I signed up for a mailing list a while ago from a reasonably famous entrepreneur and he sent me this mass email in late November promising to share “Silicon Valley Secrets.” I don’t know if it’s because I have worked in Silicon Valley for more than three decades but I found the whole thing kind of sad (of course, he’s probably laughing all the way to the bank).
The following announcement went out this morning:
ARMONK, N.Y – 25 Sep 2014: IBM (NYSE: IBM) today announced that Verdafero, a San Francisco-based utility analytics startup, has selected IBM Cloud to power its utility analytics platform, allowing customers to reduce their energy, water or waste consumption by up to 30 percent. Verdafero chose IBM’s open cloud platform, Bluemix, over a previously used platform, in order to significantly speed the development and delivery of more features and offerings to its users.
Direct Mail: A Letter With a Stamp Is Not Spam
In advertising it pays to be different. Letters and postcards with real stamps get through.
With everyone getting some much email SPAM, direct mail can be a way to differentiate yourself.
Postcards Work Too
We have used postcards to announce events where clients will be speaking or exhibiting. They have been very useful for raising awareness, increasing attendance at the event, and triggering a few phone calls. They don’t have to be opened to be read and are an inexpensive way to send a color image.
- Consider using unique URLs or phone numbers if you really want to track effectiveness.
- You can rent mailing lists or use your own.
- Because of the cost of this method you need to be careful to debug the message in advance: consider small targeted mailings, e-mail tests, adwords tests, or feedback from a few customers and prospects if time is short.
- We have used Overnight Prints and VistaPrint for printing as well as more than one visit to Fedex/Kinkos when time ran short.
Consider direct mail as an option for the target prospects you are trying to reach.
Steve DiBartolomeo is co-founder of Artwork Conversion Software, Inc., an EDA software firm headquartered in Santa Cruz CA with a development office in Manhattan Beach, CA. Founded in 1989, the company develops CAD translation programs, CAD viewers, plotting software and IC packaging software. Artwork has over 5000 customers worldwide including Alcatel, AMD, Applied Materials, Agere, Bosch, KLA Tencor, Motorola, Ericsson, General Electric, Hewlett Packard, Hitachi, Lockheed Martin, Siemens, Seagate, Sony, TRW..
Q: Can you talk a little about your background and how you came to found Artwork Conversion Services?
I have a BS/MS in Electrical Engineering from UCLA (1978). My founding partner, Antonio Morawski, has a BS from Loyola and a MS from UCLA from around the same time period. I cut my teeth at TRW Semiconductor in Southern Calif starting in 1976 as a student. When I graduated I continued on there until 1980 as an RF design engineer, as did Antonio–we met at TRW.
I took a year and a half off of work and went back to college (UCSB) until I ran out of money and then in 1982 joined Avantek in Santa Clara as an international sales engineer. In 1984 my boss asked me to join a startup, Step Electronics, that would specialize in high tech import/export selling microwave and RF components and subassemblies. One of our first clients was a small software start up, EEsof, which pioneered microwave EDA on PCs. (Prior to that microwave design software ran on a $250K VAX and cost $50K – EEsof’s ran on a $5K PC and cost $7500.) I spent much of the next years selling EEsof tools in Europe (where I lived for a year in 1986) and then later in Asia.
In 1986 I needed a translator for a pattern generator in order to close a large EEsof sale in Germany. EEsof could not do it. I mentioned this to Antonio and he said he knew how to write such a translator. We took the order and delivered it 6 months later.
In 1987 I returned back to the US and tried to sell more pattern generator translators in Silicon Valley. The companies that I contacted were not interested in our translator but had lots of suggestions as to what they did need — so we slowly developed new products (on a part time basis) based on their feedback. At that time (between 87 and 89) Antonio was employed as a consultant at TRW and as a professor at Loyola. He did the programming out of a corner of his small garage.
Finally in 1989 we decided to do this full time. I left Step (which had really been an excellent apprenticeship for learning how to run a small, lean operation) and Antonio left Loyola after completing his teaching contract.
Our primary reason for starting the company was to be “masters of our own destiny” and to work on stuff that was interesting. We really only wanted to make enough money to cover our mortgages and live a reasonably comfortable life.
Q: So what were the early days like?
Between us we put up $10K each and started with that (and two years of experience and a few customers and orders in the pipeline). As mentioned, our largest initial purchase was two fax machines (at $1500 each) and a copy machine ($3000). I worked out of a 500 sq foot office in Santa Cruz and Antonio continued to work out of his garage in Manhattan Beach. We broke even from day one even if the monthly salary was small. Eventually we added a secretary and a programmer and Antonio moved from his one car garage to his father’s two car garage.
I handled all the sales which were almost 100% from Silicon Valley. I basically drove into the valley several times a week and installed and demonstrated the software. I also did tech support, marketing, technical writing … basically everything except programming.
We added employees one at a time and grew slowly but surely.
At the time we started (end of 89), the business we knew best — RF and Microwave components and design — was taking a tremendous hit; the giant build up of the early and mid 80’s (due to Reagan’s military budget) was over and an enormous consolidation was occurring. I’d call an engineer on a Monday to make an appointment and by Friday he’d be gone.
There was not yet any Internet and even cell phones were a tiny market. Things looked especially grim because no one could envision what was going to drive new designs. But somehow we ground through the first couple of years — not making much money but not losing any either and slowly adding a few products every year.
By 1995 we grew to a peak of 14 people – 8 programmers, 1 sales guy, 1 boss (me) and 3 office people. Our maximum revenues peaked at about $3 million dollars in the late 90’s.
Business took a major downturn in 2001 what with the dot-com crash which killed a whole bunch of network and chip startups that were buying our tools as well as hurting just about everybody in the tech business. I recall our shipments dropped 40% one month and stayed down for 18 months before slowly building back up again. By 2004 business was excellent again. Things stayed pretty buoyant until 2007; from that point on it seemed to drift down gradually and, of course, at the end of 2008 the downward drift became disturbingly steep. Most of 2009 was pretty awful and it was not until early 2010 that we saw the green shoots of a recovery.
Q: Where are you today?
Today we are 10 people (7 programmers, 1 sales guy, 1 boss and 1 office person – the internet nature of business no longer requires production of software other than a click). Our goals are not high growth but rather a good profit margin. As a software company we have zero cost-of-goods and the great majority of our expenses is salary. So once you are past “break even” everything after that is profit.
Q: When you look back over the last two decades or so what are the accomplishments that you are most proud of ?
We are very proud of having kept the company going for over 20 years completely on our own. We didn’t borrow a penny and every quarter we showed an operating profit.
We made several major market and technology shifts during those 20 years that kept us going:
- We started by building software for RF and Microwave designers.
- We branched into software directed at PCB designers.
- We branched into software directed at IC designers (back end).
- We moved from translators to display software (viewers).
- We moved from direct sales to end users to OEM sales to other EDA companies.
We have seen many other EDA and technology firms try to change direction, usually in response to major changes in technology or the market that either died or were badly injured in the process.
We were early Internet and web adopters and this enabled us to expand our market from just Silicon Valley to worldwide without a large sales force.
Q: What’s been the biggest surprise?
I think it was more of a gradual realization: most EDA entrepreneurs start as EDA users, run into problems doing their job, come up with a clever solution and are suddenly find themselves an EDA supplier. The surprise comes some years after you are an EDA supplier–you have stopped designing stuff and find that you no longer really understand the “problem” side of the equation and have to pester people to tell you about what problems they need solving. However this reliance on others for your critical input is never as reliable as your own (past) understanding of the problems that need solving.
Q: What were the significant changes in the environment you have had to respond to?
The internet changed everything. We jumped on it early and have benefited from our ability to be everywhere in the world from our desks in Santa Cruz. Nowadays I think WEBEX (and the other screen sharing apps) is one of the seven wonders of the modern world.
We realized that we needed to change from direct sales to OEM partnerships in the late 90’s because the big kahunas–Cadence, Mentor and Synopsys–started sucking the air out of the EDA markets. They each wanted to be all things to the customer and cut the kind of deals (we call them all-you-can-eat) that would cut off any other vendor. So we changed our focus to selling into the big EDA companies with small modules that enhanced their products.
Q: What’s the current challenge you are wrestling with?
Design is following manufacturing offshore. We’ve seen this accelerate since after the dot-com crash. It’s a lot harder for a small US based company to cover Taiwan, China, India and Singapore. The big guys set up design and application center’s in these countries.
Q: Any suggestions for other entrepreneurs who want to bootstrap a software business?
If you want to run a company you can make a living from–in other words you are not writing a business plan where the exit strategy is on the first page–then I think I can make a couple of suggestions.
- Start with a small team with common values and complementing skills – in our case Antonio was the programming guy and I was the sales/applications guy.
- Don’t take any more money–none if possible–from outsiders than absolutely required.
- Create something small and simple and quickly get it out there. You’ll get much better and faster feedback than if you try to go around asking people what they want.
- Refine it based on feedback. Document it. Do it again.
- Grow slowly. Fast growth is very inefficient since you will then have a lot of people on board that have not figured out their job.
- Staff or employee turnover has a high hidden cost since the replacements have to start over.
- Cash is king. Save some of your profits as a cushion against a rainy day.
- Spend a lot of time listening to your customer’s problems. Not every problem is one you can or should solve, but the aggregation of their issues gives you a solid base for making seat-of-the-pants decisions. You’ll never have enough information to make a MBA-style decision on new products or directions. But if you’ve listened to enough customers you’ll have a good “feel” and make better decisions.
- Beware of business plans. Have a look at some business plans that are 3-5 years old of both successful and unsuccessful companies. You’ll have a good laugh at both. The main difference between the successful companies and the dead/dying ones is how they reacted when their assumptions blew up.
Finally and most importantly: people can say one thing and do another. Only act on what people tell you if you see that their behavior is consistent with their talk. People are much better at telling you what they don’t like than at what they want. When we are developing a new product we try to get something into their hands quickly and then listen to them criticize it. The criticisms are usually much more specific and useful to defining a product.
Q: Steve thanks very much for your time.
While there are many challenges to master in building a new business, technology entrepreneurs have to balance three primary aspects:
- Team: can you assemble the talent required and keep them together and moving forward?
- Technology development: can you build a working product?
- Customer development: can you solve a problem that people will pay for?
from all of us at SKMurphy
“Civilization is a movement and not a condition, a voyage not a harbor.”
Update July 5: I came across this video captured by UAV flying through the fireworks:
h/t Glenn Reynolds
“Not everyone who is worth knowing is famous.
Not everyone who is famous is worth knowing.
You meet your community of practice,
those who can help you see the adjacent possible,
in line waiting for the famous.”
Sean Murphy (inspired by Elia Freedman’s “Accidental Meetings“)
The conversations I had with individual entrepreneurs were the best part people of the Startup Conference 2014. 2,000 entrepreneurs, VCs, and met in Redwood City on, May 14, 2014. I talked to a number of folks and had several conversations that were far better than any of the presentations I sat through.
I came away with a couple of thoughts on networking.
- Focus first on understanding the other person’s situation and what they are trying to accomplish. This enables you to share useful and directly relevant information and to ask for insight and assistance that they are more likely to be able to offer.
- Trust develops over time: smiling helps, listening closely can require effort in a crowd but by giving someone your clear attention you encourage them to have a serious conversation.
- Make a note to jog your memory of the conversation. I often use either a their business card or a 3×5 card, use your smartphone or tablet if that’s easier.
- You can only make connections if you first listen carefully and understand their story.
- If you meet someone at an event don’t skip talking to them if you have the opportunity. Serendipity is always at work but is only possible if you make the effort to have a conversation. It’s hard to predict where things will lead.
- If you intend to talk to a speaker rehearse what you want to say and get to the point in 15-20 seconds. Exchange cards if you want to follow up. Especially if there is a line get to the point and limit yourself to 30-60 seconds. If a minute leaves you with the strong impression that they would like to talk more go back to the end of the line and let others have a chance to talk briefly before engaging in an extended conversation.
“All great work is preparing yourself for the accident to happen.”
Comparing notes and making commitments to a group of peers can enable you to see things you might otherwise overlook and to persevere on tasks where you may have previously faltered. Active participation in a mastermind group one of the best ways to reach your goals.
SKMurphy offers small mastermind (accountability) groups for entrepreneurs. We currently have groups with the following focus that meet face to face in Silicon Valley twice a month:
- Women Entrepreneurs
Let’s us know if you are looking for a group to keep you focused and on track. More information
“Isn’t it funny how day by day nothing changes, but when you look back everything is different.”
Sean Murphy is honored to speak at Linked CXO Forum on Tuesday, May 27th, 2014 at Haworth Showroom in San Francisco, California. Linked CXO provides networking for senior executives – “Bosses Need Professional Development, Too.”
“Lean” provides a scientific approach for creating a product and developing new businesses. Teams can build products or services to meet the needs of early customers by adopting a combination of customer development, business-hypothesis-driven experimentation and iterative product releases.
Tuesday, May 27th, 2014
11:30am-1:30pm, San Francisco, California
- Why more and more companies are using Lean
- What is Lean; What it is Not
- Rules of thumb for successful lean innovation
- Get out of your BatCave
- Use an initial product (MVP) as a probe to explore the market
- When and how to pivot
Speaker: Sean Murphy, CEO of SKMurphy, Inc., offers customer development services for technology entrepreneurs. SKMurphy’s focus is on early customers and early revenue for startups. Sean is an early and active member of the Lean Startup group and has been a workshop presenter and mentor at Lean Startup Conferences. SKMurphy’s clients have offerings in electronic design automation, artificial intelligence, web-enabled collaboration, proteomics, text analytics, legal services automation, and medical services workflow. Sean holds a BS in Mathematical Sciences and an MS in Engineering-Economic Systems (Management Science) from Stanford University.
Here is some advice from a couple of founders that ran successful crowdfunding campaigns:
Matt Oscamou, CEO of Frontier Bites shared at a recent Bootstrappers Breakfast meeting that he ran a successful kickstarter campaign $30K for pay for new packaging artwork and initial order. He found it useful as a way friend and family could help support his effort but he had little donations from strangers.
Mark Palaima, Distinguished Engineer at Avagent, hit their funding goal in the first 5 hours. Most of their donations came in the first two days and spent a great deal of time on a marketing road trip hanging out at tech bars showing off the product. See more about their campaigns at Avegant Glyph Kickstarter Surpasses Stretch Goals Before They’re Made, Try the Glyph in a City Near You
At a recent SV Hardware Startup to Scale meetup, Noah Dentzel, CEO of Nomad Goods emphasized the importance of getting the word out on your campaign. He offered the tip of writing article for press and bloggers. His goal is to make their job easier for them. He also took advance of holes in press schedules – no shows or other delays. His biggest piece of advise is to go for it, ask, knock on the doors. His biggest surprise was learning all the logistics about shipping and delivering products oversea. He knows that shipping to S and Russia cost $0.90-1.10.
Come share ideas, form teams, and launch startups. … Come join us for weekend-long, hands-on experience where you will learn what it takes to launch a startup, meet others with the same shared passion for entrepreneurship, and maybe even create a new business! Sean Murphy is excited to be a mentor at the event.
June 6-8 in San Francisco, CA
Use promo code SFB2B10
During this Startup Weekend, entrepreneurs will be empowered to pitch, build teams and transform their B2B based ideas into Minimum Viable Products (MVPs).
Update Sat-May-17 from Sean Murphy: I am grateful to Scott Sambucci of SalesQualia for recommending me as a mentor and glad that I was able to suggest that Emily Tucker of TaroWorks and Liz Fraley of Single Sourcing Solutions take part as mentors.
Focus For Effect
“Nothing is as difficult as to achieve results in this world if one is filled full of great tolerance and the milk of human kindness. The person who achieves must generally be a one-idea individual, concentrated entirely on that one idea, and ruthless in his aspect toward other men and other ideas.”
Corinne Roosevelt Robinson in chapter 1 of “My Brother Theodore Roosevelt.”
This passage is actually about her father, Theodore Roosevelt Sr. She continues:
“My father, in his brief life of forty-six years, achieved almost everything he undertook, and he undertook many things, but, although able to give the concentration which is necessary to achievement, he had the power of interesting himself in many things outside of his own special interests, and by the most delicate and comprehending sympathy made himself a factor in the lives of any number of other human beings.”
Corinne Roosevelt Robinson in chapter 1 of “My Brother Theodore Roosevelt.”
Good advice for entrepreneurs: you have to focus for effect, making hard choices to drive a project or product forward. But if you are only interested in yourself and your own needs you won’t have much of a life.
Related Blog Posts
Nobody disputes how important “Call to Actions” are but sometimes I run out of ideas for good ones. Here is my list of favorite ones.
- Find out the latest
- Watch this short video for more information
- Check this out!
- See why we are excited!
- Learn more
- Read how we did it!
- Start saving
- Compare us to your current solution
Please suggest any that you have found effective in the comments and I will continue to update the list as they come to me.
Tristan Kromer offers a great workshop on taking your big idea and break it into a series of small steps to test.
Your MVP Sucks! – How to crush your dreams and embrace reality
- Monday, May 5, 2014 from 9:00 AM to 5:00 PM (PDT) more info
- Tuesday, May 20, 2014 from 9:00 AM to 5:00 PM (PDT) more info
You should attend if:
- Have an understanding of lean but are looking for a deep dive;
- You do not currently have Product / Market Fit;
- Keep running experiments but either aren’t making progress or can’t tell if you’re making progress.
Recently, I attended the silicon valley robot block party. Like a mini-makers faire, it was a lot of fun. Folks were there with business robotics, home robotics, toy and entertainment robotics, and homemade robotic products by hobbyists and students.
Some of the robots showcased.
Early this year, I interviewed the organizer of the event, Andra Keay, about the opportunities and challenges she sees in the robotic community. She is an Managing Director at Silicon Valley Robotics, and Co Founder at Robot Garden
More coverage of the Silicon Valley Robotic Block Party
Are you a startup founder who wants to make an objective assessment of your new product idea? Schedule a no-cost, no-obligation MVP Readiness Review.
We wanted to let all of you know that IEEE-CNSV has a new benefit for its members. You have a chance to join and participate in a formal Mastermind (Peer Support) Group. This group is much different from our regular meetings. We will meet for a fixed set of four weeks about every other week starting on April 3, 2014. Group members will make a commitment to come to all of these four meetings, and to keep what is discussed in confidence. So, that means the members really get to know each other, and work on what is keeping their businesses from higher levels of success.
- DATES: Thursdays in April & May — April 3, April 17, May 1 and May 15 of 2014
- TIME: 4-6pm
- LOCATION: Hobee’s at 800 W Ahwanee Ave, Sunnyvale, CA 94085 (just off Mathilda Ave at 101)
- COST: Free, but agree to purchase something from the restaurant, so they will reserve this room for us. This set of four meetings would normally cost $200, so this is a real bargain.
WHAT MIGHT BE DISCUSSED IN A MASTERMIND MEETING?
Mastermind meetings allow you do share ideas as to what areas you are considering for the growth of your business, or your business and life balance. You will get feedback from your peers on how to resolve the concerns.
Areas that could be discussed:
- Business Plans for 2014
- How to get more business
- ow to handle the stress of too much business at one time
- How to get out from under Brokers
- How to keep up with changing technologies
- Whatever concerns or challenges you might be having
Five serious but avoidable financial mistakes we hear from time to time at a Bootstrapper Breakfast:
- Mistake: using credit cards to finance your startup.
Fix: Pay cash, trade favors, barter, go without, but don’t let your monthly balance roll over and accumulate.
- Mistake: not having a stopping rule for when you need to stop bootstrapping and look for work. This can lead to bankruptcy.
Fix: set a time limit and an expense limit for getting your new business off the ground. Work part time and work on your business part time to maintain break even cash flow.
- Mistake: not keeping your spouse in the loop if they are working and keeping the lights on while you bootstrap.
Fix: treat your spouse as an investor or a board member: provide ongoing detailed accounting of plans and spending.
- Mistake: hiring a full time employee too soon.
Fix: start with contractors, make sure you can at least break-even on a regular basis with the contribution the employee will make vs. the additional expenses incurred–understand all of the expenses you first full time employee will trigger (e.g. workers compensation, payroll service, fixed salary expense (vs. contractor)).
- Mistake: signing a lease on an office too soon
Fix: use co-working space, look for an informal sublet, be clear on why you need an office (e.g. just pay for meeting rooms as needed, barter for lab or working space as needed, look at hourly/day rate offices for conference calls or meetings).
#3 got picked up by Entrepreneur Magazine in a roundup of 7 tips: “Funding Your Business on Your Own? Learn From These 7 Entrepreneurs.” I thought these three from the list were also common and avoidable:
- “Branding too soon” by Rebecca Tracey of The Uncaged Life
This is really investing too much in messaging before you know what works. I have made this mistake and I see others do it as a way to make the business seem “more real” or “like an established company.” Trying things out in conversation gives you the fastest feedback and is the easiest way to iterate if you are deliberate about it.
- “Idealism about costs” by Tom Alexander of PK4 Media
This comes in many forms, but the most serious that he touches on is not understanding how long it can take to get paid, especially by a larger firm. 90 to 120 days from invoice has not been uncommon for many of our clients. Small firms tend to pay faster, and getting paid the first time by a large firm can take much longer than subsequently.
- “Failing to calculate burn rates” by Steve Spalding of Project MONA
This takes several forms, but one mistake is to pay yourself a salary (incurring State and Federal taxes on the “round trip” from your savings back to your bills instead of putting less money into the business and living off of your savings. It’s also better to provide the bulk of your starting capital as a loan instead of equity, so that early profits can be distributed as loan repayments instead of salary or dividends.
Update Thu-Feb-27 (morning): Elia Freedman offered a common critique of this post, In Getting Good At Making Money by Justin Williams and “How to Get Good at Making Money” by Jason Fried. Writing “The Art of Bootstrapping” he observes
The only thing a bootstrapper needs to know: CASH IS KING. Nothing else matters and every decision needs to be made to maximize cash. The articles refer to revenues, but revenue is not cash. Here’s an example: I do a contract development job today for $10,000. When done I submit an invoice and the company takes 60 days to pay. Yes, I have $10,000 in revenues today but I don’t get the cash for 60 days. How do I pay my bills in the meantime?
I am relentless when it comes to managing cash. I have a spreadsheet that gets duplicated and updated with actuals and projections every month. This allows me to make cash flow decisions months before the negative shortfall actually happens, allowing me at various times in the history of the company to ratchet up spending, lay people off, cut payroll or minimize other expenses. Because of this work, I see the company very very clearly on a month to month basis and can make appropriate choices.
I think it’s a fair criticism. An accrual accounting perspective has too much parallax from bootstrapper’s actual cash position and offers a false sense of security. I tried to sharpen the advice from the Entrepreneur round up on “Idealism about costs” toward this but I would add a sixth mistake to make it clear:
Mistake: Using accrual accounting (ignoring the timing–the real cash impact–of cost and revenue items) will kill you.
Fix: Forecast and manage the explicit timing of cash in and cash out for your business. Understand that people will cash your checks immediately but be slow to pay your invoices. Some won’t pay the full amount or even pay at all. Rely on clear understanding and simple plain English agreements, don’t hope that “legal language” in a contract will make a difference to your getting paid (assume any contracts you sign will be enforced against you by larger firms.
I think trust is as important, if not more important than cash. Bootstrappers who focus exclusively on cash without also managing trust and social capital will often fail to prosper as well. Related blog posts:
- “Treat Social Capital With the Same Care as Cash“
- “Keeping Your Customers’ Trust“
- “Conserving Trust In a Downturn“
- “Three Tips For Minimizing Misunderstandings Among Co-Founders“
- “The Business is Everyone’s Business”
- “Experiments Vs. Commitments“
Update Mar 8: this post was included in the Founder Institute’s “Mar 2 2014: This Week’s Must Read Articles For Entrepreneurs.“
Peter Cohan from Second Derivative offers some of the best sales demo/pitch training and hands-on learning that we have seen. So we are honored to offer these interactive workshops to startups.
Here is the upcoming schedule:
|March 5&6, 2014 “Great Demo!” San Jose, CA|
|May 21&22, 2014 “Great Demo!” San Jose, CA|
|October 15&16, 2014 “Great Demo!” San Jose, CA|