Archive for July, 2008
July 30th, 2008
This phrase is attributed to Sergey Gorshkov, the commander in chief of the Soviet Navy from 1956 to 1985, who managed it’s dramatic expansion during the Cold War. Perfectionists get this wrong, siding with “Better.” Entrepreneurs who prosper, for the most part, side with “Good Enough” and keep improving.
I was reminded of this quote when I read a recent blog post “Vaporware” by Chris Crawford, who is working on new start-up called Storytron in the interactive storytelling space. I have a lot of respect for Chris Crawford, who is an innovator in the computer gaming field. I subscribed to his “Journal of Computer Game Design” and took away a number of useful insights.
In particular his 1992 article “Lessons from Patton Strikes Back” outlines several useful concepts that most early stage and niche software companies should keep firmly in mind, what follows is a lightly edited summary of his five lessons:
- Start with a clear mission statement. The essence of game design is decision-making; a designer makes thousands of decisions during the course of a project. Your choice is always between options with different merits. This is one advantage of the clear mission statement: it simplifies the decision-making process. Instead of asking, “Which option is better?” you need instead ask only, “Which option better fits my mission statement?” This latter question is more precise, more specific, and therefore easier to answer. More important, it is faster to answer. The bulk of a game designer’s important work is making decisions about what to include and what to pass up; anything that makes this difficult process faster and more reliable is worthwhile.
- Plan then code at a program level, code then plan at a feature level. Hacked code is so brittle that, over the long run, it takes more time to debug and maintain than properly structured code. [Planned, well structured code] can be easily modified and corrected after it has been written. The early stages of a game project have us writing code that we know will change considerably later on. However, there is another time scale to consider: the short-term time scale in which we write up a single feature. Most game programming is in some way experimental; any feature that is fully understood is probably obsolete in our fast-moving industry. You can’t plan such code in advance; you just have to wade in and hack until you figure it out. The conclusion I came to is this: hack first, then recode it right.
- Don’t be seduced by the cleverness of your own ideas. This was the single biggest mistake I made. I came up with a truly clever idea…and I was justifiably proud of it. But it caused too many problems. [It] turned out to be clumsy to use. Most players eschewed it. I should have had the courage to dump a clever idea that, in the final analysis, created more problems than it solved. I didn’t, and the game suffered for it.
- Bake the cake first, then add the icing. Publishers sell games in the same way that bakers sell cake. The customer doesn’t taste the cake until he gets it home; all he sees in the store is the icing. So bakers don’t sell cake; they sell icing. In the same way, most publishers don’t give a damn about gameplay (cake); all they care about are the graphics and sound (icing). With Patton Strikes Back, I baked the cake before I even showed it to any publisher. I designed and developed the game first. I finished all the basic game structures, wrote and tuned the artificial intelligence, even got much of the play balance worked out. Only then did I show it to publishers. Guess what they wanted? More icing! At that point, it was easy. Having finished the cake, it was easy to pile the icing on.
- Make sure there is a market for your product before you develop it. Patton Strikes Back was a “wargame for the rest of us.” It received excellent reviews. Unfortunately, it has not sold well. It would seem that “the rest of us” aren’t buying computer wargames. The aficionados certainly hated it. Without their support, the game withered…I will never make a significant income from the game. Lesson #5 is, I think, the most important lesson to learn from Patton Strikes Back.
Real candor and some valuable lessons. Two I take to heart are to stay clear on the mission and to guard against being seduced by my own “clever ideas.”
I am of two minds about Chris Crawford’s Storytron effort. It’s possible that they will make a huge breakthrough, certainly he has done several very innovative interactive games to date. His 1982 book “The Art of Computer Design” is out of print but still worth reading on-line for it’s insights into how to create engaging interactive environments, appropriate for anyone developing advanced analytics or social software. But it increasingly looks like an effort that’s suffering from “mission creep.” What follows are some selections from his “Vaporware” post, highlighting the team’s issues with traction and “making things better” (bold text in original):
Perhaps you have noticed that Storytron seems to be suffering from a bad case of the vapors. Our very first business plan called for us to publicly launch everything on January 1st, 2008. That didn’t happen. We pushed the launch date back to March 15th…and we pushed back the launch date to May 15th…once again I went back to the drawing board and came up with major changes… despite the fact that our official launch date has been pushed back repeatedly, our progress has been relentless.
It’s easy to stand on the outside and criticize, so let me just make what I hope is a constructive observation. If you have slipped four times you need to start to radically shrink the mission and focus for your first version.
The website. The Storytron website has quite a few special capabilities that require some custom programming. There’s nothing earth-shattering, to be sure, but it is not a collection of HTML pages. There’s a lot more going on underneath the hood. Louis has been doing lots of coding to make all this work properly, and Pati and Laura have been deeply involved in organizing the overall effort.
If a simple collection of HTML pages would make a “good enough” impression I would consider pushing out a dynamic website to a later version of the product/company. A basic demo has to be central to the mission, but they may be aiming much too high for their initial release.
The reference material and tutorials. This pile is huge. Worse, the technology it explains has been constantly changing. We made changes in April and May that required Pati to completely rewrite large portions of the tutorials. All in all, the content of the materials on the website adds up to about the size of a book — which Pati and Laura have generated in a matter of months.
It’s not clear what the changes were, but it doesn’t sound from the context they are keeping their focus on a simple app and demo for their first release. Again, hindsight is easier but if you find yourself re-writing the manual significantly before the product is in customers’ hands you should consider sharpening your focus and deferring features.
So how much longer will Storytron remain in vapor? How much longer will we give you promises that we later break?
If you find yourself worrying that prospects no longer believe you–and therefore no longer trust you–you need to change methods. Trust is hard to earn and too easily lost. I would think that they could sort their early users by risk tolerance and relevant technical skill levels and release the current “deficient” version to those it’s unlikely to turn off.
The board of directors discussed this matter at length at its recent meeting, and we hammered out the details of how we’re going to handle the launch. This time, though, we really want to be sure about our promises.
Again, you always want to be sure about your promises. One of Gerald Weinberg’s key observations for consultants and other change agents–and make no mistake about it, Chris and the Storytron team are trying to trigger a revolution in interactive entertainment–is that “people don’t tell you when they stop trusting you.” And once you’ve lost their trust, there is little basis for the kind of relationship that’s needed to convince early adopters to work with you.
Therefore, all we are saying at this time that the launch will NOT occur before August 18th. We are HOPEFUL that it will occur by September 1st. And that’s the best we can say at this time.
It’s better to give a “blood date” (vs. one written in pen, pencil, or crayon) and then work to beat it. It doesn’t sound like the team has a date that they are committed to hitting. This can be the death of many of promising start-up.
Please do not conclude that we couldn’t meet a deadline to save our lives. In every case, we have deferred the launch in order to improve the quality of our products. We could in fact have launched on January 1st, 2008, as originally planned — and the product we had ready at that time was better than what was originally planned.
This may be a slow death by good intentions. No development team ever slips a product to make it worse (in their own mind).
However, we deemed it to be unacceptable, so we pushed the deadline back.
As a rule of thumb the second time this happens you have to start to reduce the scope of your efforts and the mission you are trying to accomplish. In particular, bootstrappers have to sell what they have. Gordon Bell writes about the “Schedule Fantasy Factor” which he defines as the ratio of the time allocated to a particular task divided by the time it actually took. His belief is that a ratio above 1.2 puts a project in trouble: if it’s above 2 he believes that you are doing research, not product development.
The same thing happened in mid-March; Swat and Storyteller were better than we had expected back in January — but they still weren’t good enough. The changes we have been making have dramatically improved our technology. Yes, it’s frustrating to have to wait. You think you’re frustrated? However much you’re frustrated, I’m frustrated a lot more. But we only get one chance to show off to the venture capitalists, and we want to make this our best shot.
Normally the venture capitalist’s question is not “can you make this work?” but who wants to buy it, how much will they pay, and how many of them are there? Remember lesson 5, the real risk is not that you can’t ultimately do what you have set out to do, but that once you have a working technology you will discover that the market you anticipated for it does not exist. It’s a risk that many innovative start-ups face.
Update Dec-31-2008: the Vaporware blog post is still up on the Storytron blog site but none of the permalinks for the individual posts resolve correctly. To read the post go the blog and look for July of 2008 in the archives.
July 29th, 2008
Continuing my twitter experiment from April, May, and June I continue to select a quote every couple of days that is applicable to the challenges of entrepreneurship. Here are my choices for July:
“Find your place on the planet. Dig in, and take responsibility from there.”
Gary Snyder
I thought this was more poetic than “find a niche and fill it.”
“Strategy is a hypothesis. Metrics are the data for testing the hypothesis. It is a continuous feedback process.”
Glen B. Alleman
This is a condensed version of a set of bullets from a 2003 presentation “Using Balanced Scorecard to Build a Project Focused IT organization” he gave at an IQPC conference. The net effect is to get IT to take a more entrepreneurial approach to serving end users. It’s no wonder his blog is called “Herding Cats.”
- Strategy is a hypothesis. Metrics are the data for testing the hypothesis.
- Strategy is making a hypothesis about a desired outcome, constructing the measures to test the hypothesis, deploying the experiment to test the hypothesis, then making adjustments based on the metrics.
- The concept of strategy as a hypothesis and the experiments to test the hypothesis may be new to many. But this approach puts strategy in a different light.
- Strategy is not something you do then go off to execute the plan. It is a continuous feedback process. Always testing the strategy with metrics derived from projects.”
“The true object of all human life is play. Life is a task garden, heaven is a playground.”
G. K. Chesterton
Truly creative problem solving, the kind that fuels an entrepreneur’s “creative destruction” is playful.
“The need to write comes from the need to make sense of one’s life and discover one’s usefulness.”
John Cheever
I find that writing down my thoughts and experiences have allowed me to get a better sense of perspective on my life and various business activities. I actually think I do my best story telling at a whiteboard, at least for the first few drafts, but presentations ultimately have to become articles and essays to have broader influence. Re-reading what I’ve written, perhaps edited from a transcript of a talk or a presentation, allows someone as extroverted as myself to really hone my thinking.
“Business is more exciting than any game.”
Kitty O’Neill Collins
I believe that too many technically oriented entrepreneurs neglect the business model and relationship aspects a making a start-up successful. In particular software engineers become accustomed to the total control of their environment, an expectation that does not hold for activities that involve negotiation and persuasion such as sales, marketing, and business development. Activities that are vital to business success.
“You learn something every day, unless you’re careful.”
Tom Van Vleck
Vleck has a great website, I thought this gem was pithy restatement of Fred Brooks’ observation that “Good judgment comes from experience…experience comes from bad judgment.”
“When will you know you have enough, and what will you do then?”
Barbara DeAngelis
I am suspicious of entrepreneurs who are only motivated by money. I am not against wealth, but the Irish proverb “there are no pockets in shrouds” is a gentle reminder of the need to base your life on higher purposes than accumulation and consumption.
“Getting an idea should be like sitting down on a pin. It should make you jump up and do something.”
E. L. Simpson
Imagination is necessary but not sufficient for successful entrepreneurship.
“All we have is our time. How we spend our time is our priorities, our strategy. Your calendar knows what you really care about.”
Tom Peters
Especially for bootstrappers, we’ve come to appreciate that how you spend your time is much more important that how you spend your funds.
“More important than talent, strength, or knowledge is the ability to laugh at yourself and enjoy the pursuit of your dreams.”
Amy Grant
I think I get better at tasks where I enjoy the deliberate practice that improves my skill and I am able to maintain a sense of humor about my shortcomings. This is not always that case at three in the morning when I wonder why I left the security of a big company, but I think that security is an illusion and no matter what course of action you embark on you can have second thoughts. I have been at this latest venture for five years and continue to make new mistakes, so I am not in a rut.
“The difference between one man and another is not mere ability, it is energy.”
Thomas Arnold
Especially the energy to continue to experiment until you persevere.
July 27th, 2008
Getting More Customers (a Do-It-Yourself marketing and self-promotion workshop) leads SKMurphy’s fall workshop schedule. SKMurphy workshop combine lecture, written exercises, and interaction with a roomful of entrepreneurs. We guide you through your one-page plan and provide time dedicated to your business. You leave with a one-page action plan that’s based on sound principles, reflection, and review and feedback both from us and peers..
- Thursday August 21, 2008 8:15-1:00pm Getting More Customers Sunnyvale CA
- Saturday Sept 13, 2008 8:15-1:00pm Great Demo San Jose CA
- Wednesday Sept 24, 2008 11:30-1:30pm Financial Modeling for Start-Ups Sunnyvale CA
- Tuesday October 14, 2008 8:15-1:00pm Engineering Your Sales Process Redwood Shores CA
- Dec 2008 Idea to Revenue (TBA)
This workshop has consistently enjoyed very positive feedback and the last couple have sold out, so register early.
July 23rd, 2008
I researched an opinion piece for SCDSource about three weeks ago that is up on the site today at “How Cadence’s Mentor buy would impact EDA startups.” I start from the following premise:
I believe that the merger will be consummated, but that Cadence will not remain as one of the top three players in the industry within two to four years. I have three reasons:
- EDA is an R&D intensive business and it will be hard to retain talent in a hostile takeover. Moreover, there is considerable overlap in a number of product areas, which means that many Cadence employees will also be concerned for their continued employment, injecting uncertainty and slowing work on both sides of the merged company.
- Cadence is taking on significant debt and will have to focus on near term revenue at a time when design methodologies, development practices, and computing paradigms are all undergoing significant shifts. Their ability to nurture the new products they will need in two to four years will be limited.
- New customers are coming into the market as electronic systems incorporate more software at all levels of integration. Cadence’s ability to market and sell beyond the hardware engineering groups, and to invest ahead of revenue from relevant software teams, will be limited.
By coincidence today was the Cadence Q2 earnings call, available at http://biz.yahoo.com/cc/7/94067.html (and transcript here: http://seekingalpha.com/article/86645-cadence-design-systems-inc-q2-2008-earnings-call-transcript?source=yahoo&page=-1) for the next week and then on the Cadence site. They have revised revenue downward for the year from $1.5 Billion to $1.12 Billion, with minimal profitability. One thing I had overlooked in the earlier analysis was that they have spent about $500 million buying back their own stock from the middle of last year through March of this year: stock that is worth perhaps 35-50% less now, and money that might have been used to offset the $1.1 Billion in borrowing they need to consummate the merger with Mentor.
As of today’s call they were still full speed ahead on merger plans, as of July 11 they have acquired 4.7 million share of Mentor (about 4.3% of the outstanding shares). With that possibility still very real, I want to highlight two key strategies that I also covered in the article:
- Think longer term. Because Cadence/Mentor will be focused even more ruthlessly on near term revenue, now is the time to focus on long term opportunities and relationships.
- Focus on revenue opportunities where turmoil at Cadence/Mentor will cloud the future of many products, and slow if not inhibit a competitive response until they determine who is in charge. You will more likely be able to snatch emerging technology areas where revenue opportunities are smaller from a Cadence/Mentor perspective but still very attractive for a startup.
Postscript Aug 1: Seeking Alpha has the Cadence quarterly earnings calls transcripts available for Q4/2005 onward here: http://seekingalpha.com/symbol/cdns/transcripts
July 22nd, 2008
I just added Cadence to the list of companies with blogs on my May 28 post “Bloggers Covering Design Automation.” I didn’t see any announcement but they appear to have re-designed their website in the last three or four weeks and now highlight a community of bloggers on their home page.
My simple projection is that within three years every EDA company, large or small, will have at least one blog, and EDA consulting firms of all sizes will add a blog to their website. So that says we are on track to grow from 70 to over 500. I base this in part on the speed on adoption of the web by EDA firms and what’s already happened for web startups and many other emerging technology spaces: entrepreneurs consider a blog a core component of their corporate identity.
Making sense of 500 feeds will be no easier than surfing across 500 television channels to find something new and worth reading. I mentioned David Lin’s experimental Netvibes page in my “Primer on Blogs for EDA Start-Ups” and it certainly represents a good start. But I think an opportunity exists for community lens approach similar to what Hacker News provides web entrepreneurs (which is different in some important but subtle ways from digg and reddit that allow it to avoid the death of the lowest common denominator topics migrating to the home page). Other models are certainly viable as well, based on forums, wikis, and new forms both emerging and yet to be invented.
Paul Saffo’s 1994 Wired article “It’s the Context Stupid” (also available on www.saffo.com/essays/contextstupid.php) makes the point that the value is as much in providing context as the raw content.
“It’s the content, stupid.” This catchy apothegm [is] now the mantra of an infant new media industry. […] As compelling as this phrase may be, it is also dead wrong. It is not content but context that will matter most a decade or so from now. The scarce resource will not be stuff, but point of view.
[…]
The future belongs to neither the conduit or content players, but those who control the filtering, searching, and sense-making tools we will rely on to navigate through the expanses of cyberspace.
One example of a hybrid model of journalism is what John Byler is doing at Chip Design magazine in adding 8 blogs to complement his print publication. I was particularly impressed by a recent post by Grant Martin on “Leibson’s Law in Action? Cadence returns to ESL with new synthesis tool” because he did something that is natural for a blogger and highly unusual for an article in an on-line paper or magazine: he links to whoever has the best information on the topic, even it’s a competitor to Chip Design. It’s not only a very useful summary that places several recent ESL announcements in context, but Martin links to the source material on-line, regardless of where it came from: EE Times, SCDSource, EDN, and Chip Design Mag. And he has comments from a number of key players ESL.
I was talking to a well respected EDA PR professional recently who was waiting for the EDA blogging ecosystem to sort itself out and pick a dozen “A” blogs so that it would resemble the good old days of print (and EDA PR could “return to normal”). I said I didn’t think that would happen because blogging uses links for context in a way that print didn’t (and can’t). On any given topic there may only be a dozen well respected bloggers, but there would be a lot of topics with different sets for each. It’s different when you have knowledgeable practitioners writing directly on the web.
I believe Grant Martin’s post is a harbinger for a very different kind of “sense-making mechanism” than both traditional EDA print journalism and the press release aggregation model that’s practiced on a number of websites. Not necessarily better (or worse) but different.
We have time to get ready, and since we are all steering we may end up somewhere else. But I think 500 blogs (plus or minus 250) is likely by 2011 because it they don’t depend upon a business model transition: blogs are like weeds, they don’t require cultivation to thrive. I think they create a substrate that complements and potentially displaces the press release with the RSS/Atom feed as the quantum unit of information distribution for (social) media.
July 21st, 2008
I spent most of Saturday July 19 at “Cloud Computing-the New Face of Computing-Promises and Challenges” which I have already blogged about on last Thursday. There was a large turnout for a Saturday morning in July: Cubberley holds about 400 and it was between half and three-quarters full. There were a number of excellent presentations from practitioners in both industry, commercial research labs, and academia. Many of them are now up on http://www.ewh.ieee.org/r6/scv/computer/
The slides from the keynote by Dr. Hamid Pirahesh, an IBM Fellow in their Almaden Research Center, on the “Impact of Cloud Computing on Emerging Software System Architecture and Solutions” are not up yet, which is a shame because it was an excellent overview of cloud computing. One thought to take away: Dr. Pirahesh postulated breakpoints in computing architectures and methodologies at 20, 300, 2,000 and 10,000 processors. Certainly the first, and possibly the second are amenable to multi-core techniques, but the last two are going to rely manycore approaches.
This isn’t Web 3.0, this is something else. Mano Marks, the Google Developer Advocate who talked about the Google App engine made an offhand remark that brought me up short: “ten years ago was the late 90’s.” We’ve moved beyond the web boom (and bust) and fiber build out and are getting a glimpse of a new kind of application that I believe will be as transformational as the initial rollout of the Web was. But it will be used to solve different problems.
Several of the speakers talked about using cloud computing models for processing log files of all sorts, in particular web site clickstream logs and system error logs. The Hadoop project is one example of a ground up re-examination of how to leverage a low cost computing infrastructure composed of fast but unreliable (because they are low cost) processing units. Ashish Thusoo’s presentation on how Facebook is using it to track user activity recorded in web logs is a representative example of this new approach to computing.
My challenge is moving beyond my mental map of existing computing paradigms. I blogged last August about Robert Pirsig’s afterword to the 10th anniversary edition of Zen and the Art of Motorcycle Maintenance where he describes the Ancient Greek perception of time. Time carries you on the back of an oxcart, facing the road you have already travelled:
They saw the future as something that came upon them from behind their backs with the past receding away before their eyes. When you think about it, that’s a more accurate metaphor than our present one. Who really can face the future? All you can do is project from the past, even when the past shows that such projections are often wrong. And who really can forget the past? What else is there to know?
It’s difficult navigating by an outdated mental map of a landscape that is undergoing radical transformation. It’s hard to believe but Salesforce is also a decade old. I was disappointed that Jim Rivera, VP of Product Management at Salesforce.com, misjudged his audience and spent an unfortunate 30 minutes giving a sales pitch that stood in contrast to the rest of the speakers on Saturday. He managed to mention “multi-tenant hosting” so many times that I thought I had taken a wrong turn after the coffee break and ended up at a different event. It’s unfortunate when a company misses an opportunity to engage a technical audience as effectively as the other speakers did.
If you missed the event the presentations are quite detailed and worth a look.
July 18th, 2008
We have our fall workshop schedule up:
Thursday August 21, 2008 8:15-1:00pm Getting More Customers
Description: We will cover a variety of proven marketing techniques for growing your business: attendees will select two or three that fit their style and develop a plan to implement them in their business in the next 90 days. As a part of your workshop registration, we will also follow up via e-mail and brief phone calls at two weeks, four weeks, 8 weeks, and 13 weeks to help you track your progress. You will leave with a one page action plan, a workbook, and 90 days of access to a private workspace with the workshop materials to enable you to execute one or two marketing strategies to bring your business more customers.
Saturday Sept 13, 2008 8:15-1:00pm Great Demo
Description: This is an interactive workshop with Peter Cohan geared especially for startup entrepreneur. Bring a copy of your demo and be prepared to present it. As a part of your workshop registration, we will also follow up via e-mail and brief phone calls to track your progress.
Tuesday October 14, 2008 8:15-1:00pm Engineering Your Sales Process
Description: Building a repeatable sales process is key to a sustainable business, understanding how to scale your sales process is key to revenue growth. Learn how to synchronize your sales process with your customer buying process. We will look at ways to shorten your sales cycle. This highly interactive session allows you to analyze and debug your sales cycle.
December “Idea to Revenue” still finalizing date/location
If you would like to be notified of upcoming workshops you can sign up here. If these times/locations don’t work for you but you are interested in attending please give us feedback to help us picking better times/locations for workshops.
July 17th, 2008
Consulting is a referral business. Four things you can do today to build referrals:
- Make a list of at least 30 people you have had shared success with. Go back at least 15 years or college/university. Taking the time to go back to your first job is worth it.
- Contact those people and tell them
- What you have been up to
- Here’s what I am looking for, please refer people to if they are looking for my services
- Please let me know what you have been up to and call if there is anything I can do to help.
- Keep their needs in mind and pro-actively notify them if you run across articles, people, events, or opportunities that are relevant or likely to be useful.
- Write 2 testimonials for people in the shared success category in LinkedIn
July 17th, 2008
I have become convinced that “software above the level of the device” whether it’s called Grid, Farm, Cluster, Multi-Core, ManyCore, or Cloud Computing represents a significant opportunity for application development by start-ups. The IEEE Stanford (Student Chapter), IEEE Computer Society (Santa Clara Valley Chapter), and NATEA are jointly sponsoring an event this Saturday that offers an excellent set of speakers on various aspects of cloud computing. The announcement is here http://www.ewh.ieee.org/r6/scv/computer/ it’s 8:30 to 3:45 at Cubberley Auditorium on the Stanford Campus.
Speakers include:
- Hamid Pirahesh, IBM Almaden Research, “Impact of Cloud Computing on Software System Architecture”
- Jimmy Lin, University of Maryland at College Park, “Scalable Text Processing with MapReduce”
- Jim Rivera, Salesforce.com, “Platform as a Service: Changing the Economics of Innovation”
- Joydeep Sen Sarma and Ashish Thusoo, Facebook, “Hive: Datawarehousing and Analytics on Hadoop”
- Hairong Kuang, Yahoo, “Take an internal look at Hadoop”
- Mano Marks, Google, “App Engine: Building a Scalable Web Application on Google’s infrastructure“
- Kevin Beyer, IBM Almaden Research,“Jaql: Querying JSON data on Hadoop”
- Mihai Budiu, Microsoft Research, “DryadLINQ – a language for data-parallel computation on clusters”
- Jinesh Varia, Evangelist, Amazon Web Services, “Cloud Architectures”
This looks to be a very good overview on various aspects of Cloud Computing.
It’s only $65 ($60 for IEEE and NATEA members, $30 for students) sign-up at the NATEA registration page.
July 16th, 2008
What is an advisory board?
An advisory board is a formal or informal group of advisers who give advise, contacts, and feedback. Unlike the board of directors they do not have a fiduciary responsibility but are critical for start-ups. Also see Forming an advisory board.
How can they help me?
There are three broad ways that an advisory board can help you. The first is domain or technology knowledge. Secondly, industry knowledge advisors will understand the real ins and outs of how your market works and what the market needs are, they may also be able to open doors. Domain or technology folks maybe able to open door to potential partners and suppliers, but market knowledge folks maybe able to bring in the prospects or at least have you talk to people that prevent strategic misfires as you go into the market. And thirdly, if neither of the other two groups have been in a start-up before, it’s good to have at least one person either on your team or as an adviser who has rapid growth. So, if you are fortunate and you start to really takeoff, you have some somebody that helps you make decisions in a timely way and understands what to look out for and how to scale the company.
What do I give them?
Normally advisors which add credibility to your firm in a variety of ways, will trade expertise or services for equity.You typically are going to give them founders’ equity stock which is coming out of your pocket. It is frankly a negotiation, how much time they give you or how much equity they get, and that brings anywhere from 0.1% or 1%, in some very rare cases perhaps 2%, that’s the negotiation. Usually there is some kind of vesting schedule maybe on a 2-year or 3-year schedule with a 3 month or 6 month cliff. Because you want to make sure that things are working out, you don’t have a values’ conflict or getting value, you normally have a 3 or 6 month cliff. If things do not work out, then they walk away and they don’t get anything. You can consider those early few months a probationary period that allows you to make a final mutual assessment.
How do I use them?
You want to actually bring them together as appropriate to do at least a quarterly meeting, might be a phone call, might be a nice dinner. This time you can brief them on your business, dry run your demo, and get feedback on your plans. you would like to be to able get some introductions. They are a great source for contacts for employees, partners, prospects, or investment partners.
What do I ask of them?
- You are looking typically for 2 hours a month, 4 hours a quarter. Schedule either monthly, or twice a quarter, once a quarter formal meeting where you present a briefing for them. These become a proxy for your real board meetings until you have a real board of directors, this is a board of advisors.
- You want to be able to call them when urgent things come up. They are busy people, so you only want call for urgent things, but when urgent things come up, you want to be able to reach out to them.
- You want to negotiate use their name. You would like to announce in a press release that they have joined you, would like to be able to use their name on your website, you would like to be able to have folks call them to get their opinion of you, it might be investors or it might be a major prospect you are talking to.
Normally about two-thirds of that value is the advice they give you and one-third is the doors they open and the value that their reputation sheds on your company.
VentureHacks has three relevant posts that are more focused on VC related issues than bootstrapping but still worth reviewing:
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