Talking with Startups

I speak with a lot of founders of startups. Since I’m not a VC I do sign NDAs and offer them what advice I can.

Inevitably one of the first things I get asked after they tell me their idea is “What do you think of it?”

Most great ideas only seem obvious in hind-sight. If someone asked ten years ago about starting “a message service where people spew short snippets routinely” it would have seemed pointless … and yet Twitter exists.

Because of this, I have no illusion about being able to advise on the quality of the ideas themselves. Is it smart to make a site that offers <insert great service here>? I’ve no idea.

Of course, I do suggest that they look for their competitors. It is a rare idea that has no existing competitor (rare enough that I’ve had no idea explained to me that was unique and wholly original). Should they throw their idea away because of a competitor?

Perhaps. If the competitor is established and the eager startup has nothing of value to distinguish themselves then it’s pretty hard to compete!

That’s one of the first points to clarify when dealing with a startup. Not “Are you first?” but “Do you add value?” If there’s nothing added other than “like Facebook” I’m going to ask the question “Why should someone leave Facebook for you then?” If that can’t be answered, it’s a problem.

After “the idea” talk I discuss startups in a more pragmatic way. Every startup is a business.

And that’s one area where I try to help them … not in their marketing and market definition (I’ve no expertise) but in their boring operations. For instance, a startup has a website and hopes to get customers. How are they going to work the accounting? Quickbooks? An accountant? Excel?

It’s not the case that your payment service summary report “is your accounting.” That’s ludicrous on the face of it. For instance, they might do a hold-back or credit only partial payment. How much are they holding? What percent? Is that reasonable? How do you know? Should you change payment service?

It takes an accounting system to get that picture. Which means the startup founders need to know something about accounting.

Yes, I know … BORING. But, if they don’t know the difference between assets and expenses (do YOU?) then they can make poor decisions that leave them owing taxes and having no money in checking. Oops.

No, I don’t propose they become CPAs (or even hire a CPA) so much as that they learn the basics of double-entry book keeping sufficient to accurately populate Quickbooks. They need to understand their business. The language is accounting.

They also need to understand their relationships.

Many startups seek partners using equity. After all, they have no money, what choice do they have? We’ve all seen the Craig’s List ads for “Seeking partner in disruptive startup.”

Really? That’s roughly as smart as seeking a spouse that way!

Business partnerships are mostly the same as marriages (including liability). They lack children of course.

Don’t pick a partner from a newspaper. Normally, “would you add them to your personal checking account?” as a question sums that up nicely.

The great partnerships (Jobs and Wozniak for instance, or Gates and Allen) predated the business relationship.

The legal issues are things an attorney should advise on. My advise: be sure to write down all the expectations. A real lawyer can do a contract but even before you get to that part if it’s just talk … it’s worthless.

What about technical issues?

That’s the main reason I tend to talk to these people in the first place. I get dragged into the other stuff because I’ve run a company since 1994, but it’s my “geek hat” that has them asking me personally about software startups.

There really aren’t a lot of technical issues.

A few basics:

  1. the repository holds your crown jewels and should be protected and backed up at all costs
  2. everything important goes into the repository even if it’s not code
  3. language picked doesn’t matter so pick the one that lets you get to market fastest
  4. if you write the software poorly it will haunt you forever
  5. if your code isn’t beautiful you will have written your own version of Dante’s hell
  6. optimization follows correctness (do NOT fall for premature optimization)

Startups are a business; keeping that focus actually avoids many problems.

They are not hobbies and they are not experiments (though they may experiment heavily and come from what was a hobby).

They are meant to own assets that generate enormous gobs of cash. And like any business there’s a good chance they will be absorbed over time (ideally for even more gobs of cash).

The most useful thing I’ve been able to do for startups is encourage them.

For reasons I don’t understand when people decide to “go for it” they’re bombarded with “It’s risky!” and “What if it fails?” and “You should have a fall-back” and so on. Talk about sucking the life from a founder…

I have different advice: give 100% to your startup and have no regrets. Might it fail? Sure, 90+% chance it will.

But if you quit or don’t try … 100% chance it will fail.

I’ve never regretted the various business ventures I’ve tried; if nothing else they all gave me useful perspectives for my clients. But I would hate to look back and say “I wish I had tried … but I didn’t.”

Founders are a funny breed. Courageous, audacious, and mostly unsuccessful. But when they succeed, they succeed BIG. Support your local founder even if you don’t “get it.”

Keep the Light,
Brian Jones

One thought on “Talking with Startups

  1. This was good. It covers a lot of the topics we’ve talked about in the past. And, it ends with the most important part: Don’t give up. An entrepreneur may not end up 1st at the end of the race, but at least he will have been in the race. His life won’t have been a grind on someone else’s treadmill. Life will maintain its allure because he’s always reaching, and there’s always hope.

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