How startups should die

 

When we did OpenVote, a web 2.0 Facebook app company, back in 2007, we were enabling college students to debate issues on their campus.  And in the unfortunate theme of that era, we had lots of people using it but nothing resembling a business model.  And as our cash dwindled down and our traction didn’t explode, I personally faced a crisis.

One of my cofounders had left for an awesome opportunity. I couldn’t blame him.  Our investors had declined to put more money into the company.  I couldn’t blame them either.

I would sit alone everyday working feverishly to try to find any way to save the company.  Amongst a bunch of failed pivot attempts, one opportunity kept creeping back onto the table…

We had our users’ data.

We had over a million confirmed email addresses for a fairly targeted demographic. I had companies calling me interested in purchasing it.  I remember rationalizing with myself why it would be okay to sell the list.  My credit card debt was out of control.  It was a period of my life when every dollar counted and I had this asset.

Would it really be so bad?  Would anyone ever need to know?  Don’t companies do this sort thing all of the time?

 

***

 

We shut down the company a few months later and I moved on. I never sold that list.  I had been close though. I think back on that time every now and again.  What would have happened if it had been ten million email addresses?  What would have happened if the price had been higher? Would I have taken it?

My ethical discipline had been vulnerable.  I know right from wrong, but it hadn’t felt as clear then as it usually does.

But if there’s one thing I am grateful about our OpenVote experience – it is that we decided to let the startup die elegantly.  We paid all of our service providers, which was tough because I had long since run out of investor money.  So to rephrase that – I paid our service providers with my credit card debt.  We closed down all our paperwork thoroughly and correctly.  And I didn’t get tempted into last second shenanigans that I would’ve later regretted.

 

***

 

Fast forward to today.   The deadpool is getting more crowded every day.  That’s part of a healthy startup ecosystem.

I just talked to an entrepreneur who is running a company that is on its last leg (though he is only fifty percent willing to admit it).  He’s raised a couple million dollars, has built a reasonable product, but his efforts at raising another round have just failed and he’s looking for options.

I just found out that he is selling enterprise contracts for software he knows he won’t be able to deliver.

Not only is he going to screw over some customer when they find out that he can’t fulfill his promises, but he is also ruining it for the rest of us.  Additionally, he is screwing his investors who will never back him again when they find out.  I had a phone call with him and I begged him not to do it.  I don’t know.  Maybe I got through, maybe I didn’t.  But all I wanted to convey to him is, “I believe in you. I think you’ll be back with another idea. But for now, die elegantly.”  I hope he does.

 

Tips to make sure you die elegantly

 

Share your finances openly with your team

It takes so much pressure off of you individually when everyone is on your team. And, yes, the less committed of your people will leave you when your cash reserves get low.  But the reality is you couldn’t afford to keep them anyway, so at least now you’re not stuck living a lie everyday to people that work around you.

 

Communicate more to your investors, not less

When you’re dying is the time to communicate the most.  Not only because they might be able to help you with last minute acqui-hire attempts or guidance on how to proceed, but also they might fund you next time if they appreciated your efforts during the tough times.  I remember sitting down with Paul Graham as our startup was failing. I remember how unbelievable difficult it was to get myself to that meeting.  The last thing in the world I wanted to do was to tell him my startup was failing.   It took him 30 seconds to process the failure and then he moved on.  He was so unbelievably supportive and so excited for whatever it was I was going to do next.

 

Pass the Hacker News test

It used to be called the Wall Street Journal test, but that was more about managing the ethics of bankers.  For us it’s the Hacker News test.  Will you be okay with your every action posted and commented on in Hacker News?  Assume there is no way what you do will be kept secret.

 

Pay everyone in full

Don’t push your mismanagement onto other people – employees get paid, service providers get paid, lawyers get paid, accountants get paid. Hell, even the IRS gets paid!  There will be many people who tell you that you don’t need to save money for the lawyers.  Screw that. I’m working with the same lawyer on my third startup now, and he’s the best in Silicon Valley.  I shudder to think if I had screwed him over two startups ago.

 

Pursue interesting acqui-hires

I have already written on how to get an acqui-hire done.  Google and Facebook have set this precedent that acqui-hires can be this awesome cash out opportunity.  That works with a very, very small number of companies. What about the rest of us?  What if you could turn your failure into an acqui-hire with a company that you actually would love to work for?  You won’t make a million per engineer, but you’ll keep your team together.  I will humbly throw my company 42Floors out as an example.  We’re solvingcommercial real estate and we love working with entrepreneurs.  Our entire team is made up of entrepreneurs that have at some point failed their own startup.  There are hundreds of companies like us that are always looking to hire awesome entrepreneurs.

 

 

Finally, one last note.  Same thing I say to every entrepreneur that comes to me for advice as they’re on their very last legs.  Welcome to the club! We are a culture that celebrates risk takers.  We all fail at some point.   So while you may feel your startup career is over, you actually just passed your entrance exam.

Startup Common Sense


  

I had a really interesting conversation with an entrepreneur last week. He is the brother of a friend who wanted to talk about his world-changing idea.  It was so world-changing in fact that he didn’t want to tell it to me without me first signing an NDA.  I gave him myusual spiel about what type of advice startups in stealth mode really need.  Usually at this point I would just politely decline to engage further.

There’s nothing I can offer to someone who is so antiquated in their thinking that they still hold onto the misguided belief that an NDA will protect them. As I said, usually I just politely pass them on, but this time I was dealing with the brother of a close friend.  There was no way for me to easily extricate myself.

He’s a lawyer by trade, so he was more argumentative than most and forced me to defend my opinion on why he should be sharing his ideas freely instead of requiring NDAs.  And the conversation on NDAs turned into he and I disputing other startup philosophies I hold dear.

We talked about launching fast; but he believed in taking his time and making sure he got it right.  We talked about forgetting about scaling until product market fit had been validated; but he knew it was the right product and wanted to scale from the beginning.

And so this conversation went on and on.  And I started to actually enjoy it because this guy was forcing me to find the words to explain these beliefs that most of us in the HN community hold as unquestioned truisms in 2013.  And as the conversation developed, it was also interesting that in almost every case his intuition was leading him towards the exact opposite approach.

 

***

 

There is something about how to do a startup in 2013 that is 180 degrees different from what an intelligent, thoughtful outside observer will intuitively do using their own common sense.  And so, given that I was speaking to a trained lawyer, we started to get fairly abstract.  Here was our little exchange:

 

Me:  What is the basis by which you are forming your opinions?

Him:  What do you mean the basis?

Me:  I mean, you have very strong opinions about each of these activities even though you’ve never done a startup before.

Him:  I’m using my common sense.  I think through each problem and come up with a solution that makes the most sense to me.

Me:  What if I could prove to you that your startup common sense was categorically wrong?

 

And then, finally, for the first time in 45 minutes, there was silence on the phone.   For me to prove to him that his common sense in this particular subject was categorically wrong would mean that he couldn’t trust his own mind.  It would mean that his most relied upon tool would be of no use to him.  It’s a terrifying thought.

 

***

 

I know this terror.  In my first startup, my trusted common sense failed me miserably.  I look back on that time and can finally laugh about how awful I performed.  I was so sure of myself.  And yet, I was always so wrong.  I didn’t just come up short, I did everything as if failure was actually my goal.  How could I be so naive?  Or more accurately, how could my intuition be so backwards?

After that failure, I fortunately got into Y Combinator.  And man, YC will get you turned around quickly.  They tore my previously held beliefs to shreds.  It was really tough.

 

***

 

Our lawyer friend here was only reacting to the world of startups that he knew.  He only knew about them after they had been successful.  And when you’re reading about successful startups in Forbes or BusinessWeek, you have a very different conception of what it takes to get one started – a conception so flawed that it will actually lead you to have perfectly incorrect common sense.  That is how I emerged from business school, having only learned about startups through case examples that suffered from a bit too much hindsight.

If you do indeed find that your common sense needs some adjusting, I’ve got a few suggestions.

 

 

Tips to reprogram your common sense

 

Get a great advisor

The very best advisor you could have is someone who has successfully done what you are trying to do and is only 18 months ahead of you.  Not some industry superstar.  Not a famously successful entrepreneur.  Not an investor.  The best pure advisor is a fellow entrepreneur who is just a little bit farther down the road because they are the ones who have only recently gone through the epiphanies that you are currently in search of.

 

Read up

You not only need to read a few books, you need to make sure you read the right ones. I have six specific books that I recommend every entrepreneur read before they get too deep into their startup.  These books are not only helpful, they are also paradigm shifting and you can read them quickly and know that you are on the right path.

 

Read Hacker News

Originally, I put here “stay current with blogs,” but the problem with blogs in general is that you don’t know which ones are good and which ones aren’t.  Hacker News is the best community out there for getting a daily curated reading list.  And if you’re not technical, read it anyway; there will be plenty of posts that are relevant to you and can help guide your personal startup education.

 

Get into an accelerator

Whether it’s YCombinator or 500 Startups or Tech Stars, accelerators are right now the single best way to get your startup started on the right foot.  Not only will you benefit from the advice, you’ll also feel the pressure of keeping up with your peers.  If you can’t get into a top tier accelerator, act as if you did anyways.

 

Launch your product and talk to users

I probably should have put this sequentially number one because launching is the single best educator.  But I also know that many of you will choose to do absolutely everything possible to avoid launching your product. I know how scary it is to launch your product.  In fact, you should launch your product as early as possible to the point that you are thoroughly embarrassed by its quality so that you can start learning from your users much, much earlier.

 

Stop taking bad advice

If you’re getting the wrong type of advice, you need to stop it.   The worst advice is never maliciously wrong.  That’s would be easy to spot and avoid.  The worst advice is the advice that is outdated.  Successful people and big company people are especially prone to outdated advice.  What worked in 1998 will not be relevant to your 2 person startup in 2013.

 

 

The first step to recovery is admitting you have a problem.  As a fellow confident, stubborn asshole that thinks he’s always right, I know this won’t be easy.  My advisors ripped apart many of my strongest held beliefs.  And I can’t thank them enough.
Discuss on Hacker News.

If you’ve ever wanted to do a startup there is simply no better time than right now.

 

Enough with the excuses.  Either start your company or don’t, but at least don’t lie to yourself.

There has never been a better time to start a company.  All the software you need is now open source.  It wasn’t like that ten years ago.  Fortunately, the entire technology world has created this incredible software stack that you get to use for free.  It didn’t use to be that way.

The Cloud has abstracted away the need to build your own infrastructure.  To put it bluntly, you don’t need to know anything about servers anymore, at least not in the beginning.  If you can get code that works, you can pay Heroku or some other platform as a service to host it for you.  It didn’t use to be that way.

Social media has created the potential for viral distribution.  It used to be that you couldn’t get anywhere without raising tens of millions of dollars in venture capital in order to help you strike a deal with AOL or Yahoo! so you could acquire your initial users, and even then you would use expensive offline marketing. It’s really true that you can now build an incredible product and people will find out about it through word of mouth.  It didn’t use to be that way.

There are now built-in business models. If you want to charge for your product, you previously had to setup a complicated billing structure.  Now, you can sell your app on the app store for a $99 developer fee, or you can use Stripe to implement payment right into your web app with almost no hassle.  Never before has it been so easy to sell your products world-wide.  It didn’t use to be that way.

So, I ask you, again. What the hell are you waiting for?

  

See this moment for how precious it is.  The world has basically gotten together and made it so that anyone who wants to be an entrepreneur can.  There really is no excuse left.  If you are one of those people who say you want to start a company, do it.  Do it right now.  Make it happen.  Now is the perfect time.  There are no excuses left.

 

Faulty Excuse Number One:  “I don’t have a technical cofounder.” 

This is just bullshit.  And, hopefully, by now you know it.  Just get started.  Whatever you do, please don’t ask me to help you find one.  But, I can say with no uncertainty that it is possible to start your company right now, just you.  If you can make some progress on your own and validate your product, you will be able to find a technical founder in due time.

 

Faulty excuse Number Two:  “I don’t have any technical expertise.”

Yes, it may be true, you don’t.  But that doesn’t have to stop you.  You could teach yourself how to code using Code Academy, General Assembly or any other number of emerging platforms.  Sure, you might not be that good at first, but it doesn’t have to stop you from getting a startup off the ground.  And, if your idea is simply too complicated, here’s a very real startup lesson you can take hold of right now— Make it less complicated.

 

Faulty Excuse Number Three:  “I can’t quit my job.”

Well, it’s not that you can’t, it’s that you won’t.  And that’s okay, but it’s also never going to change.  Startups involve risk.  The fact that this is the least risky time ever can’t help you take that next step, you have to do that yourself.  Go all in.

 

Faulty Excuse Number Four:  “I don’t know how to raise money.”

That has fortunately been solved for you.  You can apply to a bajillion incubators that will teach you how and provide the intros and necessary hype for you to execute.  And, with Angelist as an emerging alternative, you can hustle your way some investor demand and raise your seed round without any preexisting connections.

 

 

A quick footnote since I just know I’m going to get hammered on this post.  No, you can’t build a successful company having just 10 weeks of hobby-like technical ability.  No, you can’t just assume Heroku will solve your scaling problems.  Growing a company is really, really hard for hundreds of reasons.  But relentlessly resourceful founders figure out ways to solve these problems when growth is actually occurring.  You’ll never get there if you don’t at least start.

 

Discuss on Hacker News

You can't teach passion

I just had a really frustrating meeting with a friend that just moved to the Bay Area.  He had the ever-so common request of wanting help finding a great job, working with awesome people in disruptive technologies blah, blah, blah…

This guy knew the right things to say, was clearly very smart and was networking in an honest attempt to find a great fit.  I was having a really hard time because I wanted to help him but I couldn’t get around my gut feeling that he just sounded uninteresting.

He was doing that thing that lots of people do where they talk abstractly about what it is they want.  So he was saying things like, “I really want to get into digital media and specifically data-based analytics.”

And all I’m thinking is what the hell does that mean?  I mean, literally, what the hell is he talking about?  And the funniest part is he used the word “specifically” as if one abstraction layered on top of another abstraction was a route to being more understandable. I’m thinking about what it would be like if I introduced him to someone at another startup.  Would they really want to hire a guy that talks like this?  And the answer is clearly no.  I mean, maybe he would work really well at a large company where it seems like this sort of businessy speak is more welcome, but I know startups don’t like it.

And finally in the midst of going back and forth where he was trying to describe what it is he actually wanted to do and I was continuing to struggle to understand him, I finally said, “Dude, you just don’t sound passionate about anything and no one around here likes to hire people that aren’t passionate.”

 

And that hit him like a ton of bricks.

 

Was he interested in digital media? Yeah, probably.  Was he interested in data?  Yeah, probably.  Was he passionate about it? That’s probably a stretch.  And at large companies, it’s probably okay to be really interested in something, really good at it and receive a paycheck.  But startups don’t work that way.

chickenpassionintoyourwork

 

 

My company, 42Floors, is trying to solve the way people search forcommercial real estate.  My cofounders and I have risked everything to do this.  Two years ago we had no money, massive credit card debt, no one believed in us, and yet we kept building because we knew this was possible. And now we have a site that looks good, we have investors, we have users, we’re growing.  We need people on our team who could push us forward.  We’re looking for people that are just as passionate as we are.

And I think that’s what every founder wants.  Every founder I know has taken unbelievable risks and made incredible sacrifices in order to get their startup off the ground; and they want people that are just as passionate as they are.

 

***

 

And so my friend, though incredibly intelligent and well educated, simply wasn’t passionate enough to even get to the first interview.  So our conversation kind of ended in a weird way because he was sitting there knowing that my observation had struck true and not knowing what to do about it, and I similarly felt bad because I felt like I was leaving him hanging without a rope.

But I’ve now had some time to reflect upon it and I’m going to go back to him with a few pieces of advice because the reality is, I still think it’s true that you can’t teach passion but you can certainly help them search for it.

 

So here you go, 6 tips for finding your passion:

 

Hang out with passionate people

Passion is by its very nature contagious and when you’re with passionate, you get inspired.  You start to see what it’s like to truly be engaged in something.  In a way, this is what accelerators like YCombinator provide.  It’s a community of unbelievably passionate people and it is unbelievably motivating to be around them.

 

Stop generalizing

It’s really, really hard to be passionate about something in the abstract.  Passionate people are always obsessed with details.  At 42Floors, we’re crazy obsessed with the angle at which we take photos of an office.  If you shoot an office from the corner, slightly high, using a wide-angle lens, the picture just comes to life.  We love people who care about details.

 

Be a maker

It’s really hard to be truly passionate about something when all you’re doing is critically analyzing it.  All of my friends that went into consulting – virtually all of them – have complained about how, in the end, they were frustrated that their end product was a PowerPoint deck.  Several of them have now gone into entrepreneurship and they have been amazed themselves about how passionate they are about building something real.  Making stuff is liberating.  It taps at your creative potential.

 

Experiment with different niches

One of the common things I hear whenever I encourage someone to take a really deep dive into one thing specifically is that they don’t want to close off their options. But doing a deep dive into one specific job track doesn’t preclude you from also doing deep dives into other areas.  Think of your job search as an in-depth survey course in startups where each week you spend time diving really deep into one type of startup so that you emerge from that week passionate or not passionate.

 

Be patient with your time

It’s really hard to find something deeply engaging so you have to give yourself the opportunity to search for it.  If all you are looking for is a job as quickly as possible you’ll be less likely to find it. And probably less likely to find a job that’s right for you anyway.

 

Be willing to learn

What I found with my friend is that he had learned a particular set of skills at business school and needed a place to apply those specific skills.  As if the learning process had ended.  But every super passionate person I know is constantly learning, so if you want to find your passion you should assume that it will involve learning new things.

 

 

 

And finally, don’t settle.  Just flat out don’t settle.  And that’s kind of, in the end, what it felt like this guy was doing.  He was just looking for a job and was kind of willing to settle for anything that wasn’t miserable.   In the end, if he had a startup that paid him a salary, was located in the Bay Area, and had reasonable people around him he was going to be content.

Aspire for much more. In fact, demand much more.  It’s okay if you’re not feeling the passion right now.  Just go out and find it.

Cargo Cults



So let me tell you a little story about Papua New Guinea.  Located in the southwest Pacific, Papua New Guinea had been, for most of its existence, isolated from the rest of the world.  That is until its location played a role in WWII.  From the perspective of a native inhabitant of Papua New Guinea, it must have been fairly shocking to see massive metal birds flying across the sky.  No less interesting were the giant metal whales that floated in the sea.  And you can imagine how confusing it must have been the first time one of these giant metal birds or one of these giant metal whales broke apart and came crashing down onto their island.

And if that weren’t crazy enough, their bellies always seemed to include wondrous riches, themselves almost unfathomable.  Wooden cubes filled with food and drink and all sorts of rare treasures.  And without too much of a stretch of an imagination, you can envision natives of Papua New Guinea beginning to think that these gifts that came out of the bellies of these metal birds and metal whales were actually gifts directly from the gods.  What else could explain such craziness?  And then these metal birds started landing and out of their bellies came people.

They looked different though and they spoke their own ancient language and wore their own ancient robes.  And these creatures prayed to their own gods in their unique ways.  They built these temples specifically designed to attract more of these wondrous metal birds with such riches inside their bellies.  These temples were long, flat rectangles that they arranged on the ground like an oversized nest for the metal birds.  And to get the metal birds to come out of the heavens, the aliens would wave bright orange ritualistic objects in long rehearsed dance.

And the long rectangular temples and the orange baton ceremonial dance worked!  For in fact, they did bring forth more of these metal birds from the sky.  And for years, there were riches coming from their bellies.

But then one day, for no reason at all, the aliens left.  The metal birds no longer came.  The metal whales no longer sailed in the seas.  And there were no more riches.

Clearly, the aliens had not prayed enough.  Had not built enough temples.  So the natives took up the cause and built their own rectangular temples.  They performed their own ceremonial orange baton dance, just as the aliens had done.  And for decades, hearing stories of great riches, the Cargo Cults on the island of Papua New Guinea continue to pray to the gods of the metal birds, awaiting their inevitable return.

Untitled

 

 

I think about Cargo Cults whenever I hear founders spouting buzzwords.

Is it really so strange to believe that the words mobilecloud,crowdsource could be part of an elaborate ceremony.  As if saying the works will bring forth millions of dollars from our venture capital enriched heavens? Is it really that crazy to believe that uttering the words agile or lean or customer development would produce holy engineering teams blessed by the startup gods?

And if you were to see someone praying to these gods, using their ceremonial words, so devout in their religious devotion, do you really think you could convince them otherwise?  After they had seen such proof to the contrary, do you think you could convince them that merely uttering these words is not enough – that the ceremony doesn’t actually matter at all?

 

 

Discuss on Hacker News


The one HR benefit every startup should add

I just did a review of all of our benefits programs. Like other startups, 42Floors offers a great health, vision and dental package  and life insurance coverage.  We pay 100% for both employees and dependants. It’s expensive, but it’s worth it.

Having recently gotten married, I’ve been spending a bunch of time thinking about these sorts of things in my personal life as well.  And one of the things my dad brought up with me is just how important it is to have a good long term disability insurance plan in place.  I had never actually heard about it.  Long term disability is a policy that can pay out 60% of your salary for the rest of your life if you have an occupation-ending injury.

If something should happen to me and I can no longer do my job, a long term disability program could fundamentally preserve the standard of living in my family.  But they’re not cheap.  The premiums I was looking at for a middle of the road plan were around $2,500-$3,000 a year.  That’s a lot of cash to pay year after year.

 

***

 

Back to startups.

Our company benefits provider explained that individual long term disability insurance is much more expensive than a group policy.  To get all of 42Floors covered on a long term disability policy from a reputable firm will cost about $2,500 a year.  That’s incredible.  It’s almost identical to buy a group policy that covers everyone as it is to buy an individual policy that would only cover just me.

But there is so much more than just cost savings. I asked everyone in our company if they had long term disability policies in place.  Big surprise—no one did.  It’s just not something most of us think about.

I’m sitting here envisioning in my head what I would do if one of our employees was no longer able to do their job – what a horrible ethical position to be in.

For a fairly nominal sum, you could cover them with a policy that could make an enormous difference in their entire life.  And if at that horrible moment when you’re hearing the devastating news that one of your employees has been severely injured, you’ll at least know that because you took the time to set up this policy, they are going to receive a majority of their current paycheck for (nearly) the rest of their life.

 

***

 

Sometimes we get caught up with thinking of our various compensation packages and benefits as recruiting tools.  This one won’t really register as a recruiting tool. But, as the founder of a startup you should take the well-being of your employees as your single most important responsibility.  Spend five minutes today.  Do it right now.  Call your broker and get a good long term disability insurance policy in place.  And hope you never have to use it.

3rd Annual NFTE Launch: Mentor Aspiring Teen Entrepreneurs in SF



For the 3rd year in a row, I'm running NFTE Launch later this month.  NFTE is the Network for Teaching Entrepreneurship.  It connects mentors with aspiring teen entrepreneurs from underserved high schools in the Bay Area

We'll have 15-20 teens that all have ideas and want to build something.  You donate your time for one 3 hour spot.  Show up and you'll find yourself immediatley helpful.  No preparation needed, no follow up required.  It's one of the best ways to give back to the community doing what you love: helping people make something people want.

In the past we've helped set up Weebly sites, fill out Etsy profiles, and start Shopify stores.  This program is less about finding the next big innovation and more about making a connection with a kid.  



This year's program runs June 24-28th and is hosted by Rackspace on Folsom St.

Sign up here for one 3 hour mentorship session.



The week's mentorship session culminate with a Demo Day: Thursday 6/27, 5-7pm at Rackspace.  Everyone is welcome to attend.  More details here.


I would love to once again have lots of startup people there.  Please also forward this to others in your company and to others in the startup community.  Anyone versed in startups and interested in helping kids is welcome to sign up.




Here's an easy snippet to tweet:

In SF and want to mentor aspiring teen entrepreneurs?  Volunteer for 3 hours and make an impact.  6/24-6/28 http://bit.ly/1bCtUgJ

YC without being in YC


Back in 2010, my startup FlightCaster had hit some serious obstacles and we needed to pivot.  We had set a deadline for ourselves for some metrics and we failed to meet them.  It was a bruising time.  We had to let half the team go.  I had to tell my investors what had gone wrong.  They asked that we consider just giving back the remainder of their money.  It sucked.

We had set this deadline early enough that we still had some money in the bank and still had plenty of enthusiasm.  What seemed insurmountable was starting over with a new idea.  To get us through this tough time, we played a little trick on ourselves.  We pretended that we had just gotten into Y Combinator again.  We had about the same amount of money left as YC+Start Fund.  Our runway was similar.  Why not just pretend we were in the program.  When you’re in YC, going from zero product to a launched product in 10 weeks is the name of the game.  When you’re not in YC, building something that fast feels overwhelming.

For the next 10 weeks, we tried to mimic each step.  We wrote up our various ideas as if they were YC applications.  I re-read a bunch of Paul Graham essays and got myself back in the mindset.  Once we landed on an idea (it was an enterprise travel product), we gave ourselves 4 weeks to get to Prototype day, just like YC.  We demoed weekly–to each other, other entrepreneurs, and our investors.  It wasn’t as good as Tuesday night dinners, but it worked–our productivity shot up as we wanted to make significant progress each week.  After that, the pressure was on to launch something.  We held off working on a business deck stuff until our Demo Day approached.

I was amazed how simply adding some YC-like structure to those several months made everything we were doing feel better.  Before that, we had been pretty lost.   But once we pretended to be in YC, we were motivated because we had a schedule to hit.

Effectively, our Demo Day turned out to be presentations of the new product to large travel agencies.  And they were interested.  Which then brought new term sheets from our investors.  Which also brought interest from a larger company, who wanted to have acquisition talks.  Eventually, we took the acquisition.

 

***

 

I’m hearing from fellow entrepreneurs right now that didn’t get into Y Combinator.  The very  best of them have already moved forward and are working on their startup at full speed.  Love that.  YC is helpful but certainly not required.

While there are definitely a lot of advantages to being in the YC program, the fact is you don’t need them to succeed.  You can get a huge chunk of the value of YC without actually being in the program.  That what this post is about.    Go out and grab it.

 

 What you can get from YC without being in YC

 

Advice from Paul Graham and the YC partners

Fortunately, Paul Graham writes down most of advice right in hisessays.  There is no set of  YC secrets that he hides from the rest of the startup world.  In fact, much of what he says in person simply reinforces the advice that he has already doled out through his essays.  Having watched him for several years now, I also find that if he starts to give out new advice within a YC batch, you will soon find that idea better articulated in an essay a couple of months later.  The same goes for many of the other YC partners who give their advice out for free in their blogs.

 

Advice from speakers

Every Tuesday night in YC, famous founders give advice to the group. Fortunately, a substantially similar experience is available to you every year.  YC runs startup school each year in October.  Many of the speakers that come to YC on Tuesday night dinners also present at startup school.  And if you miss it, their videos are posted up in the startup school archives.  When I did my first startup (which we did not do YC for) I sat down and watched two years worth of startup school videos as part of my preparation.

 

A set launch date

One of the most overlooked values YC provides is the date of demo day itself.  When you get into YC, the date at which you will have to show your product and traction to investors has already been set.  When you have a demo day approaching and you desperately want to show 4 or 5 weeks of traction, the pressure is really on to launch quickly.  And launching quickly is one of the single best pieces of advice you can get out of YC.  So, if you’re not in YC, simply continue to accept the date of demo day and force yourself to launch before then.

 

Feedback from other founders

One of the most intimidating parts of being in YC is that we demo our progress to each other every Tuesday night.  There is nothing formal about it; you’re just around a lot of people who are working non-stop and everyone is interested in what each other’s building.  And when you demo that often you inherently want to show progress so that you’re not showing the same thing two weeks in a row.  Just like taking a class in college provides some social motivation and structure, YC provides a really nice social cadence.  Find a community of startups in your city, and start demo’ing each week.  Make weekly feedback a heartbeat that powers your startup.

 

The cash

I don’t want to be dismissive of the $15,000 you get from YC.  For three of my startups, I was dead broke (and significantly negative) during the building phase of the company.  But I can still look back and honestly say that $15,000 was not a make or break number.  There are other ways to make it work.  Now of course, YC also gets you start fund now, and it is certainly nice to have $80,000.  However, it’s rarely a number that fundamentally makes the difference.

 

The mantras

YC has a bunch of mantras.  For the most part, they are simply concise versions of advice that has n0w been given hundreds of times.  Ignore them at your own peril.

“Make Something People Want”

“Write Code, Talk to Users”

“Be a cockroach, impossible to kill”

“Do stuff that doesn’t scale”

“Launch early”

 

Demo Day

No doubt, demo day is an incredible opportunity for a startup.  The amazing thing though is just how far each of the startups have gotten in such a short time.  Most of the startups have traction graphs that go steeply up and to the right.  If you make the same progress in your own startup, you won’t need a demo day to raise money.  With extra networking and AngeList effort, you’ll do just fine raising money.  No traction?  Well then, demo day wouldn’t have helped you anyways.

 

The Network

The network of YC alumni is quite awesome.  Everyone’s willing to help each other out.  It’s the second most helpful community I’ve ever been a part of.  The first?  Hacker News.  Ask for feedback and you’ll get it.  Ask for help and you’ll get it.  Give back to the Hacker News community whenever you can.  Treat it as your community, full of people conspiring to help you with your startups.  The comments can often be overly critical.  Don’t let that distract you from the immense value this community overall still provides you.  Use it.

 

 

Go to it everyone!    And if we here at 42Floors can help you in any way at all—please let us know.

 

 

 

Discussion on Hacker News


Is this what it’s supposed to feel like?


I couldn’t sleep last night because I’m concerned about how we’re going to get more high quality photos up onto 42Floors.  We’re a site that makes it easy to search for commercial real estate.  But it’s not a good search experience unless you have great photos.

We have increased the number of listings on our site.  Awesome!  But so much so that the performance on our site slowed to a crawl.   We had tried to avoid premature optimization.  But now we have too many new listings to load at once.  No caching.  No intelligent API calls.  Big surprise that our site is painfully slow.

I just got an email from an engineering prospect who has decided to turn down our offer.  We put so much time and effort and passion into recruiting him.  He decided he wants to go off and start his own company right now.  I can’t hold that against him.  But we’ve got like a gazillion open positions, and I need to get them filled.  My team is depending on me.  I hate letting them down.

We’ve been doing tons of user testing in the last few weeks.  People complain that it’s difficult to go back and forth between our map view and our listings view.  I can’t blame them. I’ve wanted to fix that for months, along with 100 other things I’ve wanted to do.  But to see users, right in front of me, trying to use our product and getting visibly frustrated – Ughh! It’s like they’re calling my baby ugly, and I have no other choice but to agree.

We just had an investor ask why we still don’t have email alerts setup for new spaces that come online.  It’s the most simple of features.  We should’ve done it nine months ago, and we still haven’t gotten around to it.  Oy! Should I just say what I said nine months ago?  “Yep, it’s in our pipeline.  We’re about to get to it.”

I’m not even going to go into all the challenges with traction, user acquisition, business model… nor will I mention the team issues, the tough conversations with investors, and everything else.

I keep reading on Techcrunch of these startups that are crushing it.  Do they also feel this way?

 

***

 

Startups are just plain hard.

All too often we startups market ourselves on Hacker News as fairy tales.  But this is no Potemkin village.    Startups are hard. They are always hard.  Every step of the way.  I’ve never met a single successful founder who has said otherwise.

 

***

 

We are hiring right now at 42Floors – we have a ton of job openings.  I wish I could say that everything is perfect here.   But if you join our team, we’ll be open with each other.  We’ll face every challenge head on.

And maybe someday we’ll look back on all the struggles and tough times and realize we were crushing it.


Comments on Hacker News

My strange aversion to vacations


Vacations have always been hard for me.  It’s a weird thing to say, but it’s true.  They just don’t come naturally to me.

I remember when I was in business school, all of my classmates were taking these epic vacations seemingly all the time.  Spring breaks in Costa Rica, pre-internship trips to South America… I saw the pictures and they did look like fun, but yet each time I stayed home to work on my startup.

This was back in 2007 when I was running OpenVote, which was a web 2.0 Facebook app company.   That went nowhere.  After two years of making no money for the company, spending all of my investor’s money, and wasting away what little cash I personally had, those pictures of everyone else’s vacations were painful to look at.

But when we finally turned the servers off for OpenVote, I didn’t make up for lost time and go on some sweet vacation. Hell, I didn’t even relax for a few days.  I was so in debt and so frustrated with failure that I got right to work filling as many hours of the day as I could with random consulting jobs.

And, wouldn’t you know, less than three weeks later, we had stumbled upon Flightcaster and off I was starting another startup.  The time for vacations had passed once again.

***

 

I always thought my issue with vacations was just some internal restlessness. That is until I started 42Floors and my good friend Dana told me his version of the exact same story.  There is something about vacations and startups that just don’t work well together.

Forgive me for generalizing…but at a big company, you are trading your time and passion for compensation.  Vacation is time off. It’s paying for 11 scoops and getting the 12th for free.

But startups are different.  Startups are a mission; a belief that something impossible is actually possible.  It’s being part of a team that is working toward some distant horizon.  It’s this competing against the impossible that makes it so much fun.  Your coworkers are your friends.  It’s so much closer to a life style than a job that taking a vacation from your startup doesn’t have the same connotation.

But that doesn’t mean startup people don’t need vacations – we clearly do.  If for no other reason than our best ideas come when we’ve been able to disengage from the problem in front of us.  Vacations are a change of scenery.  They’re a chance for perspective.  They’re quality time with our friends, family and significant others.  They’re a chance to see the world, to waste away the day reading books, playing chess, trying new things.  Vacations are 100% essential.

***

 

At 42floors, we created an unlimited paid time-off policy.  Everyone takes as much as they want whenever they want.  Because we’re smart, motivated, responsible people, we don’t have to worry about this policy being abused.

 

But here’s the kicker:  unlimited time-off doesn’t work.

 

While the unlimited paid time-off policy works for some of the people some of the time; it still feels too hard to get away.  It’s not the social pressure part. We’ve worked really hard to promote vacation-taking in the company.  It just comes back to the fundamental issue that vacations for startup people are hard.

So we have been searching for ways within the company to address it, and we’ve come up with a really good one that I thought I’d share.

 

Everyone Needs a Pre’cation

 

At 42floors, we heavily, heavily recommend that all new people take two weeks of vacation starting exactly on their first official day.  What this means is that when you get a job offer from us, you’ll pick a start date.  And that’s the day we start your payroll.  And that’s the day you leave for vacation.

And you get to take that time to transition from one chapter of your life to the next.  If your startup just failed or you hated your last job, you get a couple weeks of mental and physical recovery.  If you have a significant other that’s been dying to get away with you, you can go away someplace nice knowing that your first paycheck will be waiting for you when you return.

You’re mentally free to completely let go.  Vacations when you’re searching for a job don’t work great because you feel the pressure to find a new job.  Vacations in the middle of a job are tough because you have the urge to check in.  But vacations between jobs with a signed offer letter in your hand, those are the absolute best.  The only thing that holds people back from taking advantage of this perfect time is that it feels akward to ask.

And so that is why we had to make precation a policy in our company (we would make it actually mandatory, but we have this thing against telling people what to do in our company). Thus far there has been 100% adoption.

 

***

 

Precation doesn’t solve everything, but it’s at least a way to start off on the right foot.  If you’re a founder of your own company, think seriously about implementing this.  You won’t regret it. If you’re an employee in a company, chat about this on Hacker News and, hopefully, enough founders will see it that it could become a thing in the startup world just like free lunch and no start times.  And if you’re looking around for a new gig, well then obviously come check us out at 42floors.  We’ve got like a gazillion roles open and we’d love your help.