m typing this on my brand new spiffy MacBook Pro 2.66 GHz Intel Core i7 with 8GB RAM, with a 500GB solid state hard drive. That’s sweet.

23. The Right Kind of Ambition- Ben's Blog, August 29, 2010

    “Some say that I’m they favorite. But I aint hearing none of that. m about my team ho. Young money running back”. Drake. Stay in your place. While I sit here and rule. m king of a cow. And I’m king of a mule”. Yertle the Turtle. In my last post, I mentioned that you should strive to hire people with the right kind of ambition. sales? Final Thought.

24. The Expanding Birthrate Of Web Startups- A VC : Venture Capital and Technology, August 22, 2010

    There is a general consensus that web startups are being created at a faster rate than ever. The impact of accelerator programs like Y Combinator, Techstars, Seedcamp, and dozens more are one factor. The expanding pool of angel, seed, and super seed funds is another. You can bootstrap your way into existence. believe that is certainly true.

25. Making Money From Social Games- ArcticStartup, August 23, 2010

    Games Developer Conference Europe 2010 (GDCE) took place last week in Cologne, Germany. Social gaming was naturally one of the key topics, covered in many presentations. As most, if not all, of the games on social networks use the freemium business model (i.e. Requests - Expect 70% on request (e.g. 10 cents per DAU.

26. The right way to position against competition- A Smart Bear: Startups and Marketing for Geeks, August 23, 2010

    This is Part 4 of the series: 5 lessons from 150 startup pitches.?? After seeing hundreds of startup pitches for this year's Capital Factory program, I can tell you that the two most common errors in positioning a company against competition are, strangely, opposites: Claiming you have no competition. There is no competition. Example: Netflix).

27. Boys Rules, Girls Lose – Women at Work- Steve Blank, August 30, 2010

    My two daughters are now in college and have put their toes in the working-world with summer jobs. As they’ve grown older, they’ve heard their parent’s advice about women in the workforce. This post is not advice nor is it a recommendation of what you should do. It’s simply my interpretation of what I observed watching my daughters grow up.

28. How #redgate hired 10 geeks in five weeks- Business of Software Blog, August 5, 2010

    In April, I wrote : Right now, we’re running a “Ten geeks in five weeks” project. The major thing that’s holding back Red Gate’s growth is our struggle to hire great people. So Alice, Mark and Nick are going to hire ten people over the next five (now four) weeks. m not entirely sure how they’re going to do it. know that iPads are involved. Enjoy.

29. 20 Amazing Women Entrepreneurs- Blogtrepreneur | Entrepreneur Blog, August 18, 2010

    These days, it seems successful entrepreneurs are popping up everywhere.  And some of the most impressive entrepreneurial success stories are those of women who have accomplished amazing things in every area of business imaginable.  From IT to retail, and from marketing to inventions, women have shown they are a force to be reckoned with. 

30. Converts versus equity deals- Chris Dixon, August 31, 2010

    There has been a debate going on the past few days over whether seed deals should be funded using equity or convertible notes (converts). Paul Graham kicked it off by noting that all the financings in the recent YC batch were converts. Prominent investors including Mark Suster and Seth Levine weighed in (I highly recommend reading their posts). While

31. Rapid prototyping as burnout antidote- Gabriel Weinberg, August 24, 2010

    Sometimes I get burnt out. Who doesn't? I'm very sensitive to it though because I know it can be devastating to a startup, especially a single founder startup. Over the past several years I've learned that a burnout antidote, at least for myself, is rapid prototyping of something brand new. Recently I cleaned out and organized our basement.

32. Big Tech is Broken - badly- deal architect, August 20, 2010

    Someone at a large outsourcer shares with me an email he sent to his CEO lamenting the while the annual report repeatedly talks about innovation, there is no budget in R&D/innovation at the firm - and he has been there

33. Negotiation Tips For Small Businesses, Entrepreneurs and Freelancers- crowdSPRING Blog, August 10, 2010

    Not every entrepreneur, small business owner or freelancer is comfortable negotiating. Many dread the adversarial nature of negotiation. Even so, it’s difficult (and perhaps impossible) to operate a small business or startup and not negotiate agreements with employees, vendors, customers, and others. Know Your Objective. Prepare. We declined.

34. How to Make Paper.li and Flipboard Rock- How to Change the World, August 24, 2010

    In the last few weeks two companies have released services that enable you to take tweets and turn them into a newspaper or magazine format: Paper.li and Flipboard. Alltop is a great source of information for both Paper.li and Flipboard newspapers. If you’d like to learn how to do this for Paper.li, click here, and for Flipboard, click here

35. Some Thoughts On Convertible Debt- A VC : Venture Capital and Technology, August 31, 2010

    Seth Levine has a long and thoughtful post on convertible debt vs equity. If you are an entrepreneur or active in the angel/seed sector, you should read it. He wrote it in response to Paul Graham 's tweet that said: Convertible notes have won. But since our firm does participate in select angel/seed rounds, this was interesting to me. In truth.

36. Eight Business Processes Every Startup Must Have- Startup Professionals Musings, August 1, 2010

    Even when your startup is a one-man show, you will soon find that you are “out of control,” unless you start organizing and writing down how and when key things need to get done. Like it or not, you are now entering the dreaded realm of “formal business processes.” The right question is “What is the minimum that I need?” Develop your business plan.

37. What the crazy name "Smart Bear" taught me about branding- A Smart Bear: Startups and Marketing for Geeks, August 2, 2010

    Every founder struggles to find a great name for her company. Often it's the first source of good-natured strife between co-founders. My name started as a whim, was almost changed for the wrong reasons, and ended up with a punch-line I would never have dreamed of. Storytime! Lessons at the end.). An inauspicious birth. It sounds like shareware.".

38. Solving the Innovator’s Dilemma – Customer Development in a Big Company- Steve Blank, August 23, 2010

    One of the ways I learn is to teach. My students ask questions I can’t answer and challenge me to solve problems I never considered. My last session was with a passionate, smart, entrepreneurial team from a Fortune 100 company. And if I told you who they were I’d have to kill you.) That’s the good news. Do you agree?  Lessons Learned.

39. The Magical Founding Team Mix For Web Startups- OnStartups, August 16, 2010

    At a startup dinner I had with a bunch of really smart software entrepreneurs in Austin, Texas during SXSW earlier this year, something really struck me. Of the 8 founders at the dinner, half of them had a design/ui/ux background. This got me to thinking: What would the ideal founding team at a web startup look like? Thanks.]. Developer.

40. 7 angel investing tips in 7 minutes- Venture Hacks, August 3, 2010

    Last week, Naval and a slew of angel investors shared their investing advice with an audience of angels-in-training at AngelConf 2010. Here’s the video (each talk is 7 minutes long): Video: AngelConf 2010. Wade Roush at Xconomy took detailed notes on all the talks and published them here and here. angel investing tips. Ride on their coattails.

More Web Events in Los Angeles

I’ve updated my earlier post on Networking Events Los Angeles with some great suggestions from Lorin Cha who I just met through LinkedIn. Here were the new ones:

• LeanLA Startup Circle Meetup

  I’ve gone to a couple of these. Often the presentations are pretty basic because of a fair number of newbies in the audience. However, there are some great folks who have lots of experience also attending so the networking and discussion is generally pretty great. Especially if you are looking at early-stage start-up issues.

• Social media week Los Angeles

  Runs week of Sept 20 - 24. Lots of scattered events around LA on social media.

• SoCal Kanban/Lean software meetup

• Coloft

  They have a line up of events there. Doing a good job of helping to make events happen. And for what it's worth, a few folks I know have used their space as a coworking space and say they really like it.

Don’t forget to check out Plancast. I sometimes find some interesting events through that system.

And take a look at Networking Events Los Angeles for the complete list. This also will help with the issues raised in Los Angeles Web Developer.

Top 30 Startup Posts for July 2010

Some great content around the intersection of startups and being a Startup CTO in June this year.  This continues my series of posts:

• Top 30 Startup Posts in June 2010
• Top 29 Startup Posts May 2010
• Startup CTO Top 30 Posts for April
• 16 Great Startup Posts from March

The following are the top items based on social signals.

1. 5 Lessons from 150 startup pitches- A Smart Bear: Startups and Marketing for Geeks, July 11, 2010

   I just reviewed several hundred startup pitches for Capital Factory. Most were on paper and video; 20 were invited to pitch in person. Interesting patterns emerged: Everyone makes the same classes of error. Those who avoided just one of those errors stood out in the crowd. You're probably making a lot of these errors too. Not that I blame you!

2. Batch Processing Millions and Millions of Images- Code as Craft, July 9, 2010

   I joined Etsy back in February and knew immediately that there would be no shortage of technical challenges.  Many of our job postings for Engineering positions describe the company as a place “where the word ‘millions’ is used frequently and in many contexts&#.  I got a taste of that within my first weeks on the job. Ganglia.

3. SaaS 101: 7 Simple Lessons From Inside HubSpot- OnStartups, July 19, 2010

   It’s been a little over 4 years since I officially launched my internet marketing software company , HubSpot. The “official” date is June 9 th , 2006 — for those that are curious about such things). So, I’ve had about 4 years on the “inside” of a fast-growing, venture-backed B2B SaaS startup. Not bad.

4. Welcome to the Lost Decade (for Entrepreneurs, IPO’s and VC’s)- Steve Blank, July 15, 2010

   If you take funding from a venture capital firm or angel investor and want to build a large, enduring company (rather than sell it to the highest bidder), this isn’t the decade to do it. The collapse of the IPO market and dysfunctional math in the venture capital community has stacked the odds against you. Here’s why. Take a look at the chart below.

5. 10 Blogging Tips. My 1,000th Post on This Blog- Tim Berry's Blog - Planning Startups Stories, July 21, 2010

   Last night I was halfway through a draft post patting myself on the back, illustrated with champagne glasses, when my youngest daughter, Megan, called from San Francisco, where she lives now. That’s @MeganBerry to you, blogger and social media expert, marketing manager of Klout.com. So I asked her this: “What do I do with my 1,000th post?”. Rarely.

6. Wannabe entrepreneur symptoms and cures- Gabriel Weinberg, July 25, 2010

   I was once a wannabe entrepreneur. Fresh out of college and a summer internship at a VC firm, I thought I knew what I was doing. Though this was 2000 , and all startup & VC blogs we've grown to love didn't exist yet, I did have mentors available. should have leaned on them a lot more, but I didn't, or at least not in the right ways.

7. Real Unfair Advantages- A Smart Bear: Startups and Marketing for Geeks, July 19, 2010

   This is Part 2 of the series: 5 lessons from 150 startup pitches.??? What if someone copies your awesome business idea? How can I answer this question? No, the question is: What are doing now knowing that a big company will copy your idea? The good news: There are good answers to these questions! The first step is admitting you have a problem.

8. Graphs- Chris Dixon, July 22, 2010

   It has become customary to use “ graph &# to refer to the underlying data structures at social networks like Facebook. Computer scientists call the study of graphs “ network theory ,&# but on the web the word “network&# is used to refer to the websites themselves). graph consists of a set of nodes connected by edges.

9. Startup Culture Lessons From Mad Men- OnStartups, July 26, 2010

   The following is a guest post by Brian Halligan who is my co-founder and CEO at HubSpot (which means he gets to do most of the really hard work). recently did a lecture at a Babson MBA summer class on Entrepreneurial Leadership. Believe it or not, this post-modern culture was inspired by the TV show Mad Men. Every Friday at 4pm ET, we film HubSpot.tv

10. You Can’t Take It With You- Steve Blank, July 26, 2010

    If you’ve had a great career what happens to all your knowledge and experience when you retire? Great Suit. My wife and I had dinner last night with a friend of hers from high school. Tom, her husband whom I had never met before joined us as well. He was a trial litigator, one of the guys that slug it out in court in front of a judge and jury.

11. How to raise money with no lead- Venture Hacks, July 31, 2010

    Paul Graham says “The future [of funding] is no fixed amount, no fixed closing date, and no lead.” In other words, the future of financing is continuous funding, not discrete. This post explains how to raise a single round with no lead, no fixed amount, and a fluid closing date. The process is called mass syndication, or a party round. Interview.

12. Think Different: How To Make Your Tagline Stand Out From The Crowd- crowdSPRING Blog, July 2, 2010

    As I wrote last week in 10 Tips for Startups and Small Businesses on Naming Your Company , coming up with a great company name for your new small business or startup can be challenging and time consuming. Coming up with a memorable tagline can present an even greater challenge. California Milk Processor Board) – 1993. Make it unique.

13. No, that IS NOT a competitive advantage- A Smart Bear: Startups and Marketing for Geeks, July 12, 2010

    This is part 1 of the series: 5 Lessons from 150 startup pitches. Listening to first-time entrepreneurs talk about their competitive advantages is as predictably invalid as the local weatherman's 10-day forecast. Between this blog and reviewing applications to Capital Factory I see hundreds of pitches a year. We have the most features. Silly, right?

14. MongoDB at Etsy, Part 2- Code as Craft, July 3, 2010

    Dan and Wil posted a while ago about how we’re using MongoDB at Etsy. We’ve been using MongoDB as the backing store for Treasury , and over the course of two and a half months , we’ve had over 50,000 excellent Treasuries created by the Etsy community, all stored and served in MongoDB. Not so bad. Metrics availability. Performance.

15. Angel vs VC?- A VC : Venture Capital and Technology, July 25, 2010

    AVC regular Charlie Crystle asked me this question yesterday in the comments : Fred, it might be helpful to some of your readers to explain when a startup should seek angel vs seed/early stage VC. 0160; If I need $250,000 to get to 100 customers, or $1 million to get to X, and I can raise both amounts from either Angels or VCs, where do we turn?

16. It’s not that seed investors are smarter – it’s that entrepreneurs are- Chris Dixon, July 5, 2010

    Paul Kedrosky recently  speculated that there might be seed fund “crash&# looming. But then — Kim Kardashian is the only one who can make a living tweeting. At some point it will be quite obvious whether the super angels’ investments and strategy succeed or fail. Consider the case of the last company I co-founded, SiteAdvisor. at a $2.5M

17. How to be a successful iPhone developer- 47 Hats, July 20, 2010

    I came across this YouTube video of Brian Greenstone from Pangea Software talking about how his company made $1.5 million on a two-week port of a Mac OS game over in the comments of my online friend Andy Brice’s blog. If not, don’t give up the day job just yet,&# Andy concludes. They ignore/disrespect the platform. What do you think?

18. You Shouldn’t Have to Pay to Talk To Your Own Customers- Austin Startup, July 12, 2010

    Andy Meadows is the founder and CEO of Bearhug , an Austin-based customer engagement platform launching today. He is focused on delivering real business value by educating clients about the latest proven technologies, strategies that deliver improved profits and operational efficiencies, and using technology to improve life. Customer Care Today.

19. Top linked domains from Facebook pages- Gabriel Weinberg, July 10, 2010

    I've been messing around with Facebook pages for an upcoming DuckDuckGo integration, and I came across some data that seemed interesting enough to share. These are the top linked domains from Facebook pages. Each of those domains would get one point in the aggregated list. If duckduckgo.com had appeared twice, it would still just get one point.

20. Automating the Path to a Better User Experience- The Product Guy, July 5, 2010

    I started writing about Quick-UX in 2008. Since then, I have written many detailed articles exploring, evaluating, and identifying areas of improvement for real products — along the components that make up Quick-UX. About Quick-UX. Quick-UX evaluates the degree to which a product successfully addresses the following 3 questions: Can I use it?

21. Eight Suggestions For Great Brainstorming/Ideation- Gregg Fraley, Author of Jack's Notebook, July 23, 2010

    Those of you who read this blog will know of the recent online debate I had with author Ashley Merryman. Essentially, I was not letting her get away with dismissing brainstorming. Ashley co-wrote a recent Newsweek article titled “Forget Brainstorming.&# While I liked the article generally, I hated the title, and disagree and dispute the [.].

22. The Phantom Sales Forecast – Failing at Customer Validation- Steve Blank, July 22, 2010

    Startup CEO’s can’t delegate sales and expect it to happen. Customer Validation needs to have the CEO actively involved. Here’s an example in a direct sales channel. Customer Development Diagnostics over Lunch. VC asked me to have lunch with the CEO of  a startup building cloud-based enterprise software. Boy did I feel like Rip Van Winkle.) I asked.

23. Dave McClure's Investment Thesis- A VC : Venture Capital and Technology, July 31, 2010

    I’ve been a fan of Dave McClure since I met him some time ago. He has strong opinions, he shares them liberally, spices them up with foul language, and finds himself involved with a lot of interesting entrepreneurs and companies. In a nutshell, he’s my kind of investor. Yesterday he outlined his investment thesis on his blog. Some VCs will adapt.

24. Small Business Marketing: Web Design Best Practices and Tips- crowdSPRING Blog, July 27, 2010

    We’ve recently discussed several useful topics for small businesses and startups, including naming your company ,  how to make you taglines stand out from the crowd., and tips for buyers looking for logo design. Today, we’ll cover web design marketing best practices and tips for small business. Showscase your products and services.

25. CEOs Should Tell It Like It Is- Ben's Blog, July 2, 2010

    Unemployment at a record high. People coming, people going, people born to die. Don’t ask me, because I don’t know why. But it’s like that, and that’s the way it is. Run DMC. My single biggest personal improvement as CEO occurred on the day when I stopped being too positive. was completely wrong. The Positivity Delusion.

26. Let Interns Be Your Startup Competitive Edge- Startup Professionals Musings, July 19, 2010

    By Mark Babbitt We’re all familiar in some way with the concept of “interns” in business. Quite possibly your perception is the young adult working dutifully in the company mailroom. Or, perhaps the hectic “get me coffee” and “make me copies” chores associated with climbing the corporate ladder. That stereotype may be changing. Confidence vs.

27. Traction trumps everything- Gabriel Weinberg, July 5, 2010

    If you ask an angel investor what they look for in a company, they'll usually rattle off a list of things that describe the ideal angel investment: huge market, great team, superior product, sustainable competitive advantage, etc. Trouble is, even if your startup has those things (and most don't), you still have to convince each investor.

28. Presentation: How To Raise VC- Get Venture: Venture Made Transparent, July 21, 2010

    I had a fun day yesterday - I have grown to really enjoy public speaking. For those interested, the presentation that I delivered to the members of the VANJ is embedded below. special "thank you" to the leadership of the VANJ for having me. How To Raise Venture Capital View more presentations from Mark Davis.

29. Some Thoughts On The Seed Fund Phenomenon- A VC : Venture Capital and Technology, July 13, 2010

    There have been quite a few posts written about this meme in the past few weeks.  0160; I think that Paul Kedrosky got the discussion started with this post. Chris Dixon wrote an interesting response. And yesterday John Boyd wrote a thoughtful post on the topic. John makes a point in his post that I want to second and add to. Absolutely.

30. The Headline as Content- Venture Chronicles, July 11, 2010

    One of the challenges in deciphering online news is that a catchy headline is often peddled instead of the actual story, something fully on display today in a NYTimes article. As an exercise to demonstrate this, read the headline below and stop to consider your emotional and intellectual response: “Wall St. Okay this is good, right?