Archive for December, 2007

Fostering Technology Adoption: Early Customer & Early Revenue

Written by Theresa Shafer. Posted in 2 Open for Business Stage, Customer Development, Startups

Software companies typically have to convince prospects to adopt new technologies based on their shared history, their service track record, and their ability to accurately predict and deliver real results that overcome the cost and friction of adopting new tools and methodologies. There are a number of lessons we draw on to help startups attract their first paying customers.

A lesson we can draw from the networking industry is that competitors must cooperate to create a market. Everyone who developed their own proprietary protocols lost: no one else could connect to them and customers were leery of an investment in a closed system.

A lesson from open source community is that you are not a leader if you cannot get people to follow you. There are tens of thousands of open source projects, with new ones added every day, but the successful ones get people to contribute.

Social media tools like blogs, wiki, podcast offer this lesson. Below a certain team size, it’s all a social process not a workflow.

The Internet Engineering Task Force (IETF) model reminds us that elegant plans lose out to ugly working code based on rough consensus. In the words of Dave Clark in “A Cloudy Crystal Ball

We reject: kings, presidents and voting
We believe in: rough consensus and running code.

Two lessons from the success of Software as a Service (SaaS) offerings are to focus on the under-served segments and provide the whole solution.

Gaming industry and SaaS remind us that people have to like using your product. IT has largely forgotten this and tends to rely on mandated usage.

Early adoption continues to be one of the more challenging parts of every deployment. Understanding the various options for deployment of a new technology and their affect on adoption by organizations is critical for startups.

CINA Holiday Mixer

Written by Sean Murphy. Posted in Events, skmurphy

The CINA Holiday Mixer had a nice turnout: it was networking followed by a traditional twelve course Chinese lunch. All in all a relaxing couple of hours, and I enjoyed playing emcee. There were a number of folks who were new to Silicon Valley who got to make new friends and connections, as well as CINA life members and the mix of folks who regularly attend CINA events. It was consistent with CINA’s guiding principles:

  • To share and exchange cutting-edge technology information among members
  • To foster entrepreneurship among members
  • To guide career development and create business opportunities for our members
  • To provide a platform for networking and partnership among members
  • To serve as a bridge for American and Asia Pacific technology companies

A good time was had by all.

Seeing The Elephant: The Entrepreneur’s Challenge of Integrating Advice

Written by Sean Murphy. Posted in skmurphy, Startups

I blogged about the challenge of advising entrepreneurs in mid-October. I thought I would try and capture it from the entrepreneur’s perspective: the challenge of integrating all of the (seemingly) contradictory advice they routinely get into an understanding of their own entrepreneurial journey. In my experience Josh Billings offers some of the best advice on navigating the entrepreneurial landscape: “It’s not the things we don’t know that get us into trouble, it’s the things we know that aren’t so.”

From Jan 15, 2002 Word Detective “To See The Elephant”

Back in the early 19th century, the arrival of such a carnival in a small town was a major occasion, affording the town’s residents the opportunity to sample all sorts of exotic attractions, from the grotesque denizens of the sideshow to wild beasts from Africa and Asia that many people at that time had only read of in books. The big draw at many of these shows was an elephant, a far bigger and stranger critter than any animal native to North America. [...] So ritualized was this small-town pachyderm-mania that by about 1835 “to see the elephant” had become a catch phrase meaning “to experience all that there is to see, to see all that can be endured,” with the sense that after having “seen the elephant” there was nothing left to see. A related, more general sense arose a few years later, in which “to have seen the elephant” meant “to be worldly, no longer innocent, to have learned a hard lesson.” Many young people of the day who left the country for the big city with stars in their eyes only to experience hardship and disappointment were wryly said to have “seen the elephant” in this sense. And by about 1840, “see the elephant” had acquired the specialized military sense you have heard, meaning “to experience combat for the first time,” with the brutal loss of innocence that ordeal conveys.

So the challenge is to see things as they are, or to infer from others’ remarks how things work. But complex subjects admit of many perspectives, and like the Blind Men with the Elephant (or the Men in a Dark Room with the Elephant) each of us has a grasp on a different aspect of the subject.

  • Trunk: Snake
  • Trunk (end): Water Spout
  • Tusk: Pipe
  • Tusk (point): Spear
  • Ear: Hand Fan
  • Flank: Wall
  • Leg: Tree Trunk
  • Tail: Rope
  • Tail (end): Bristle Brush
  • Back: Throne

But Donald N. Michael has some observations regarding a missing elephant (which I originally read in David Isenberg’s Smart Letter #45 “Don’s Elephant”) that suggest an alternate explanation.

I’ll begin with a Sufi story we’re all familiar with. It’s the story of the blind persons and the elephant. Recall that persons who were blind were each coming up with a different definition of what was ‘out there’ depending on what part of the elephant they were touching. Notice that the story depends on a storyteller, someone who can see that there is an elephant. What I’m going to propose today is that the storyteller is blind. There is no elephant. The storyteller doesn’t know what he or she is talking about.

At the other end of the spectrum is William Gibson in his interview in the The Rolling Stone 40th Anniversary Issue

One of the things our grandchildren will find quaintest about us is that we distinguish the digital from the real, the virtual from the real. In the future, that will become literally impossible. The distinction between cyberspace and that which isn’t cyberspace is going to be unimaginable. When I wrote Neuromancer in 1984, cyberspace already existed for some people, but they didn’t spend all their time there. So cyberspace was there, and we were here. Now cyberspace is here for a lot of us, and there has become any state of relative non-connectivity. There is where they don’t have Wi-Fi.

In a world of super-ubiquitous computing, you’re not gonna know when you’re on or when you’re off. You’re always going to be on, in some sort of blended-reality state. You only think about it when something goes wrong and it goes off. And then it’s a drag.

It could be that in Silicon Valley we are so surrounded by entrepreneurship that we can’t parse it. Like fish in water we can’t really see it until it’s suppressed. Another possibility is that there isn’t a single paradigm for entrepreneurship. An excerpt from “The Limitations of Scientific Truth” by Nigel Brush

Therefore, when a new paradigm is built upon the structure of the preceding paradigm, it is often difficult to show continuity; instead of representing quantitative increases in knowledge new paradigms are often little more than shifts in perspective. The process could be compared to the old baseball parks that had wooden fences around their outfields. People unable to afford a ticket into the park could still watch the game by looking through the knotholes in the fence. Each knothole, though, gave a different view of the playing field. A hole in the left field fence gave a good view of the left fielder and third base, but the center fielder might be completely out of sight. Each knothole in the fence provided the viewer with a different perspective of the game. Paradigms are somewhat akin to knotholes in that each gives only a limited view of the universe, never the whole picture.

Entrepreneurs, Luck, and Silicon Valley

Written by Sean Murphy. Posted in Books, Rules of Thumb, skmurphy

Two articles from June of 2003, the month I decided to start SKMurphy, Inc. First up is “Life in the Bust Belt” by Po Bronson in Wired with the following observations that reflected much of the conventional wisdom in Silicon Valley at the time:

As a regional economy, Silicon Valley will steam ahead splendidly; as an icon, however, it’s over.

Perhaps most telling is a newfound and poignant reluctance when it comes to startups. Says one San Francisco entrepreneur who founded three companies, “I never want to start another company again. I saw an ugliness in human character that destroyed my faith in the common man.”

I doubt startups will ever become commonplace again. Most new products will be funded and developed through intrapreneur programs at well-established companies. Venture-funded startups will be reserved for only the rare great ideas. They’ll be highly watched anomalies, a spectator sport for the average Highway 101 commuter.

Silicon Valley 3.0 needs people who are good at working a single problem for several years. The kind of people who don’t find themselves saying, after only six months, “Enterprise server software has gotten old.” People who don’t mind that it takes two years to be promoted from Web engineer to bottom-rung manager

As my uncle John used to say “It’s generally accepted, so generally accepted it may not be true at all.” So far at least Mr. Bronson has proven to be too darkly pessimistic. Two month earlier, in April of 2003, Roger McNamee wrote “The New Normal” for Wired (that later became the book, “The New Normal“)

In the New Normal, the trick is to get real about the new set of challenges we face and what it takes to win in an environment where there are no shortcuts. “You have two choices,” says McNamee. “You can say, ‘I’m out. I’m never going to do this again.’ Or, if you’re a lifer, you say, ‘Okay, what lessons have I learned? Because I have to do it again, whatever the circumstances in the marketplace. I’m just going to be a lot smarter this time.’ If you’re willing to do some homework, and if you’re willing to be a little different from everyone else, there are countless opportunities worth pursuing. That’s what the New Normal is all about.”

Which brings me to the second article “How To Make Your Own Luck” by Daniel Pink in Fast Company.

It’s really a summary of Richard Wiseman‘s “The Luck Factor: Changing Your Luck, Changing Your Life: The Four Essential Principles.”

  1. Maximize Chance Opportunities: Lucky people are skilled at creating, noticing, and acting upon chance opportunities. They do this in various ways, which include building and maintaining a strong network, adopting a relaxed attitude to life, and being open to new experiences.
  2. Listen to Your Lucky Hunches Lucky people make effective decisions by listening to their intuition and gut feelings. They also take steps to actively boost their intuitive abilities — for example, by meditating and clearing their mind of other thoughts.
  3. Expect Good Fortune Lucky people are certain that the future will be bright. Over time, that expectation becomes a self-fulfilling prophecy because it helps lucky people persist in the face of failure and positively shapes their interactions with other people.
  4. Turn Bad Luck Into Good Lucky people employ various psychological techniques to cope with, and even thrive upon, the ill fortune that comes their way. For example, they spontaneously imagine how things could have been worse, they don’t dwell on the ill fortune, and they take control of the situation.

How To Ask An Expert For Help

Written by Sean Murphy. Posted in Books, skmurphy

I get the New York Enterprise Report delivered (it’s a controlled circulation–free–subscribe here) and was reading it this afternoon when I came across some great advice from Andrea R. Nierenberg in their “Ask the Expert” column.

Q: Like most small business owners, I find there aren’t enough hours in the day to accomplish all I want to do. Plus there is another, growing demand on my time — people who call me and e-mail me asking for my advice, help, etc. I feel that as a growing business, I need to get back to anyone who communicates with me, and I am aware that these contacts may provide some opportunities for my company. But the sheer volume is beginning to bog me down. Do I owe a response to everyone who contacts me? If so, how do I handle it all?

A: I have been a business owner for over 13 years, and a week does not go by without someone calling or e-mailing me to “pick my brain” (a phrase that, by the way, I detest). While I always believe in the courtesy of responding to everyone, I am also a stickler for time management. Here is how I handle my inquiries:

When someone calls, I immediately say, “I have five minutes: how can I help you?” As the caller starts to tell his story, I stop him or her and say, “Would you mind writing down your specific questions and let me know what you have done so far to seek a solution? Then, please e-mail them to me, in bulleted form, so that we can arrange a follow-up meeting or phone call. This way, I’ll be prepared and we can get right to the matter.” Here is the funny thing: About 5% of the people actually follow up. I have found that while many people say they want your advice, time and suggestions, they will never act on what you say — so I find out in advance by asking them to meet me halfway. The ones that are serious about soliciting my advice or opinion will follow through.

With an E-mail inquiry, I will basically give the same sort of reply. Like many people, I carry a BlackBerry and I will glance at my e-mails all day long. But for the sake of time management, I often wait to answer them all at once, when I have a mini-block of time.

To keep things under control, it’s also crucial to batch these kinds of calls by category and importance. Don’t stop and start on each inquiry that comes in without finishing your prior work. You will only get more bogged down.

A caveat here: If during the first few minutes of the phone call, or if in reading the initial e-mail, I know I cannot help this individual or provide useful advice, I immediately say so; if possible, I may refer him or her to someone else. The last thing I want to do is waste time figuring out “some way” to help someone when I know that ultimately I won’t be able to.

Regardless of who calls, always take those few minutes to listen carefully and be courteous. Be firm, stick to your time limit, and remind them that you can talk to them at a later date, when you have blocked out the time. Let people know that your time is valuable and help them get to the point. I’ve made some great connections and contacts through lending a helping hand, and I firmly believe that what goes around does come around. You just have to set up your rules so that your helping hand remains just that and you can get on with the business of running your business.

I don’t know that you should be quite so brusque with prospects, but let’s turn this around for a minute an assume you were going to ask someone for help. I think there is some good advice here if you are planning to ask someone with expertise for help.

  • If it’s in writing (for example in a forum):
    • Outline very briefly who you are
    • your situation or problem
    • what you have done to investigate and/or solve the problem
    • what specific alternatives you are trying to choose from or have ruled out
    • Any other directly relevant information
  • On the phone: E-mail ahead the information above adding
    • who suggested that you contact the person
    • how helping you might also help the other person
    • end your call in five minutes or less unless the other person is clearly interested in talking
  • Approaching a speaker after a talk
    • Introduce yourself, exchange business cards, and ask if they mind you e-mailing a question about “X” in less than thirty seconds. Especially if there are folks behind you the speaker may be anxious to chat with them briefly as well.
    • When you follow up mention where you met them and that they said is was OK to follow up (unless they didn’t say it was OK, in which case don’t).

I am amazed at the number of folks who ask questions on forums without doing any basic homework. It’s much more motivating to read they have tried six things and are now asking for help because none of them gave a satisfactory answer. I am disappointed at events by the number of folks who strike up long conversation with the speaker and there are half a dozen or a dozen people in line. You can always get back in line or wait until the line clears to see if the presenter wants to have a longer conversation.

Chapter 6 “Knowing Who Knows, Plugging Into the Knowledge Network” in How to be a Star at Work by Robert Kelley also details an excellent model for connecting with experts stressing the need to

  • Build your network before you need it, if possible.
  • Be very mindful of people’s time and don’t waste it.
  • Give careful thought to how you phrase your request or question.
  • Summarize your attempts to solve the problem or find the information you as asking for help with.
  • Verbally thank and follow up in writing, publicly credit.

Update Jan-21-2011: William Pietri suggested Eric Raymond’s “How To Ask Questions The Smart Way” that has a lot of good advice for asking questions in forums and e-mail groups.

Are You Generating iPod Fishbowl Leads?

Written by Francis Adanza. Posted in Events, Lead Generation

While at the Sales 2.0 Conference on Oct 30, 2007, I attended a panel presentation titled Lead Qualification & Cultivation. The complete transcripts are available at the Sales 2.0 portal, I have extracted Stu’s opening story to pair it with one of my own about iPod fishbowl leads.

Lead Qualification and Cultivation Panel

Moderator: Stu Silverman, CEO, SalesRamp

Panelists:

Stu Silverman’s opening remarks:

So let me first start off by giving my definition of the old way [of lead generation]. So we’ve got a $40 million early stage venture-backed company, maybe 12 reps in the field, no inside sales group. And you’ve got a good marketing group and they’ve gone to a tradeshow and they have acquired 400 leads from that tradeshow. So some of those leads are good of course, some of those leads are not good of course.

And then there’s the hundred or so that came from the fishbowl where you were raffling off the iPod and hoping to get a number of good quality leads from the iPod fishbowl leads as I call them.

So let’s say you come back with these 400 leads and what usually happens? In many companies there’s no qualification of those leads and they’re given to the field sales force. And then we all kind of know what happens there. The field sales reps start to call a few of them, they hit or miss and they then feel that the leads are really crap and then they don’t follow up with them. They complain with them and there’s enormous amount of waste of money and time and really significantly a lot of frustration between sales and marketing. So that’s what my example of the old way is and believe me it’s still going on.

IPod Fishbowl Leads

I recently attended the Streaming Media West conference. Just like Stu described it, almost every booth was an early stage venture-backed company with approximately six reps in the field and no inside sales group. These booths had the exact same lead generation strategy, raffling off an iPod for business cards. Having made this mistake before, I can confidently assume that at the end of the show, the marketing team feels ecstatic because they have acquired hundreds of leads. Of course, some of those leads are good, but most of them are not. So now what?

Back at the office each rep is given a stack of cards to start the cold calling process. Having been there, done that, this usually results with frustrated sales reps because of the enormous amount of wasted time and money spent on dialing for dollars. This could have been avoided if the booth people were more concerned with qualifying “real leads” instead of collecting business cards.

At trade shows, its not just the number of leads but the quality of leads. It’s a chance to have a conversation with a prospect, which is more difficult if you are drawing folks who are only interested in the iPod. As Stu coins it, “its not what is inside your funnel but what is moving through your funnel.” Startups do not have the time or the budget to waste trying to filter through hundreds of business cards. Startups are much better served using show floor time to qualify a hand full of serious prospects instead of wasting time afterward eliminating the prize entries.

On-line Tools for Startups

Written by Theresa Shafer. Posted in Startups, Tools for Startups

I am an small business owner. We are virtual team and use many on-line tools. These are ones that we actually pay for and use everyday:

I am looking for a good backup service and email.

Update Dec-11-2007 Rahul Pathak commented

Hi there,

Thanks for posting this – it’s awesome. I used Google Apps for Your Domain at Judy’s Book for email/calendaring/etc and I’m using it again for my new startup.

Looks like you’re fairly committed to Central Desktop, but perhaps Google Apps is worth it just for gmail.

Cheers,

Rahul

Rahul: we use GMail but found the Google Apps more languid than Central Desktop. It also lacks some key features compared to Central Desktop, in particular a real wiki style linking environment and an easy ability to clone a workspace. We use a lot of workspaces (for example for all of our clients, for workshop attendees, and for partners). This gets a lot of content and communication out of the inbox and into the wiki/workspace. Because we are typically working against a deadline in the workspace, the contention management features (which many other tools ignore) make it easy to avoid losing work or having to manually reconcile overlapping edits.

We are always interested in looking at new technology and open to upgrading, but we looked at a number of alternatives before consolidating onto Central Desktop for our workspaces. The two things we really need right now is a workspace that allows us to create content that is useful as a presentation (e.g. can output PowerPoint), can be used to create a document or workbook, and is also separate pages in a workspace. We find we need to present, hand out, and edit/update (typically in a collaborative fashion with clients/attendees) the same content. In edit/update mode it’s more useful to have the content burst into many pages, but we are then faced with turning it into a single document or slide deck.

CINA Holiday Mixer Sat-Dec-15

Written by Sean Murphy. Posted in Events, skmurphy

I have been invited to emcee this year’s CINA Holiday mixer, it will be held at Fenwick on Saturday December 15, from 10am to 1pm (with lunch included). It should be a lot of fun. The CINACon 2007 Showcase participants in attendance will be asked to answer three questions:

  • “What is it you do again?” (in 30 seconds or less, and those of you keeping score at home can compare that to their pitch at CINACon)
  • “What was one memorable thing from CINACon 2007?” (Our answer: “it was a great conference for entrepreneurs“).
  • “Tell us, in the next minute, two things you learned in 2007 you plan to apply in 2008″

Fenwick is at 801 California Street in Mountain View.

Register by e-mailing rsvp@cina.org

One Name or Two for Product and Company

Written by Sean Murphy. Posted in skmurphy

Athol Foden was a guest speaker at today’s Bootstrapper Breakfast and he brought his passion for naming and deep knowledge of the issues that around it. One question that came up this morning–and comes up with a lot of very early stage teams–is whether or not to name the company the same as the product or web service. The natural inclination is to have one name for the company that’s a domain name you’ve been able to secure–don’t forget to check with TESS (Trademark Electronic Search System) at the USPTO, just because the domain is free doesn’t mean the name is free. But what about scalability: the technology you are developing may be applicable to more markets than the first one you enter.

Your startup is in competition for prospects’ awareness and attention. The reality for bootstrappers is that you do not have a lot of resources available to enter their awareness much less gain their attention.

It’s twice as expensive to teach people two names instead of one…and to do name searches / trademark searches for two names. Pick one name for both the company and the product service. You can always rename the company or add a second product name later, but establishing the name in the prospect’s mind takes an enormous amount of effort: don’t double your workload. Also, finding one good name and agreeing on it is a challenge, finding two that are somewhat related and both acceptable is much much harder.

Brighter Naming offers a jump start program for early stage startups that takes into account their limited resources and need to move quickly, it’s worth contacting them. They also offer a self-service approach that you can follow if you need a good methodology.

Legal Issues: Q&A with Pete Tormey of Action Patents

Written by Francis Adanza. Posted in Legal Issues, skmurphy

Today I was able to sit down with Pete Tormey, founder of Action Patents. Pete is a registered patent agent who specializes in providing patents for Software, Electronics, Life Science Instrumentation and Business Methods. From blogs to entrepreneurial events, patents are always a controversial topic. This is why I took the opportunity to speak with an expert. Below are the questions and answers from our conversation.

Q: What is the difference between a patent and a trademark?
A patent protects an inventor for the production or sale of a new useful invention. Whereas a trademark is protection for a distinctive name, symbol, motto or emblem that identifies a product.

Q: If I were to hire a patent practitioner, what are three specific things I can include in my description to make your job easier and reduce costs?
The most important thing is to move beyond just the new idea so that you can explain to the patent prosecutor how to make and use the invention. Secondly provide at least one good sketch illustrating the invention, and finally provide a good description of the technical background and need for the invention. This helps the patent practitioner explain the purpose and value to the patent examiner.

Q: Looking beyond the value in a legal action, how else can patents help me?
A patent has marketing value too. For example customers may view patented technology as superior to a competitor’s product which can greatly help your sales process. Also, for startup companies, getting investment capital may be dependent on having an idea that’s patentable. Patents provide your company with the ability to show people what you do that no one else does. That is a significant competitive advantage.

Q: I have heard people say that a patent is only as strong as the dollars you have to back it, what are your thoughts?
Most patents never go through an entire legal challenge. Simply having a patent may be sufficient because your competition does not want an expensive court battle either. If patenting your technology prevents your competitor from attacking you directly in the market, the patent has done its job without the cost of a court battle.

Q: I have also heard people say that the patent is only as strong as the reputation of the patent practitioner who filed it, is this true?

It’s not the reputation that matters, but the technical knowledge and experience in that industry that have the greatest effect. Most inventors are not really aware of the person who actually drafts the patent. Large firms often use technical writers. The practitioner needs to clearly articulate the invention and draft solid claims to it.

Q: Who may apply for a U.S. Patent?
A patent may be granted to the inventor or discoverer of any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, or on any distinct and new variety of plant, which is asexually reproduced, or on any new, original, and ornamental design for an article of manufacture.

Q: On what subject matter may a patent not be granted?
A patent may not be granted on a useless device, on printed matter, on an improvement in a device which would be obvious to a person skilled in the art, or on a machine which is not useful such as an alleged perpetual motion machine. A patent may also not be granted for an idea or abstraction such as a mathematical formula.

Q: If one person furnishes the ideas for invention and another person employs him or finances his experimentation, should the patent application be filed by them jointly?
No. The application should be signed by the true inventor and filed in his or her name.

Q: Is there any danger that the Patent and Trademark Office will give others information contained in my application while it is pending?

All patent applications are maintained in the strictest secrecy until the patent is issued or the application is published. Publication is limited to only certain applications. After the patent is issued, however, the file containing the application and all correspondence leading up to issuance of the patent is made available in the files information room for inspection by anyone, and copies of these files may be purchased from the Patent Office.

Q: I have made some changes in my invention after the filing of my patent application documents. May I amend my patent application by adding a description and illustration of these features?
No. The law provides that new matter cannot be introduced into the disclosure of a patent application. However, there is a procedure called “continuation-in-part application” that allows the patent applicant to file a new application which contains new subject matter to replace or supplement the original. You should notify your patent agent immediately of any changes you make in your invention.

Q: While on vacation last summer, I found an article on sale which has not yet been introduced into the U.S. or patented or described in the U.S. May I get a U.S. patent on this invention?
No. According to the law, a U.S. Patent can only be obtained by the true inventor, not by one who learns of the invention of another.

Q: Does the Patent and Trademark Office control the fees charged by patent agents for their services?
No. The Office maintains a roster of registered patent practitioners, but the Office does not control fees, nor will the Office help you select a patent agent.

Q: If I obtain a patent on my invention, will that protect me against claims of others who say that I am infringing their patents?
No. There may be a patent of a more basic nature on which your invention is an improvement. If your invention is a detailed refinement or feature of such a basically protected invention, you may not use it without the consent of the patentee, just as no one will have the right to use your patented improvements without your consent.

Q: What do the terms “patent pending” and “patent applied for” mean?
They are used by a manufacturer or seller of an article to inform the public that an application for patent on that article is on file in the Patent and Trademark Office. The law imposes a fine on those who use these terms falsely to deceive the public.

Q: Can an inventor sell his right to a patent or patent application to someone else?
Yes. The inventor can sell all or any part of his interest in the patent application or the patent.

Q: Does a U.S. patent protect my invention in other countries?
No. The U.S. patent protects your invention only in this country. If you wish to protect your invention in foreign countries, you must file an application in the patent office of each country within the time limit permitted by law. Check with your patent agent about costs before you decide to file in foreign countries.

Pete has a great website with a lot of practical advice. One question we get a lot “is what does a patent cost?” Pete has a great “Patent Fees” section that addresses this directly

Action Patents charges $100 per hour for patent preparation and prosecution. There are additional costs such as filing fees and possibly drawing fees. The cost of a typical patent application generally runs from $3,000 for simple inventions to over $7,000 for complex business methods and software inventions.

The legal fees vary depending upon the technical complexity of the subject matter, the quality of the written description provided by the inventor, and the number of revisions required to accurately describe your invention. If you provide a good written description of the invention, your legal fees are less. Government fees are subject to change.

Once an application is filed, there are other costs incurred while the patent is pending. The United States Patent and Trademark Office will issue an “Office Action” setting forth their findings on patentability and may require the Applicant to file a response. After one or two responses outstanding issues are usually resolved. Each response generally incurs about $1,000 in legal fees. After the patent is allowed there is an issue fee of $700 plus a $200 preparation fee.

Once a patent issues there are maintenance fees at 3 1/2, 7 1/2, and 11 1/2 years. They are presently $450, $1,150 and $1,900 respectively for small entities. The maintenance fees are subject to change by the U.S. Patent and Trademark Office.

21 Great Questions for Developing New Products

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

Taken from “Breakthrough Thinking From Inside the Box” by Kevin Coyne, Patricia Gorman Clifford, and Renee Dye in the December 2007 Harvard Business Review. You can actually skip the article if you are looking for additional insights or elaborations on these very useful questions, it’s actually an attack on the brainstorming process as practiced by large corporations and not relevant for startups. I have numbered the questions to make reference easier.

1. Which customers use or purchase our product in the most unusual way?

Understand that “unusual” is from your perspective not theirs, from their perspective they are using it in a very natural way. Resist the temptation to tell them “you’re using my product wrong!” or attempt to snatch it back out of their hands and instead explore how you might make it even more fit for this “unusual use.”

2. Do any customers need vastly more or less sales and service attention than most.

Alas it’s typically visionary customers who need vastly less sales and service attention (in fact with visionaries it’s frequently the case that the product is bought not sold). One of the key characteristics of visionary customers is their scarcity. Customers who need more sales and service support are typically normal, it’s your sales process, marketing message, product documentation and training materials that are frequently in need of improvement. I’ve met a number of startups over the years who in effect administer an IQ test to prospects (“Let’s see if you can figure out what this is good for and how to use it”) and console themselves with the thought that “our product is not for everyone” or “we need to find smarter prospects.”

3. For which customers are our support costs (e.g. order entry, tracking, customer specific design) either unusually high or low?

Winston Churchill observed that “we shape our buildings, thereafter they shape us.” The same can be true of a startup’s systems. What you are really uncovering with this question, especially if you look at the trend over time of when they were acquired, is how suitable for current and likely customers are our current assumptions about our engagement model.

4. Could we still meet the needs of a significant subset of customers if we stripped 25% of the hard or soft costs out of our products?

For software this is primarily what features can be deleted. And for a startup that has built a “Swiss Army Chainsaw” figuring out the key two or three blades to focus on can be a source of great success as is it can increase quality (much less unnecessary functionality to debug and maintain) and lower barriers to adoption by virtue of a simpler interface.

5. Who spends at least 50% of what our product costs to adapt it to their specific needs?

If you can figure out what features to add or delete, or what customer facing processes to change, you have an opportunity either to increase price (since you are lowering their effective cost) or see a large increase in usage. Adding more end user programmability into interfaces and functionality can also have the effect of lowering the cost to adapt.

6. Who uses our product in ways that we never expected or intended?

This is a variation on #1

7. Who uses our product in surprisingly large quantities?

I think there is a missing element to this question related to ratio of use to headcount or other typically usage drivers. You may have uncovered a new usage driver if your current sales and engagement model predicts a demand of that’s only half or two-thirds of use. This also assumes you have your software instrumented to measure transactions or logins, or other meaningful indicators of use. It may also be that this customer has found a way to get a very high degree of adoption that it would behoove you to understand.

8. What other firms are dealing with the same generic problem as we are but for an entirely different reason? How have they addressed it?

This systematic lateral exploration will often help you spot incipient or emerging competitors as well as potential partners or suppliers.

9. What major breakthroughs in efficiency or effectiveness have we made in our business that could be applied in another industry?

I would be a little cautious on this unless you have folks on your team from that industry or customers with operating experience in the industry. This can easily become unfounded speculation. It’s very possible to achieve a strategic advantage by moving laterally into another industry once your technology is proven, but a lack of knowledge of the details of that industry can also blind you to the unsuitability of your offering.

10. What information about customers and product use is created as a by-product of our business that could be the key to radically improving the economics of another business.

I think this is a dangerous one if it involves sharing customer information without permission. But if your customer intimacy allows you to recommend relevant solutions from other firms that your customers would welcome, then it’s clearly a basis for partnering.

11. What is the biggest hassle of purchasing or using or product?

One that’s frequently overlooked is time to become operational. If you are competing against larger firms that measure installation and bring-up in seasons (i.e. all new purchases have bring up schedules that are at least 90 days) see if you can get a customer functional in less than five working days. Hassle is actually included in your effective price, so if they have to allocate several of their best folks for two months to getting your product deployed and operational, they mentally add the opportunity cost (which is typically a multiple of the salary) of that talent to your price. I can remember walking through the bring-up history at several customers of a complex product with a startup and telling them you have a product you can charge $250K for. Needless to say they didn’t believe me, but when you factored in the opportunity of the talent that their customers had assigned for months to get the product operational they realized they could charge a lot more if they could dramatically reduce the time and effort it took a new customer to become fully operational.

12. What are some examples of ad hoc modifications that customers have made with our product.

This is actually a very good probe question to discern latent or unspoken feature requests.

13. For which current customers is our product least suited and why?

This is a variation on #11 and #12.

14. For what particular occasions is our product least suited?

This is a reframing of #11 and #12.

15. Which customers does our industry prefer not to serve and why?

The two defaults are the least skilled and the ones who pay the least. Clayton Christensen advises in the Innovator’s Dilemma that these two groups are the most likely foothold for a disruptive competitor in your market.

16. Which customers could be major users, if only we could remove one specific barrier that we’ve never previously considered?

You should be able to find example cases in or indicators in your answers to #6, #11, #12, and #13. If you have no customers of that type who are minor users it’s unlikely the category would go from non-users to major users.

17. How would we do things differently if we had perfect information about our buyers, usage, distribution channels, etc..

The other question you always have to ask when considering “perfect information” is “what is the value of perfect information?” There is an upper bound on how much extra customers will pay and how much unmet demand actually exists. Typically the more thoroughly you solve one problem for a customer the more you promote the next constraint as the one they become more willing to pay to solve.

18. How would our product change if we tailored it for every customer?

This is a variant on #17What Component Technologies in Our Products and Process are Most Likely To Be Obsolete?

19. Which technologies embedded in our product have changed the most since the product was last redesigned?

For software this would include assumptions about available memory, processor power, disk space and access, how the customer will interact and access outputs (e.g. moving beyond printouts to web pages to mobile devices). What key assumptions are built into your architectural trade-off analysis that may need to be revisited?

20. Which technologies underlying our production process have changed the most since we last rebuilt our manufacturing and distribution systems.

Another way to frame this is what key assumptions are built into your development processes.

21. Which customers’ needs are shifting more rapidly? What will they be in five years?

Not only needs but demographics. What trends can be discerned in the economic forces acting on your customers and the ecology of your partner and supplier ecosystem?

The checklist is helpful. The main thing to take away is that customer intimacy, and therefore those who are closest to your customers, is a significant source of innovative insight. Looking to adjacent industries for component technologies and methodologies to apply to your current market is another good source of inspiration. Third, assessing the total cost to acquire and own your solution, and any attendant delays and/or risks you impose on your customers, is a good place to hunt for opportunities to add value to your product.

See also

Entrepreneurial Innovation Comes More From Borrowing & Combining Than Invention

Written by Sean Murphy. Posted in Books, Quotes, skmurphy

I came across a good quote on innovation and invention in a  2004 article in Fortune Magazine by Harold Evans called “What Drives America’s Greatest Innovators“ (emphasis added)

[The] defining characteristic of the innovator: a determination to bring a brainwave into the bustle of the marketplace. […]

More innovations come from borrowing and combining than simple invention. “I invented nothing new,” Henry Ford said, “I simply assembled into a car discoveries of other men behind whom were centuries of work.” It sounds easy, but it emphasizes another quality more significant than originality: imagination as manifest in the ability to see relationships.

Harold Evans is the author of “They Made America” which was also made into a four hour PBS special.

Finding And Adding People Successfully to Your Startup Team

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

“People” includes finding the following types of team members:

  • co-founders
  • advisors
  • contractors
  • early employees (not co-founders but next 6-12)
  • employees (“real employees”)
  • consultants

The temptation is to get co-founders and early employees who are all coders and then get a contractor or “real employee” who does test/QA but as John Steuart, a partner in the VC firm Claremont Creek pointed out in a recent panel at Startup Epicenter on “Scaling up Your Product Development” the real risk comes from not hiring/attracting two kinds of people:

  1. Prior experience working in a startup that successfully scaled up rapidly.
    You need someone who has successfully negotiated the rapids of high growth and know s how to spot problems very early. You have to consider your infrastructure not to be a robust wooden structure that will creak and groan and flex under stress but more like a glass sculpture that will give very little warning before it shatters under load. You have to have someone listening for the barely perceptible high pitched screech of too much stress before current systems, processes, methodologies collapse.
  2. Marketing & Business Development expertise.
    Size of market, share of market, and price points that the market will support for your offering are typically 10-100X the risk of any development challenge that you face in a new or emerging market.

The key to successfully adding a new person to the team in the early days is to recruit people you already know, have worked with before and had prior shared success with. Or people that other current team members can vouch for based on direct prior work experience.

Why? There is a model of team developed called “Forming Storming Norming Performing” that was originally proposed by Bruce Tuckman in 1965. Essentially with folks you have already worked with you can either skip the forming/storming phases or move through them (and not get stuck) quickly whereas a new team finds it very hard to avoid a period of poor performance as they learn to work together. And not all teams progress beyond Storming/Norming to actually perform which accounts for a reasonable amount of “infant mortality” in new businesses.

You should prioritize the management hires first. Not absolutely, in the sense that you should hire strong people, against a plan, whenever you find them. But in general it’s a better idea for a couple of reasons

  • They give you more bandwidth for the hiring process.
  • It’s harder to hire folks to work for a manager who is yet to be hired.
  • It’s normally better to let a manager build their team, and they may be able to bring folks with them from prior successful teams. This is not to say that other strong players won’t refer good people as well.

A few bright high energy folks go a long way. A few can energize a team and help you to challenge some basic assumptions (if you will listen to them). But you also need folks with relevant work experience who understand what the company will become if you succeed.

Fred Brooks has noted “adding people to a late software project makes it later.” There are a number of reasons for this, and it’s not always true, but in general you have to budget for new hire orientation and acclimation to the team, as well as the ongoing communication overhead of more people on the team (“many hands make light work” does not always apply to software development). This not only means that they are not as productive during their first few weeks to months but that they also take cycles from other team members in getting oriented. To the extent that you can plan for this by assigning a “buddy” (or having a manager on board first as well) or investing some effort in documenting existing development processes and practices (and maintaining a repository of past decisions, whether it’s a simple e-mail archive or a wiki for specs or a content management system) you will cut the amount of calendar time and “other people” time needed to ensure a new hire is a productive member of the team.

I think you have to plan for a “probationary period” of 3 months where you make sure that a new hire is fit and able to satisfy the minimum requirements for the job (this should be in your offer letter and be reflected in a minimum vesting period for any options). Be more concerned about a misfit around values than a lack of knowledge (unless the person actively mis-represented their experience). The first is not likely to change, the second can be easily remedied if the person is motivated and you and your team are able to invest the time.

Finally, “trust is built over time” and across a series of interactions. Nothing should make the hair stand up on the back of your neck faster than someone you’ve just met saying “trust me.” And vice versa: if you find yourself saying “you’ll just have to trust us” you should consider how to substantiate that you will do what you are committing to. if you don’t have a work history with some shared successes with your potential team member(s) you need to take things one step at a time: create some small shared successes before you take larger risks. Unless you both know someone who can vouch for each of you to the other, and will help you spin up the firm, take things one step at a time and be clear on what you are asking for and what’s in it for the other person.

We Added a Second Idea to Revenue Workshop on January 19, 2008

Written by Sean Murphy. Posted in Events, skmurphy, Tools for Startups

To keep our workshops interactive we limit them to a dozen people. We’ve got two seats left in our Thursday December 6th “Idea to Revenue workshop” so we have added a second one Saturday January 19, 2008. This one will be held at the Moorpark Hotel in San Jose.

We got a number of requests for a Saturday workshop so we’ve obliged. Fenwick is a great venue that we plan to return to in 2008, but we’ve also really enjoyed the ambiance and staff at the Moorpark Hotel and had great experiences there. It’s a little further south but it’s just off 280 at Saratoga and on a Saturday the traffic should be much easier to manage.

These are real workshops for entrepreneurs who want to spend four hours developing a one page plan for 2008. Here is a partial list of the topics we cover:

  • Where Are You, What’s Going On – What’s the Situation
  • Guided Assessment on Software Startup Maturity: we’ve identified about four dozen key milestones that a software startup has to reach to be able to hit not just break even but growth. (Note: raising venture capital is not on the list but customer testimonials and a scalable sales process are).
  • How Did You Get Here? You Have You Done – Core Competencies (it’s not about “latent talents” but “have done, can do.”)
  • What are Your Key Assumptions About Your Startup
  • Turning What You “Intend to Do” next year into “Goals, Strategies, and Metrics”
  • Identifying Your Budget Constraints: Time and Money (in particular managing the tensions between consulting and developing a product).
  • Integrating Situation, Competencies, Goals, Strategies, and Metrics into a one page plan

Update December 3: the December 6 event is now SOLD OUT, no walk-ins will be accepted, there are still seats available for the Saturday January 19, 2008 “Idea to Revenue” workshop.

Three Points About Seeking Investment

Written by Sean Murphy. Posted in Funding, skmurphy

  1. Whenever you are planning to take an investment from someone the calculation you have to make–and that they should agree with–is will you be able to satisfy their return on investment requirements. So, maintaining a certain level of ownership, while very important to you, will matter less to them than how much and when you plan to pay them back.
  2. You also need to be very clear as to why you need the money. In particular, your need to keep the business operating or to be paid a salary are not compelling. It’s best if you can present a plan for accelerating an existing business based on proven success and a clear understanding of the market.
  3. Take careful notice that the terms and conditions that come with a financing (in particular liquidity preferences) and have your own attorney review them. They can often have a much larger impact on how much money you put in your pocket when your (former) business (goes public or) is acquired than the percentage of common stock you own after the first round of financing.

Our focus is on helping teams that are bootstrapping find early customers and early revenue, enabling the possibility that they build a business that deserves investment. So we bring a set of biases to fund raising questions. Four other sources of good information you should consult–in addition to your own attorney–would be

Quick Links

Bootstrappers Breakfast Link Startup Stages Clients In the News Upcoming Events Office Hours Button