Archive for January, 2009

Quotes for Entrepreneurs – January 2009

Written by Sean Murphy. Posted in Quotes, skmurphy

You can follow @skmurphy to get these hot off the mojo wire or wait until the end of the month when they are collected on the blog. Enter your E-mail if you would like Feedburner to deliver new blog posts to your inbox.

+ + +

“Access to information doesn’t make you well-informed any more than a library card makes you well-read.”
Bernard Robertson

This seems related to

“Knowledge is of two kinds. We know a subject ourselves, or we know where we can find information on it.”
Samuel Johnson

But I think it’s a more appropriate warning for the Age of Google we find ourselves in. I came across this originally in Mark Zimmerman’s Zhurnaly entry “Superficial Research” which also points to “If a Tree Doesn’t Fall on the Internet, Does it Exist?

Here is the deeper issue for entrepreneurs: early markets aren’t directly discoverable through Google.

+ + +

“I hope that all of you act on this. If you don’t, fewer of you will be listening to someone else next year at this time.” Irwin Federman

I like this approach of the CEO putting himself “in the same box” with his employees. It was at the core of two blog posts:

+ + +

“The Industrial Revolution did not occur when we built steam engines, but when we used steam engines to build steam engines.”
Phillip Armour

I always thought the computing revolution was the first to build on itself but clearly steam, electricity, steel, mass production, and others had the same effect.

+ + +

“The umpire’s mantra of quick to decide, slow to anger has served me well professionally for many years.”
Mike Coop

+ + +

“Never argue with a fool, onlookers may not be able to tell the difference.”
Mark Twain

Particularly good advice to bear in mind during a demo or a sales call.

+ + +

“The purpose of computing is insight, not numbers.”
Richard Hamming

Hamming’s lecture “You and Your Research” deserves a blog or two at some point.

+ + +

“Don’t confuse selling with installing. ”
Hal Stern

Strictly speaking this quote may predate Hal Stern. My source is Larry McVoy. This would be #6 on “5 Things to Remember When Selling a New Product

+ + +

“History doesn’t repeat itself, but it does rhyme.”
Mark Twain

+ + +

“Fairness is not an attitude. Fairness is a skill.”
Brit Hume

+ + +

“A nexialist is skilled in the science of linking the knowledge of one field of learning with that of other fields.”
A. E. Van Vogt

Context (full quote from Van Vogt’s “The Voyage of the Space Beagle“) is

“Nexialist: one skilled in the science of joining together in an orderly fashion the knowledge of one field of learning with that of other fields”

This quote inspired Ted Nelson from an early age.

+ + +

“Any technology distinguishable from magic is insufficiently advanced.”
Gehm’s Corollary to Clarke’s Third Law

Arthur C. Clarke’s Three Laws from his essay collection “Profiles of the Future

  1. When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
  2. The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
  3. Any sufficiently advanced technology is indistinguishable from magic.

Advanced technology is indistinguishable from a sufficiently rigged demo.”
Andy Finkel

+ + +

“A successful firm’s cash flow provides a good living for owners & employees and the profit necessary for continued growth.”
Norm Brodsky

+ + +

“I’m not afraid…I was born to do this.”
Joan of Arc

My pick for the opening quote of 2009. And an emotion I identify with as an entrepreneur.

Fewer of You Will Be Listening To Someone Else

Written by Sean Murphy. Posted in 2 Open for Business Stage, skmurphy

I worked at Monolithic Memories from 1984 until 1988, in 1985 Irwin Federman, who was CEO at the time announced that the company was informally banning meetings on Fridays. It seemed reasonable to me and I thought it would probably make us more productive. A few weeks later he announced that the company was going to four day work weeks as a way to prevent layoffs at a time when the semiconductor industry was in a serious recession. Forgive me if you’ve heard this story before, I recounted it in “Two CEO Speeches I still remember” in June of last year. I still remember his closing remarks after a low key talk encouraging us to work together and follow a short list of actions to help cut costs and improve our profitability.

“And I hope that you all act on this, because if you don’t, fewer of you will be listening to someone else next year at this time.”

I have been reflecting on the lack of four day work weeks and other creative responses to the recession. And how few CEO’s seem to be making sacrifices to keep their workers employed. For some background Peter Capelli’s Jan-5-2009 article “Alternatives to Layoffs” makes for useful reading, here are some key excerpts but read the whole thing:

The idea that there are alternative ways of handling the need to cut costs without laying off individual workers is actually a very old story. In fact, up until the mid-1980s, the idea that an employer would dismiss workers permanently — that they were not expected to come back after business picked up — was so rare that the Bureau of Labor Statistics did not even keep track of such cuts. [...]

It was in this period that more creative alternatives to layoffs flourished. The most prominent of these alternative approaches was wage cuts, often negotiated by unions under the guise of concessions to existing union contracts, but the goal was always to reduce permanent job losses.

The range of other alternatives was impressive — reduced hours of work (and pay), job sharing where the same job would be split into two part-time positions, cutting back on outsourced work and the use of vendors to make work for regular employees whose normal tasks were no longer needed, etc. [...]

The best example of a significant company that is pursuing real alternatives to layoffs is FedEx, where they are cutting wages to reduce costs. What is particularly important about the cuts at FedEx is that the cuts are even bigger for executives: 10 percent for executive pay, five percent for everyone else. (Fed Ex also announced for the first time that it will not be advertising in the Super Bowl, another very public effort to save money.)

Why are so few companies pursuing any alternatives to layoffs? Why has the interest in these alternatives declined so much over time? It isn’t because the alternatives don’t save money: A five-percent salary cut saves much more money than a five-percent layoff because there are no severance payments; the legal liability and associated costs are much less; and the savings come instantly without the agonizing administrative process of figuring out who has to go and getting them out in a dignified manner, etc.

Morale might actually improve through a collective effort to save jobs, certainly as opposed to the morale-killing effects of layoffs and, of course, the ability to ramp up when business improves is dramatically accelerated.

It comes down to how long you think this recession will last and what you want your startup to be known for.

I am not advocating holding on to poor performers: I have had to fire many people over the years as a manager, it’s never easy and it’s never pleasant. But having to lay people off is much much worse. When I look back on places where I enjoyed the work and learned the most, it was when times were tough but we got creative and persevered.

As entrepreneurs we have to hold ourselves accountable for keeping the our team intact now so that we are better prepared when the economy comes back. And remember these times as you start to hire again, because that’s when you will plant the seeds for future troubles if you are not careful.

Update Jan-29: Venture Hacks juxtaposes this quote from Barry Diller with their link to this post.

“The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”

Update Jan-30: I just read Ron Wilson’s “Why the Layoffs If We’re Still Profitable?” from Tue-Jan-27, he makes some interesting suggestions:

The most important thing is to understand your company’s cash-flow scenarios and its alternatives. [...] Sufficient bridge funding to keep cash flow above zero may be an insurmountable obstacle for a little fabless semi company, but a small risk for the huge system OEMs to whom the company is important. In fact from the system OEM’s point of view, ensuring survival for the supplier of a key component in a promising new product may be a very good short-term investment in their own cash flow. And in some cases, you can build a similar scenario for key suppliers: they may be richer, and have an interest in your survival much larger than the cost of ensuring it.

Now is the time for lateral thinking, not for reflexive conservatism. But lateral thinking means unprecedented sharing of information between engineering, financial, and corporate management. And it means resisting that reflex to pull back when the unknown yawns before us.

William Feather on “Dead Business”

Written by Sean Murphy. Posted in 2 Open for Business Stage, Books, skmurphy

Another excerpt from William Feather‘s “Business of Life

Dead Business

A neighboring grocery store went bankrupt, and a bookkeeper who was called in by the lawyers to help inventory the bankrupt stock says he never before realized the difference between a dead business and a going concern.

Here were cheese and vegetables and meat, he found, which would have been salable the next day if the store had kept open. Here were accounts with nearby customers which might have been paid by the next payday, but now would have to be turned over to a collection agency. Here were canned goods which could have gone to make up the weekday meals of a hundred families, but now would have to be sacrificed as “bankrupt stock.” No one who has not helped to salvage a disordered store and turn odds and ends into cash at a quick sale can realize how much it shrinks in value.

Every business accumulates a friendliness on the part of the customers which becomes part of its stock in trade. The habit of stopping at a certain store to buy, or the familiarity which leads one to ask for an advertised brand of anything, forms an asset as important as building and fixtures. It is this fact which enables companies about to issue stock for public sale to place a large value on their good will and to issue stock for its full amount. The money which has been invested in years of careful advertising builds up a fund of good will solid enough so that bankers lend money on it–when they lend money on anything.

My copy of “Thoughts on the Business of Life” is copyright 1949 with individual articles copyrighted between 1927 and 1949, so I can only limit the date of this article to between 1927 and 1949. It’s certainly still applicable today, and as applicable to knowledge businesses as it is to retail firms.

Entrepreneurs who are facing the challenges of closing a deal with their first few customers can be surprised how hard it is to get on prospect’s calendars and get them to return calls. Problems that will be an order of magnitude easier to manage once the prospects become customers. Credit relationships with suppliers, partners, and customers can also take a long time to establish and are equally valuable.

As you consider how to get through the recession of 2009 (or what I hope will be called the recession of 2009, instead of the recession of 2009-2010) Feather’s observations from perhaps 80 years ago are well worth bearing in mind. Find a way to continue to operate, even if in a reduced fashion, as a set of ongoing customer and supplier relationships have considerable value and act as a force multiplier on your other assets.

I close with two related quotes on reciprocal obligations from Margaret Atwood’s essay “A Matter of Life and Debt

Debt–who owes what to whom, or to what, and how that debt gets paid–is a subject much larger than money. It has to do with our basic sense of fairness, a sense that is embedded in all of our exchanges with our fellow human beings.

We are social creatures who must interact for mutual benefit, and–the negative version–who harbor grudges when we feel we’ve been treated unfairly. Without a sense of fairness and also a level of trust, without a system of reciprocal altruism and tit-for-tat–one good turn deserves another, and so does one bad turn–no one would ever lend anything, as there would be no expectation of being paid back. And people would lie, cheat and steal with abandon, as there would be no punishments for such behavior.

Here are some earlier blog posts that include excerpts from William Feather’s “The Business of Life.”

Three Most Popular Posts So Far

Written by Sean Murphy. Posted in Blogging, skmurphy

We have a little over 400 posts up on the blog since we started with “Welcome Entrepreneurs” on October 1, 2006. I thought I would offer some guidance to newer readers on which have been the most popular. I have looked at popularity through three lenses: feed clickthroughs, unique page views, and total page views.

Based on feed clickthroughs (in theory selected by regular readers, perhaps influenced by the title):

  1. Nov-26-2007: Planning Will Save a Software Startup Money
  2. Aug-25-2008: Three Tests for Negotiating a Software Deal
  3. Sep-10-2008: Good Blogging is Good Linking

Based on Unique Page Views (in theory the most popular among all readers)

  1. Dec-4-2008 We Don’t Encourage Individuals to Form a Startup
  2. May-28-2008 Bloggers Covering Electronic Design Automation
  3. Oct-4-2007 Benefits of SaaS Model

And one more based on total Page Views (some folks must have read this more than once).

Backtype is a Useful Tool for Bloggers

Written by Sean Murphy. Posted in Blogging, skmurphy

One of the things I like to do is re-work and improve comments I have left in forums or on other blogs into posts on this blog. I have been using Backtype for a few weeks now and have found it useful for keeping track of other places I have commented. You need to register and claim comments under various aliases that comment systems require you to use (e.g. my skmurphy e-mail, my Gmail account, Hacker News ID, etc..).

For a list of my recovered comments see http://www.backtype.com/skmurphy

Update Sat-Apr-24-2010: Useful while it lasted, it looks like Backtype has changed direction to focus on real time search and is no longer archiving comments older than three months. If you are aware of a tool that offers Backtype’s old comment tracking and archive capability I am happy to pay $10-25/month for this capability, depending upon the functionality set. I offered to pay Backtype $100-$200 a year to preserve this functionality but there are apparently too few folks like myself.

Douglas Partner’s LinkedIn Workshop

Written by Theresa Shafer. Posted in Events

I attended a great Douglas Partner’s workshop this week. I have always been a believer in the power of a good LinkedIn profile.  Our experience is that your website and your LinkedIn profile will be used for reference checks by people you meet. I use LinkedIn as a combination on-line bio and self-updating Rolodex.

In Silicon Valley I think that your LinkedIn profile is as important as your website to make the right impression on potential clients, partners, and future team members. A great LinkedIn profile can increase your visibility.

The workshop was chock full of tips: in addition to good feedback from the instructor and other attendees, I appreciated the time to work on my profile. Here are three improvements I made::

  1. I changed my “headline” from my current title (default) to a catchy tag line: “Customer Development for Software Startups Focusing on Early Customer and Early Revenue”
  2. With input from other attendees, I strengthened my experience section. I really liked MB Dean’s Problem, Action, Result format and am working on using it throughout my experience summary. I came up with the following three sentence overview: “I offer business development services for software entrepreneurs. I give practical advice that cuts through the bull to help you build a business. I am a hardware engineer and a mom, so I like action lists with a do-it/done methodology.”
  3. I added the SKMurphy blog to my profile.

The workshop is aimed at people looking for a job, but it applies to entrepreneurs looking for consulting work and customers. It is a great hands-on workshop. Check the event schedule on Douglas Partners website to see where others are scheduled.

Protecting Your Invention – Topic for Upcoming Breakfast

Written by Theresa Shafer. Posted in Events

Bootstrappers Breakfast(TM) announces Pete Tormey “the Patent Guy” (http://www.actionpatents.com) as invited guest to discuss when you need a patent and tips for getting one. Patents provide an important competitive advantage, and young companies need to develop an understanding of patents to maintain this competitive advantage.Bootstrappers Breakfast will meet at Omega Restaurant in Milpitas, Feb. 13, 2009 at 7:30-9am. Mr. Tormey will give a short 5-10 introduction to set the table for a roundtable discussion on protecting inventions. Bootstrappers Breakfast brings together leading entrepreneurs who eat problems for breakfast and are serious about growing their business.

“Pete Tormey is a registered patent agent who specializes in providing patents for Software, Electronics, Life Science Instrumentation and Business Methods. Action Patents is a great website with a lot of practical advice. He has a number of excellent podcasts — take a listen to Patent Basics for a great example — where he speaks in very clear and practical language about patent related legal and invention issues,” said Sean Murphy, CEO of SKMurphy.

About Action Patents

Action Patents provides fast affordable patent protection to young companies and entrepreneurs. As an experienced entrepreneur, Mr. Tormey is rare among patent agents and attorneys because he provides solid financial analysis on the value of patents before recommending patent protection. Mr. Tormey has an MBA in Marketing from St. Mary’s College in California, and a BS Electronic Engineering from San Francisco State University. He practices exclusively before the US Patent Office.

About Bootstrappers Breakfasts

Bootstrappers Breakfasts are for founders of early-stage startups. It is a chance to compare notes on operational, development, and business issues with peers. These breakfasts were designed for entrepreneurs to share ideas and leverage thoughts with other folks who are serious about growing their business. With a promise of serious conversations with other entrepreneurs who eat problems for breakfast, they meet in the back room at several Silicon Valley restaurants. The first breakfast was held at Coco’s in the heart of Silicon Valley in 2005. Since that time, they have grown to multiple locations throughout the Bay Area. The newest one is now at Red Rock Coffee in Mountain View. For the full schedule of breakfasts, please visit http://www.bootstrappersbreakfast.com

Marketing Consultants Forum at CNSV

Written by Sean Murphy. Posted in skmurphy

I took part in the Marketing Consultant’s forum at CNSV tonight as a panelist, joining Ahmet Alpdemir, Brian Berg, and Peter Salmon. The slides are on the CNSV site at www.californiaconsultants.org/download.cfm/attachment/CNSV-0901-Berg-Murphy-Alpdemir-Salmon.zip

My focus was on “Cultivating Communities to Get More Customers.” I addressed joining a community with the objective of becoming a member in good standing. Broadly there are two kinds of communities for a consultant: prospects and peers (who are both potential partners and competitors). In either case you want to learn and follow  unwritten rules and local customs, finding ways to contribute to the core purpose of the community.

In a peer community you want to think about joining and fostering a “stag hunt.” Here is a non-technical definition from the Game Theory Dictionary

The French philosopher, Jean Jacques Rousseau, presented the following situation. Two hunters can either jointly hunt a stag (an adult deer and rather large meal) or individually hunt a rabbit (tasty, but substantially less filling). Hunting stags is quite challenging and requires mutual cooperation. If either hunts a stag alone, the chance of success is minimal. Hunting stags is most beneficial for society but requires a lot of trust among its members.

What this means as a practical matter is that you are looking for other consultants who will be reliable and have complementary expertise. This will allow you to take on larger projects. You may also carry other consultant’s business cards so that you can refer work to them that’s appropriate if it’s not a match with your skills and expertise.

In a community that’s primarily prospects, you have to create more value than you harvest or you will be viewed as a parasite instead of a contributor. The challenge is to err on the side of caution in marketing your services. A side benefit, if you listen carefully, is to learn about emerging topics and issues before they become common knowledge.

It was a very well attended meeting. Brian Berg noted the organization has doubled in size in the last year and the downturn/recession has seen a lot of first time consultants join. There were a number of questions from folks who were considering consulting (or possibly anticipating an involuntary career change to consultant) as well as those who were new to consulting in the last year or so.

The challenge with learning how to market yourself as a consultant is that it’s typically a mid-career change that your earlier work as an engineer doesn’t prepare you well for. The technical challenges of consulting are for the most part straightforward compared to the new challenges in marketing oneself in a way that is authentic and effective. I think all of us on the panel were sensitive to those issues.

I would also encourage newer technical consultants to attend the CNSV marketing meetings that occur before the main meeting. Very experienced consultants like Carl Angotti and Walt Maclay donate their time to share a number of effective techniques for marketing a technical practice. They include a how to section where attendees can critique each other’s work (e.g. Craigslist profiles) and walk you through the process of posting on-line in appropriate forums.

Update Jan-24: I see that Mike Coop has also blogged about the meeting in “Recap: IEEE CNSV Meeting.

Drucker on Profit and Business Purpose

Written by Sean Murphy. Posted in 1 Idea Stage, Books, Quotes, skmurphy

After thinking some more about yesterday’s post on entrepreneurial motivation I thought I would re-read some Peter Drucker, his clarity and prescience continue to impress me. All of these quotes are from Chapter 6 “What is a Business” in “Management: Tasks, Responsibilities, and Practices

There is only one definition of business purpose: to create a customer.

It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods.

The typical engineering definition of quality is something that is hard to do, is complicated, and costs a lot of money! But that isn’t quality; it’s incompetence.

What the customer thinks he is buying, what he considers value, is decisive–it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him.

Profit is not the explanation, cause, or rationale of business behavior and business decisions, but rather the test of their validity. If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interest in making profits.

A company can make a social contribution only if it is highly profitable.

Managers must convert society’s needs into opportunities for profitable business. That, too, is a definition of innovation.

Entrepreneurial Motivation

Written by Sean Murphy. Posted in 4 Finding your Niche, Quotes, skmurphy

Tim O’Reilly had a thought provoking post “Work on Stuff that Matters” on January 11. He starts with a clarification of what he means by “the social value of business done right”

First off, though, I want to make clear that “work on stuff that matters” does not mean focusing on non-profit work, “causes, or any other form of “do-goodism.” Non-profit projects often do matter a great deal, and people with tech skills can make important contributions, but it’s essential to get beyond that narrow box. I’m a strong believer in the social value of business done right. We need to build an economy in which the important things are paid for in self-sustaining ways rather than as charities to be funded out of the goodness of our hearts.

and then offers three guidelines

1. Work on Something That Matters to You More Than Money.
The entrepreneurs who first made the market often had much less expectation of easy success, and were instead wrestling, like Jacob with the angel, with a hard problem that they thought they could solve, or at the very least make a dent on. [...] The most successful companies treat success as a byproduct of achieving their real goal, which is always something bigger and more important than they are.

By picking the right mission you also enable others to collaborate more effectively with you. Michael Schrage, who has studied collaboration in a variety of settings, has said that one clear rule of thumb has emerged. If you want talented people to collaborate, you have to pick a problem that they care about, and it is so hard that they realize they need to work together to make meaningful progress (for more on this see Shared Minds, No More Teams, or Serious Play)

2. Create More Value Than You Capture.
Most businesses do in fact create value for their community and their customers as well as themselves, and the most successful businesses do so in part by creating a self-reinforcing value loop with their customers.[...] How many people do you employ in fulfilling jobs? How many customers use your products to make their own living?

I think this good advice but very challenging to master. It’s easy to be clear on your own needs, harder to see how to co-evolve with a system of suppliers, partners, and customers in a community. Peter Drucker called “the worship of premium pricing” as first deadly sin of business: “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover.  Maximum profit is thus obtained by the profit margin that yields the largest total profit flow, and that is usually the profit margin that produces optimum market standing.”

3. Take the Long View
It’s hard to see beyond the “small here” and the “short now,” especially if you live in a favored place and time.

Peter Drucker has observed that the second deadly sin of business is “mispricing a new product by charging ‘what the market will bear.’ This, too, creates risk-free opportunity for the competition.” Beyond any entrepreneur’s concerns for successfully establishing their company in a market are the obligations that we all have to our family and our community.

On January 13, Po Bronson’s “What Should I Do With My Life, Now?” was posted on the Fast Company website. He offers a perspective that acknowledges the need to work on stuff that matters but also admits of more practical motivations. He tells a version of the story of the three brick layers (I first heard it as three stone masons) with a different emphasis.

There’s an old parable about the three bricklayers. They’re laying bricks all morning, and when they finally get a break, one guy asks the other two, “Why are you doing this job?”

The first guy says, “I’m doing it for the wages.”

The second guy says, “I’m doing it for my wife and kids.”

The third guy looks up at what they’ve been constructing all morning, which is a church — a place to get in touch with one’s highest self — and says, “I’m helping to build a cathedral.”

Now, most people hear this parable, and they think the third guy has the right answer, and the first two guys have the wrong answer. That’s the simplistic lesson that most people jump to, led their by their mythic notions of calling.

But that is not the lesson of the parable. In fact, all three men have a sense of purpose — have a “cathedral,” if you will. The third guy has the Cathedral of Spirituality. Good for him. But the second guy has his too. The Cathedral of Family. And the third guy has the Cathedral of Self-sufficiency. Those are all good purposes. Those are all right answers.

The real lesson of the parable is, notice what no man answered. Not one of the three said, “I just love laying bricks.” Doing something for the sheer love of it is not what real people mean when they say their work provides a sense of purpose. That is not how the construct a sense of meaning and rightness. Looking for it, in that form, is incredibly illusory.

I think many entrepreneurs are motivated as much by self-sufficiency, either at a personal or family level, as a higher calling. I think you elevate your goals, similar to Maslow’s “Hierarchy of Needs,” as more basic motivations are satisfied. Bronson seems to be rejecting Joseph Campbell’s “follow your bliss” but I think what he is really saying is that  pure doing is not enough–whether it’s writing code, writing books, sculpting, painting, etc.. I have to balance my obligations to myself, my family, and my community. This is at the heart of Tim O’Reilly’s three rules as well.

“If you do not have the capacity for happiness with a little money, great wealth will not bring it to you.” William Feather

Life is too short to work at a job you hate, but everyone has to do something someone else is willing to pay them for.” Sid Emmert

Update Jan-18: Scott Shane, author of  Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By has an inaugural blog post on the US News website, it’s “Why Do People Become Entrepreneurs

Researchers have identified myriad reasons why people start their own businesses, but across all of the surveys, interviews, and other efforts to understand entrepreneurial motivation, one reason stands out above all others: People start businesses because they don’t want to work for someone else.

EDAC CEO Forecast for 2009

Written by Sean Murphy. Posted in EDA, Events, skmurphy

I attended the EDAC 2009 CEO forecast tonight and what follows are some quick impressions.

Rick Carlson's picture from Verific website I got there just as the event started and the Lincoln High School String Quartet was playing one of the Brandenburg concertos, and playing it very well. Room J at the San Jose convention center has an 18′  high ceiling which gave the music an ethereal quality. I ran into Rick Carlson, who was one of the founders of EDAC–Dave Millman being his partner in crime, you would think you could learn that from the EDAC website–and someone I have done a lot of business with when I was on the “buy side” at various semiconductor and systems houses. I said to Rick, “Oh no, I’ve been in a fatal car crash and you must be one of the five people I meet in EDA Heaven.” It had been too long since I had seen him last and I always appreciate his informed perspective on the industry.


Update March 3: Slides, audio, and video are available at http://www.edac.org/events09/ceoForecast/ceoSlides.jsp

Looking Down the Money Trail at CSPA

Written by Sean Murphy. Posted in Events, skmurphy

I attended CSPA’s “Looking Down the Money Trail” tonight at Pilsbury in Palo Alto. Pilsbury hosts a number of entrepreneur oriented events and tonight their room was overflowing. One reason was that the event had a stellar panel:

Steve Bengston led off with are recap of the Q3/2008 PWC Moneytree results, so this was a retrospective in terms of the data that was presented.  The top six most active firms (by deal count) in Q3 were Draper Fisher Jurvetson 26, Intel Capital 20, New Enterprise Associates 19, Kleiner Perkins 18, Sequoia 17, and U.S. Venture Partners 17. Silicon Valley investments totaled 2.77 billion dollars in Q3, down about 3% from Q3/07′s 2.88 billion and about 10% from Q2/08′s 3.11 billion. Silicon Valley accounted for about 40% of the total US VC investment across all three time periods.

Key comments from the panel caught my attention (all are paraphrased from my notes):

  • John Steuart: healthcare consumes a significant and growing fraction of US GDP, we Claremont believe that enormous opportunities exist to build multiple large firms bringing Moore’s Law to medicine.
  • Ashmeet Sudra, in response to a question about the role of government helping innovation and entrepreneurship: California’s ban on non-competes (except in the case of the sale of a business) has done more to take the shackles off of entrepreneurs than any other government action.
  • Prashant Shah, in response to role of government question: government can make the long term investment in basic research that VC’s cannot. Basic research is the foundation for new technology entrepreneurship.
  • Gus Tai (very paraphrased):  I am interested in software & SaaS offerings that can be distributed at no charge or low cost to individuals but once it reaches a critical mass of five users in the enterprise can be priced at value. He cited Zone Labs as an example: they offered a free personal firewall that enterprises had to pay for, when they discovered five at the same IP address they contacted them and asked them to convert from free to paid.

Some consensus answers (echoed by more than one panel member).

  • No B rounds right now (either they are re-priced / down rounds as a second A or there is clearly enough traction so that it can be priced as a C round).
  • The credit crisis has caused some Limited Partners to pull back or withdraw from some commitments, making it much harder to close new funds and forcing some existing funds to re-open or add annexes.
  • What’s hot? Anything with a “hard ROI” (clear cost savings attached) or attacking an existing cost stream that has  paying customers.
  • K12 education is another area that government plays a critical role in laying the foundation for innovation and entrepreneurship.
  • The first 25-50 million in revenue can proceed from a very narrow observation of what can drive revenue in a niche. Domain expertise and intimacy with a problem make all of the difference early on, later you need experience building a large company. There are two points in the Gartner hype cycle when that narrow observation has the most value (because of the highest risk of being wrong) before the technology trigger brings the market into existence and in the “trough of disillusionment when no one is sure when the real market will materialize.

GartnerHypeCycle
Note: Gartner Hype Cycle image by Jeremy Kemp, used
under Creative Commons Attribution Share Alike License
 

A Good LinkedIn Profile Is Important

Written by Sean Murphy. Posted in Events, skmurphy

One of the things that we always review with founders is their LinkedIn profile. It’s important for a several reasons:

  1. Prospects will check it either before they contact you or as they are doing more background checking on your company.
  2. The testimonials that are posted there have authenticated authorship and should also be posted on your website.
  3. It’s a convenient mechanism for reconnecting with old co-workers and other folks you have had prior shared success with.

MB Deans is offering a good three part workshop on this Thursday January 15 at the Courtyard Marriott in Los Altos (4320 El Camino Real, Los Altos, CA 94022) for job seekers that will also be useful for bootstrappers:

  1. LinkedIn and Beyond: Building Your Job Hunt Strategy with LinkedIn and Facebook
  2. Blockbuster Profiles: Write One That Will Have Recruiters Calling You
  3. I’m on LinkedIn: Now What? Get the Next Steps to Success

If that time or location is not convenient she is offering three more later this month:

Fantastic On-Line Workshop on Wikis at CPSquare in January 2009

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

I attended a workshop put on by CPSquare in 2003 on Communities of Practice that had a profound impact on my worldview. I met folks from around the US who helped to foster communities of practice in corporate, education, government, and non-profit settings and was surprised at how common the both the challenges and methodologies for overcoming them were.

I had a chance to spend a day with Doug Engelbart, we ended up sitting at the same table and did a number of small group activities together. His concept of bootstrapping as an improvement of an improvement activity was an inspiration for our Bootstrapper Breakfasts, an effort to harness the collective IQ of a group of entrepreneurs who are each trying to get better to assist one another in getting better faster. Doug also demonstrated a version of his Open Hyperdocument System that has given me a model to aim for as we continue to improve the infrastructure for the delivery of our services: individual consulting, workshops, partner coordination, and collaboration as a part of the startup team to reach a working consensus on both strategy and the supporting materials to execute them.

I decided to take part in CPSquare workshop that just started yesterday, and I would encourage anyone who is interested in learning more about wikis and other modes of on-line and face to face collaboration to consider joining. It’s going to run for the next few weeks, blending conference calls with on-line forum interaction and a number of very interesting case studies. I have been asked to present some cases on how we leverage a number of on-line tools, wikis in particular, but I am only one of many folks detailing their practice.

We had a very good conference call to kick things off yesterday and I thought I would blog and encourage entrepreneurs who want to get better at combining a number of different modes of collaboration, both on-line and face to face, to sign up. It’s that good. The calls are taped and you will have access to the on-line examples so you haven’t missed very much at all if you sign up now.  You can register here: http://cpsquare.org/conferences/

The benefits: if you don’t learn how to be more effective in on-line collaboration, including techniques for global teams, and how to blend on-line and face to face collaboration to improve the quality of team meetings and decisions, then you are not paying attention. Our clients, while they are still primarily Silicon Valley firms, now include teams in Denmark, China, Australia, Sweden, India, and England. And watching how this international group has coordinated on this workshop has given me a number of new tools and techniques to improve how we work at a distance.
It’s not my workshop so I am not bragging about anything you will learn from me, but it’s a diverse and creative group of folks who are pushing the state of the art in collaboration. It includes Ward Cunningham who invented wikis and Etienne Wenger who helped to formalize the concept of a community of practice, a well as many other less famous but equally insightful folks.

SaaS, wikis, blogs are all more than a decade old: I think the next ten years may be as much about enhancing our understanding of how to leverage what’s already been invented as it is to invent new things. This will offer you an opportunity to start thinking hard about what that might entail in the way that you organize your work and your team.

Interview with Ivaylo Lenkov part 1

Written by Theresa Shafer. Posted in Founder Story

This is part one of Anthony Scampavia’s interview with Ivaylo Lenkov, CEO and Software Architect at SiteKreator. Lenkov explains his team’s technique for doing daily releases. Look for part 2 on “Feature Management in a SaaS World” next month.

Anthony Scampavia: Will you provide a brief overview of your company SiteKreator?

Ivaylo Lenkov: We started SiteKreator in 2002 for business owners with no knowledge of programming or web design to be able to build and modify their own websites. Recently we introduced the first SaaS platform for creating custom web designs without coding. We work with many designers who use a private-labeled version of SiteKreator to deliver complete web solutions to their clients. Our technology powers more than 100,000 business sites and we operate from 10 global data centers with hundreds of servers.

Scampavia: What made you re-evaluate your release cycle and abandon traditional software development release cycles?

Lenkov: When we started SiteKreator, our release cycle was almost a year. We were spending more than half of that time in stabilizing and polishing the release, because there have been hundreds of new features. During that time our customers weren’t able to see anything new and by the time we finally released the new version, many of the cool new features were no longer cool and some were not even needed. The web is a very dynamic space and the annual release cycle was limiting our ability to be ahead of the curve and to deliver innovative solutions to our customers. We started looking for ways to shorten our release cycle, by reducing the features going into each release. We first tried a three-month release cycle, then one-month, then one-week and we ended up with daily releases.

Scampavia: So how you accommodate long-term project planning while doing daily releases?

Lenkov: Well, that’s not easy. When you are focused on a very small feature-set, you sometimes lose the big picture. You just can’t see the forest from the trees. We had to change our planning process. We still maintain a product roadmap with milestones and everything but we chop each milestone into many small releases. This way every day we have a working product. We also review our priorities every couple of weeks and adjust them as needed.

Scampavia: How you actually do these daily releases?

Lenkov: Our team is distributed between two locations: one in California and another one in Bulgaria. This has many cons and few pros, one of them being that we can work in two shifts using the so called “follow the sun” model. Our engineers in Bulgaria finish the coding for the daily release around 11am PST and deploy on several staging servers. Then our product managers, marketers and usability experts based in California review the release and file their comments in our defect tracking system. After 11pm PST our engineers in Bulgaria come to work, fix the reported problems, if any, and push the release to the production servers worldwide. Sometimes we may skip a release if we need a little more time to fix something, but this does not happen very often. When you make small changes, it’s hard to break something big.

Scampavia: How do you ensure the stability of the release?

Lenkov: The daily deploy model would not be possible without a large-scale automated testing. We run a big farm of screen-capturing and comparing servers. We basically compare thousands of sites before and after the deploy on our staging servers. This takes few hours as we capture all possible browsers, both on Mac and PC, and in many screen resolutions.

Scampavia: Visually. So, you are doing just a Pitman comparison really.

Lenkov: Yes, but on a very large scale. The rule of thumb is that by doubling the number of sites we compare, the probability of catching new problems increases by one percent. But every increase in the number of sites also increases the number of false positives that has to be manually reviewed. So we tweaked our comparison algorithms to be more tolerant towards small differences in the screenshots. We still do human review of some screenshots that do not match, but at least it’s manageable.

Scampavia: What happens when you find a problem after the software has been deployed on the official servers?

Lenkov: This does not happen that often, but if needed, we have a single button roll-back to the last stable version. It takes about 2-3 min and it rollbacks all datacenters. But we use this for only really critical problems. For non-critical or cosmetic issue, we just fix the problem with the next deploy. That’s the advantage of having a daily release cycle.

Scampavia: How do you handle larger features that cannot be implemented in a day?

Lenkov: We implement the larger new features as modules, which are initially in stealth mode. We enable these modules only for specific users, so they can be tested. Of course we start by eating our own dog food. Then we enable the new features for users who have signed up as beta testers, as well as for our reseller partners. Once we feel confident with the stability of the new features, we begin bucket testing with real users. We start with a very small bucket (usually top 100 most active users), while keeping a finger on the Off button. Then we expand the bucket few times and at the end we enable all users. After a few weeks of running everyone on the new modules, we decommission the old modules.

There are two potential complications from this approach:

  1. If there are differences in the interfaces between the old and the new module, we need to create some throw-away glue code that “talks” to both interfaces.
  2. If there are backward incompatible changes in the database schema, we usually need to add a wrapper on the database level.

Of course this approach could not be possible without having tens of thousands of users using the software on a daily basis. Even if we miss a defect or a use-case, it always pops up during the bucket testing.

Scampavia: What do you use for version control?

Lenkov: Subversion in combination with Trac.

Scampavia: You have been doing one-day release cycles for two or three years now. Has it been worth it?

Lenkov: Initially, I thought it would be very inefficient but it turned out that shortening the release cycle resulted in reducing the time we spend on bug fixes, stabilizing the release from 50% to about 20%. Also, now we can introduce new features in a matter of days, while before it was taking months even a year for the smallest new feature to become publicly available. Our users very much appreciate that. In the SaaS world, the ability to show something new every day helps a lot in building a loyal customer base.

Scampavia: I want to thank you for your time and your thoughts. This is valuable to the SaaS world for people to realize that there is information they should at least think about for their methodology. You have put in much thought in this through the years. I will say that not all SaaS companies have done that. My experience is many companies are too busy to get to the market and do not consider the method. If they do not have the stability and methodology in place, things start to tear apart.

Lenkov: Thank you for having me. I am happy to share our experience and hopefully it will be useful to other SaaS vendors.

Scampavia: Lenkov, thanks for your time.

5 Tips For Writing a Startup’s First Backgrounder

Written by Sean Murphy. Posted in 2 Open for Business Stage, Demos, skmurphy

  1. Focus on establishing your team as trustworthy and dependable. The biggest question in a prospect’s mind is how your team will you perform when things go wrong.
  2. Stress earlier engagements with the problem you help your customers solve. Make this “phase two” of efforts to solve these problems, building on earlier relevant experience and accomplishments. Early customers want to know that you have an affinity for the problem domain.
  3. Don’t stress how smart they are or how many merit badges your team has accumulated (e.g. degrees and certificates) or your collective years of experience the team has–what does it mean when a team has collectively 60 year of experience, much less than you might think. Focus on projects that you have delivered and value they have created for former partners, customers, etc..
  4. If you have a backgrounder or presentation that is being used to raise investment–e.g a fund-raising pitch–don’t start from it as a basis for your prospect oriented backgrounder. Investors and prospects are two fundamentally different audiences with very different needs and distinct questions about your team and your offering.
  5. Keep it to between one and two pages: put it on your website and print it double-sided if it runs over one page when you include it in proposals or as part of a leave-behind package from a demo or presentation.

Francis Adanza on the Entrepreneurial Roller Coaster

Written by Sean Murphy. Posted in Founder Story, skmurphy

Francis Adanza worked for us in a project management role for the better part of two years  before taking a business development role with Global West Communications. He was back in the Bay Area last week and attended last Friday’s Bootstrappers Breakfast and we had a chance to catch up. He sent me a short e-mail on his perspective on  “entrepreneurial roller coaster” afterward. It’s a topic I have blogged about in “We Don’t Encourage Individuals to Form a Startup” and “Hugh Macleod’s Thoughts on Being an Entrepreneur 2” but I think Francis has done a better job of explaining it and with his permission I reprint it below:

The funnest yet scariest part about riding a roller coaster for the first time is the unknown knowns. You know there are going to be highs and lows, but you don’t know when they will occur. You know there will be twists, turns, even sporadic upside down thrills, but its hard to forecast them. Sometimes the adventure seems fast, and sometimes it seems long, dragging on forever.

Regardless of how scary the ride may be, we all have choices that can alter the experience. Some people keep their eyes closed the entire ride, trying to mitigate their fears. Others dare to keep their eyes open, embracing each turn of events. Some folks find reassurance and control by holding on to the safety bars. While others fly by the seat of their pants, hands waving free in the air.

At times the ride becomes so frightening, you wonder why you even got on. It doesn’t matter how much you yell or scream, all you can do is wait until it ends. Although you might walk away a little shook up with a few scratches and bruises, you know in your heart that you had the guts to give it a try.

Paul Lippe on an Entrepreneur’s Accountability

Written by Sean Murphy. Posted in Blogging, Legal Issues, skmurphy

Paul Lippe is CEO of Legal OnRamp, a community of practice website for lawyers. He did a guest post on the AmLaw Daily Blog “Welcome to the Future: Leadership, Accountability, and Swimwear” that I enjoyed, in particular his observations on accountability were worth bearing in mind in 2009:

Legal OnRamp strives to simplify innovation and value delivery, primarily for in=house lawyers but also for law firms, both by providing tools to innovate and by sharing examples of success.

We have 7,000 members, probably 3,000 of whom have contributed content or otherwise added value. Perhaps 1,000 have contributed ideas on how to make our service better. Ninety nine percent of the good ideas and 99.9 percent of the work have come from someone other than me. More than 400 law firms and more than 700 companies are participating.

There are at least 100 things that need to go right; there are 200 things that could go wrong. When we started, 80 percent of lawyers thought we were nuts; 14 months later, 80 percent of lawyers think we’re the future. I “control,” in a formal sense, very little of this.

Still, if Legal OnRamp fails, it’s my fault.

There are no words we love to hear more than “it’s not your fault.” Whether from our mother, our friend, our cleric, or our consultant, when something goes wrong, we cherish absolution.

So let’s be clear: if you are running a law firm and it fails, it’s your fault.

The balance of the article is worth reading, he addresses the need to plan for a more competitive environment in 2009. Although his intended audience is managing partners at law firms it’s very applicable to software and consulting firms as well.

Measuring 2008 Goals

Written by Theresa Shafer. Posted in skmurphy

It is that time a year again. Where we look at what we did and what do we want to get done next year.

A couple of key things we gone done this year:

  • Refine Business Dashboard
  • Develop speaker page with audio for our website
  • Expanded our network of consultant to off-load support activities
  • Developed “Engineering Your Sales Process” workshop
  • Added 3 new partners: Athol Foden, Steve Moore, and Pete Tormey
  • Added third Bootstrappers Breakfast in Milpitas at the Omega Restaurant
  • Grew mailing list by 64%
  • Completed our second workbook “Getting More Customers”

Some areas where we fell short:

  • Develop Startup Stages Idea – we make a good start for this, but fell short of where we want to take this. Stay tuned for more.
  • First Office” series. This will move to 2009 Goals.
  • Looking back over our business dashboard. We have a couple things we need to improve
    • Followup after a talk or other event
    • Quote more work
    • Give more talks

Here’s Jerry Kaplan’s “Five Biggest Mistakes That Entrepreneurs Make” at Stanford’s Entrepreneurial Thought Leader Speaker Series. It an interesting talk with good points about our goals. Summary:

  1. Unclear goals.
  2. Trying to prove that you’re smart (ego gratification) vs. building a team and building a company.
  3. Too much focus on control instead of creating value.
  4. Hiring a friend vs. best person for the job: hiring folks you like vs. folks you need.
  5. Lack of succession plan (hanging on too long): you have to let go of your children once they are grown, you have to let go of your startup when it’s grown beyond your capabilities.

Welcome to 2009

Written by Sean Murphy. Posted in Quotes, skmurphy

Believe me when I say that we have a difficult time ahead of us.
But if we are to be prepared for it, we must first shed our fear of it.
I stand before you now, truthfully, unafraid.
Because I believe something you do not?
No!
I stand here because I remember.
I remember that I am here not because the path that lies before me,
but because of the path that lies behind me.

An excerpt from Morpheus’ speech to the citizens of Zion in the film “The Matrix Reloaded” (hat tip to Fabius Maximus who opened his post “An Important Thing to Remember as We Start a New Year” with it.

2008 was one of the worst years from an economic perspective: the S&P 500 dropped 38.5% (vs. 38.6% in 1937) and the DJIA dropped 33.8% (its worst annual decline since 52.7% loss in 1931). 2009 may see the bankruptcy of major automobile manufactures, newspapers, and perhaps many more financial institutions. This is the global backdrop; our Silicon Valley perspective doesn’t appear as grim as the 25% job loss after the dotcom crash, so we have seen worse in recent memory, at least locally.

I spent last week reading Mark Zimmerman‘s Journal, which he keeps on-line as a wiki and spells zhurnal. He has serialized the entries by date of creation starting here: http://zhurnaly.com/zhurnal01.html I recommend it wholeheartedly for entrepreneurs even though it’s written by a physicist with a Zen frame of mind who has taken up marathon running in his 50′s. He is thoroughly committed to mindfulness and self-improvement, two goals any entrepreneur should strive for.

I thought I would stir in some excerpts from his “Headlights and Decisions” entry as they bear on our ability to take action in spite of limited information. Who knows how 2009 will actually turn out? We can’t know until the year is over but today January 1st has been fired at us point blank. :

E. L. Doctorow once said that “writing a novel is like driving a car at night. You can see only as far as your headlights, but you can make the whole trip that way.” You don’t have to see where you’re going, you don’t have to see your destination or everything you will pass along the way. You just have to see two or three feet ahead of you. This is right up there with the best advice about writing, or life, I have ever heard.

from Bird By Bird by Anne Lamott

Zimmerman likes the sentiments (as do I) but observes:

  • It helps tactical decision making to have a strategic viewpoint — a large-scale map of the situation, so that the right local battles can be fought to lead toward global victory.
  • In writing, it helps to have an outline (or at least a general vision) of the final product.
  • Today’s actions must be guided by immediate conditions in the light of the larger context.
  • Refusing to decide is a decision; deciding prematurely is also a decision. Wisdom lies in balancing the two.

In February of this year I wrote “Burn Your Boats But Not Your Bridges” and made a couple of points that are probably revisiting

  • Committing to a mission enables us to see possibilities for further action.
  • A decision is an irrevocable commitment of resources: the lesson from the OODA loop is that this can be through indecision and delay as much as in the affirmative.
  • “Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it.” from W. H. Murray‘s popularization of John Anisters free form translation of Faust.

Quick Links

Bootstrappers Breakfast Link Find related content Startup Stages Clients In the News