The next few weeks and perhaps the next few years are going to be awful. Keep counting your blessings anyway, remain kind, and continue to make a difference.
Peggy Noonan wrote My Brothers and Sisters on March 8, 2002 in the Wall Street Journal. She subtitled it “A report from New York, six months on” indicating it was a reflection on 9/11. I have re-formatted an excerpt as a meditation on the need for counting your blessings.
Michael S. Malone wrote “Second Sight” for the Dec-3-2001 issue of Forbes ASAP (a great quarterly magazine put out by Forbes and edited by Malone that no longer seems to be available on-line). It’s also collected in his book “The Valley of Heart’s Delight: A Silicon Valley Notebook 1963-2001” as Chapter 3. It’s a meditation on Silicon Valley and 9-11. Writing in the aftermath 9-11 he reflects on the roots of Silicon Valley in the Cold War and World War 2. What follows are excerpts with subtitles and hyperlinks added, intermixed with commentary
I gave a talk on “How to Give a Great Demo” in April at the Co-Founders Club and met Elijah Angote, founder of “The Best Notary” who arranged for me to speak at the Rotary Club of San Bruno today. So I have him to thank and the audience knew who to blame. I really enjoyed the talk and felt very at home with the group. Here is the audio for the core of the talk (I have cut intro and and about ten minutes of Q&A)
Or download from http://traffic.libsyn.com/skmurphy/ThoughtLeadership140806c.mp3
Here is a handout from the talk.
A Briefing for San Bruno Rotary, Aug-6-2014 by Sean Murphy, SKMurphy, Inc.
- What is thought leadership?
- Why will it bring you more business?
- How do you get started?
Thought Leadership: Discern the important events and trends at work in the present, predict their likely effects, and offer perspective and actionable advice in time to have an impact.
Thought Leadership In Action
- Advise prospects and customers on how to overcome their most pressing problems
- Customers bring you their hard problems, prospects ask you for insight on options
How Does It Bring You More Business?
- A reputation for expertise means that you get called first
- You can compete on more than price: expertise acts as a differentiator
- Encourages current customers to bring you new challenges
- May lead to new opportunities and even new offerings for emerging needs
Key Practices for Thought Leadership
- Careful observation, questions, networking
- Writing and speaking to build influence
Build a Communication Strategy
- Identify audience / Understand their needs / Position your message / Promote
- Measure success: website traffic, mailing list size, inquiries, customers
Execute: Your 90-day Plan Should Address:
- What other people say about you
- What you say
- What you write
- Getting found when people are looking
Topics You Can Always Talk About
- Change: what’s waxing and waning
- Significance of recent events
- Checklists to identify or resolve problems
“The future is an abstraction, all change is happening now.”
You can only take action in the present.
“I have gradually come to appreciate that the really important predictions are about the present. What is happening right now, and what is its significance?”
What Is The Current Situation / What Is Significant About it?
- Before you can make predictions you have to understand what’s happened.
- The easiest predictions are based on the “acorns” already planted in the present
Checklists: Develop A Coachable Perspective
- Teach customers and prospect to diagnose problems from symptoms
- Teach prevention and self-service so that they call you for high value problems
Thought Leadership Brings Business
- You get called first
- Compete on more than price
- New opportunities
- New offerings
About SKMurphy, Inc.: We help you find leads and close deals
- Mastermind Groups
- Workshops: Great Demo! Oct 15-16 in San Jose
- Contact: email@example.com / 408-252-9676 / skype skmurphy
Bootstrappers Breakfast www.bootstrapperbreakfast.com
- Serious roundtable conversations about growing a business based on internal cashflow: join other entrepreneurs who eat problems for breakfast.
- Silicon Valley http://www.meetup.com/Bootstrappers-Breakfast-SV/
- San Francisco http://www.meetup.com/Bootstrappers-Breakfast-San-Francisco/
If you are looking or a speaker for your Silicon Valley business group please contact us. I enjoy giving highly interactive presentations to groups of 12 to 40 people. I am happy to talk to larger groups but I prefer where there are opportunities for real audience participation. I also do a number of interactive webinars and workshops for groups who are not based in Silicon Valley so if that’s of interest please feel free to contact me as well.
Over the years I have moderated several hundred Bootstrapper Breakfasts (since starting them in Silicon Valley in 2006). After doing a hundred or so and working with many clients who were bootstrapping I came up with a checklist for common mistakes bootstrappers and bootstrapping teams make in their first year or so.
- Leaving Your Assumptions Implicit: Not Writing a Customer Development Plan
- Believing that Anyone Will Want Your Product: Not Targeting a Specific Buyer
- Confusing the User (or the Audience) with the Buyer/Customer
- Believing Your Product Will Sell Itself (Looking for Smarter Prospects)
- Developing the Full Product: Not Selling the Smallest Piece Possible at First
- Not Focusing on Break-even and Profit
- Expecting Too Much Too Soon: Not Planning for “Target Practice”, Iteration, and Improvement
- Confusing VC with Customer: Going for (2% of) a Really Big Market
- Expecting the Same Control Over Prospects and Team Members as Your Code Base (Single Founder “No Compromise” Mindset)
- Treating the Business Like a Hobby (Thank God for Significant Others, Recently Deceased Relatives, and Crappy Day Jobs)
Five additional challenges that also need to be navigated
- Managing different aspects of your identity at personal, family, and business level.
- Understanding the emotional connection required for a successful business transaction: mission, brand promise, and logo.
- The networking etiquette in Silicon Valley: cards, introductions, how to get acquainted.
- Making the transition from selling to friends to selling to a strange
- Making the commitment to a business footing: licenses, structure, tracking expenses (and acknowledging that now you can fail).
Adapted from a talk I gave in August 2009 at the San Francisco Bootstrapper Breakfast.
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.
I am helping to moderate a panel 7pm Mon-Mar-3 at IEEE-CNSV on “Innovation: Work and Life of the Engineer in Japan and Silicon Valley” The event takes place at Agilent Technologies, Inc. in the Aristotle Room, Bldg. 5 located at 5301 Stevens Creek Blvd., Santa Clara, CA 95051. There is no charge to attend and the event is open to the public.
The event is organized by Takahide Inoue, the Global Outreach Director for the Center for Information Technology Research in the Interest of Society at UC Berkeley.
The panel members are:
- Takashi Yoshimori, Toshiba Semiconductor
- Laura Smoliar, Independent Consultant, Signal Lake Venture Capital
- Tom Coughlin, IEEE Region Six Director-Elect, CNSV member and Independent Consultant
- Kim Parnell, Past Chair, IEEE Santa Clara Valley Section, CNSV member and Independent Consultant
- Brian Berg, Past Chair, IEEE Santa Clara Valley Section, CNSV member and Independent Consultant
Here are some of the questions I hope the panel is able to address:
- What are innovation lessons from Silicon Valley?
- How does Silicon Valley do so many innovations?
- What are innovation lessons from Japan?
- How do Japanese engineers sustain their interest in a topic to achieve mastery instead of moving on to the “new hot thing” or next “bright shiny object?”
- What makes an innovative culture? What can other areas do to create an innovative culture?
- In Silicon Valley, we tend to celebrate the individual over the group. For Silicon Valley engineers how do you give back to your community?
- The Japanese say that “the nail that sticks up gets hammered down.” For Japanese engineers, how do you disagree constructively with your peers to foster innovation?
- What advice do you have for engineers for finding an idea that can inspire them to work on for several years before it becomes a reality?
- How do you see the work of the engineer changing in the next five to ten years?
I hope you can join us tomorrow night. Here are some background material on Silicon Valley’s innovation culture you may find relevant.
- Soul of New Machine by Tracy Kidder
- Regional Advantage by AnnaLee Saxenian (and her follow up “The New Argonauts, Regional Advantage in the Global Economy“)
- Accidental Empires by Robert Cringely
- Understanding Silicon Valley: Anatomy of an Entrepreneurial Region (Martin Kenney, ed.) in particular the “”Silicon Valley Came to Be” chapter by Timothy Sturgeon that offers the key insight that Silicon Valley is at least 100 years old if you date it–correctly, I believe–from the founding of Federal Telegraph in 1909.
Here are five related blog posts about Silicon Valley it’s entrepreneurial culture
- In “Steve Blank on the Secret History of Silicon Valley” I suggest, based on Sturgeon’s analysis, that while World War 2 activities contributed significantly to the growth of Silicon Valley it’s founding can be dated to Federal Telegraph in 1909 (as noted by California Historical marker 836).
- Finding Silicon Valley in Two Passages from E. B. White’s Here Is New York
- Federated Entrepreneurship
- Federated Entrepreneurship: Evangelizing Entrepreneurship
- Federated Entrepreneurship: Play Your Own Game
Finally Tom Wolfe wrote “The Tinkering’s of Robert Noyce” about the founding and early culture at Fairchild and Intel for Esquire in December of 1983 and updated it for Forbes ASAP fourteen years later as “Robert Noyce and his Congregation.” (Aug-25-1997).
The text of California Historical Marker 836:
PIONEER ELECTRONICS RESEARCH LABORATORY – This is the original site of the laboratory and factory of Federal Telegraph Company, founded in 1909 by Cyril F. Elwell. Here, Dr. Lee de Forest, inventor of the three-element radio vacuum tube, devised the first vacuum tube amplifier and oscillator in 1911-13. Worldwide developments based on this research led to modern radio communication, television, and the electronics age…California Registered Historical Landmark No. 836..Plaque placed by the State Department of Parks and Recreation in cooperation with the City of Palo Alto and the Palo Alto Historical Association, May 2, 1970
This book has a lot to say about Ancient Greek perspectives and their meaning but there is one perspective it misses. That is their view of time. 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?
Ten years after the publication of Zen and the Art of Motorcycle Maintenance the Ancient Greek perspective is certainly appropriate. What sort of future is coming up from behind I don’t really know. But the past, spread out ahead, dominates everything in sight.
I feel a sense of “the future coming up from behind” more and more. When I worked in semiconductors and later networking I used to be able to rely on Moore’s Law to see at least a decade into the future. For the last thirty years Moore’s Law has always had ten years of life left in it; we will probably be saying that on the other side of the Singularity. But now it’s hard to see what trends can be relied on to continue. I spend more time now trying to discern the likely trajectories of various technologies and businesses but I have much less clarity.
“We build up whole cultural patterns based on past ‘facts’ which are extremely selective. When a new fact comes in that does not fit the pattern we don’t throw out the pattern. We throw out the fact.”
Robert Pirsig in “Zen and the Art of Motorcycle Maintenance“
It’s also hard to separate the harbingers from the outliers and to compensate for blind spots. That’s why they are called blind spots. Rejecting disconfirming evidence is another way that blind spots are preserved. When I started this business I knew that I was going to focus on Silicon Valley startups and work primarily face to face with clients. In the first year that I started I handed my card to an entrepreneur and he said, “You need a Skype address on this card.” I didn’t agree.
Of course I was dead wrong. Today more than 1/3 of our clients are “out of region.” And while we meet and work face to face with many clients, most of our interactions, even with Silicon Valley clients, are on-line in Skype, wikis, shared edit documents, and other virtual collaboration environments.
“A person filled with gumption doesn’t sit around dissipating and stewing about things. He’s at the front of the train of his own awareness, watching to see what’s up the track and meeting it when it comes. That’s gumption.
The gumption-filling process occurs when one is quiet long enough to see and hear and feel the real universe, not just one’s own stale opinions about it. But it’s nothing exotic. That’s why I like the word.
You see it often in people who return from long, quiet fishing trips. Often they’re a little defensive about having put so much time to “no account” because there’s no intellectual justification for what they’ve been doing. But the returned fisherman usually has a peculiar abundance of gumption, usually for the very same things he was sick to death of a few weeks before.
He hasn’t been wasting time. It’s only our limited cultural viewpoint that makes it seem so.”
Robert Pirsig in “Zen and the Art of Motorcycle Maintenance”
So if I can’t see what’s coming how do I maintain my gumption? I focus more on conversation and real time collaboration, to reacting intelligently to events, and to spending more time making sense of recent events–facts–rather than trying to predict. I spend more time trying to cultivate peace of mind to prevent overreaction: I find meditation, fasting, reading all very helpful in maintaining perspective.
“Peace of mind isn’t at all superficial, really. It’s the whole thing. That which produces it is good maintenance; that which disturbs it is poor maintenance. What we call workability of the machine is just an objectification of this peace of mind. The ultimate test’s always your own serenity. If you don’t have this when you start and maintain it while you’re working you’re likely to build your personal problems right into the machine itself.”
Robert Pirsig in “Zen and the Art of Motorcycle Maintenance”
Serenity as a ground state allows you to react more rapidly and more intelligently: first because you overlook less and second because you are less likely to overreact.
“The ultimate test is always your own serenity. If you don’t have this when you start and maintain it while you’re working you’re likely to build your personal problems right into the machine itself.”
Robert Pirsig in “Zen and the Art of Motorcycle Maintenance”
I guess one thing I have gotten better at compared to a decade ago is admitting mistakes–to myself and to others–more quickly. Self-deception is an “own goal” that blocks debugging a situation. And prevents you from seeing the recurring problems you are causing yourself and others.
“Sometime look at a novice workman or a bad workman and compare his expression with that of a craftsman whose work you know is excellent and you’ll see the difference. The craftsman isn’t ever following a single line of instruction. He’s making decisions as he goes along. For that reason he’ll be absorbed and attentive to what he’s doing even though he doesn’t deliberately contrive this. His motions and the machine are in a kind of harmony. “
Robert Pirsig in “Zen and the Art of Motorcycle Maintenance”
It may be as useful to determine what’s not likely to change, what will still be true in five or seven or ten years as what will be different.
Four years ago I speculated that the twenty teens were going to be less about new inventions and more about changing the design of jobs, business processes, and business models to take full advantage of what’s already been invented. I am not saying that we don’t need more innovation, just that we have not adjusted our business practices to take advantage of what’s already here.
SKMurphy Offers Two Upcoming Mastermind Open House in November and December of 2013
- Mon-Nov-18 6:00 PM to 8:00 PM in Sunnyvale
Register at http://www.meetup.com/BayAreaMastermind/events/150458632/
Tonight at Roundtable Pizza 1220 Oakmead Parkway Sunnyvale, CA 94085
- Fri-Dec-06 Noon-2pm in Cupertino
Register at http://www.meetup.com/BayAreaMastermind/events/150458632/
Both events are no charge and will allow you to meet other members and potential members of our Mastermind groups. The regular meetings run two hours and are held twice a month; the cost is $100 per month.
As we approach the new year, we want to take stock and evaluate what will impact our bottom line. Join us for the upcoming Open House. Bring your 2014 plans and let’s get a jump-start on making it your best year ever!
More information http://www.skmurphy.com/services/startup-advisor/
Many of us in Silicon Valley seek either to found or to be an early employee at a technology startup. If you aspire to create a startup come take part in a conversation with four startup founders about what’s really involved in leaving your day job and striking out on your own or with partners. The startup founders range from serial entrepreneurs to first-time CEOs, they will share their vision, drive and passion as they discuss the nuts and bolts of following their dreams to building something that will change the world.
Please Register for Silicon Valley Code Camp and indicate your interest in the session, this determines the size of room we will be in. We have had some great discussions not only among the panelists but with the audience–more than half the time for the session is allocated to questions from the audience–so please let us know if you plan attend so we will have room for you. There is also a Mobile Session Viewer And Planner.
While I think our panel is one of the better reasons to attend Code Camp there are another 232 sessions offered by experts and practitioners that cover a broad range of topics of interest to software engineers. Code Camp takes place all day Saturday October 5 and Sunday October 6 on the Foothill College campus at 12345 El Monte Rd, Los Altos Hills, CA. The “Working for Equity” panel takes place on Saturday October Oct 5 at 1:45.
For more information on earlier “Working for Equity Sessions” see
- Recap of Working For Equity CEO Panel at SVCC 2012
- Slides from Working for Equity Panel at SVCC 2011
- Sean Murphy to Moderate Panel on “Working For Equity – The World of Startups” at Silicon Valley Code Camp 2010
- Work For Equity Panel Set For SVCC 2010
Smith: What do you see in your future?
Stafford: We’ll go back West and I’ll keep on writing poems. I keep following this sort of hidden river of my life, you know, whatever the topic or impulse which comes, I follow it along trustingly. And I don’t have any sense of its coming to a kind of crescendo, or of its petering out either. It is just going steadily along. So I inhale and exhale. I experience, write poems, get now and then great feelings of being on the edge of writing something that reverberates through my own self and that’s very interesting. But I don’t have any big or sustained project or any ending revelation that I can tell you about.
A Viable Business Model Embraces Ebb and Flow
What if the right model for a successful business that is long term viable is not the crescendo (the “hockey stick”) but ebb and flow. I think it’s more important how you manage cutbacks and necessary expense reductions, the organized abandonment of products that have failed or are obsolete, and the intelligent pruning of initiatives that either have not worked out or are not longer working.
The VC ecosystem profit model is predicated on “the exit” or “the liquidity event.” The professional investor’s goal in an early stage firm is to make the ongoing management of the firm someone else’s problem. Their advice will not guide you to a long term viable business model.
A Resilient Business Model Is a Forest of Offerings
What if successful firms look more like forests, where each tree is a different product and you have a mix of offerings at different stages in their lifecycle. I admire entrepreneurs who are not afraid of running out of new ideas, in the same way that William Stafford was not afraid of having his best days behind him.
You Need A Bushel of Acorns, Not a Diamond
The alternative is to look for the one big idea that is the home run, and to guard it jealously like a precious gem. The problem is that when you guard your best ideas you don’t subject them to the scrutiny they need so that you can refine them and you don’t seek advice and perspectives from prospects, potential partners, domain experts, and others that would allow you to improve them.
“A myth about innovation is that it is about big ideas. Of course, in the end you want an idea with the power to transform your core business. No idea ever started out as a billion-dollar one, yet large companies often start out asking for $100 million ideas. But imagine if somebody asked, in month six of e-Bay, “Do you have a $100 million idea here?” Nobody could have told you that. So instead we have to create a lot of low cost experimentation. We need lots of $25,000 and $100,000 experiments.”
Gary Hamel, in an interview with David Kirkpatrick in Fortune Sep-6-2004
VC Business Model Focus is on Exit Not Sustainability
If you can look at your business as ebb and flow–acknowledging the need of renewal even at the core and requiring constant exploration at the edges to find new opportunities–you may not tell the crescendo story that excites the professional investor, but you may have a much better map for how to prosper.
On a visit to Leningrad some years ago I consulted a map to find out where I was, but I could not make it out. From where I stood, I could see several enormous churches, yet there was not trace of them on my map. When finally an interpreter came to help me, he said: “We don’t show churches on our maps.” Contradicting him I pointed to one that was very clearly marked. “That is a museum,” he said, ” not what we call a ‘living church.’ It is only the ‘living churches’ that we don’t show.”
It then occurred to me that this was not the first time I had been given a map which failed to show many things I could see right in front of my eyes.
The opening paragraphs to E. F Schumacher’s “A Guide for the Perplexed.”
Advice For Entrepreneurs Who Want to Build an Enduring Business
A long term viable business model embraces ebb and flow: it organizes the abandonment of failed and obsolete products to enable investing in new growth.
- Sustaining Is More Important Than Starting
- Exists vs. Enduring Companies
- William Feather on ‘Perseverance Rewarded‘
- 8 Tips for Evaluating Funding Alternatives
- Ben Kaufman on “What Raising Money Means”
- A Guide for the Perplexed: Mapping the Meaning of Life and the Four Levels of Being : Maria Popova offers a detailed exploration of Schumacher’s four levels of being (he actually outlines a hierarchy of four levels of physical existence–mineral plant, animal, man–and two spiritual).
Among my other pursuits, I envision a Silicon Valley renaissance that brings a love of art, culture, place, and the divine spark alive and innate within our humanness out into the open.
To that end, I’m working on some ideas that revive Parisien style salons. Imagine curated one-of-a-kind intimate living art experiences. Seasonal dishes. Cross-fertilization of folks from the agriculture/foodie arena, the arts, and the techie financiers of the region.
Inspiration and pushing our edges is not a solitary act.
The Italian Renaissance wasn’t about one artist, one patron. It was a movement. A concerto with many players in the orchestra. I concur with this statement from the Montalvo Arts Center in Saratoga, CA:
“While the voice of an idea may appear to be individual, in fact the emergence of new ideas is a collective effort.”
Evelyn Rodriguez “About Page“
It’s a compelling vision. To the extent that we can create opportunities for collaboration and shared improvisation that infuse art with our strengths in science and technology I think it would be possible to spark a new Renaissance. In Finding Silicon Valley in Two Passages from E. B. White’s “Here Is New York” I observed
What the Silicon Valley settlers lack in comparison to those who aim for New York–probably less interest in the arts or finance–they compensate for in their commitment to innovation, science, and technology.
I wonder if we have neglected the arts to our detriment.
Evelyn Rodriguez elaborates on models for collective efforts in “The Myth of the One-Woman Inspirational Whirlwind” and references a great quote by Michael Schrage:
“If we really want to understand innovation and collaboration, we have to explore shared space. Consider Watson & Crick: How many experiments did they do to confirm DNA’s double helix? Zero. Not one. They built models based on other people’s data. These models were their shared space. Their collaboration in that shared space powered their Nobel Prize-winning breakthrough. If you don’t have a shared space, you’re not collaborating.”
Michael Schrage, MIT design researcher and author of “Serious Play“
On any person who desires such queer prizes, New York will bestow the gift of loneliness and the gift of privacy. It is this largess that accounts for the presence within the city’s walls of a considerable section of the population; for the residents of Manhattan are to a large extent strangers who have pulled up stakes somewhere and come to town, seeking sanctuary or fulfillment or some greater or lesser grail. The capacity to make such dubious gifts is a mysterious quality of New York. It can destroy an individual, or it can fulfill him, depending a good deal on luck. No one should come to New York to live unless he is willing to be lucky.
I think it’s also true, at least in technology, that the residents of SiliconValley “are to a large extent strangers who have pulled up stakes somewhere and come to town, seeking sanctuary or fulfillment or some greater or lesser grail.” Silicon Valley is actually a very small place: whether you find yourself here as a visitor or a new settler you should open yourself to serendipity. Stop by a Bootstrapper Breakfast if you find yourself at loose ends early some morning.
There are roughly three New Yorks. There is, first, the New York of the man or woman who was born here, who takes the city for granted and accepts its size and its turbulence as natural and inevitable. Second, there is the New York of the commuter–the city that is devoured by locusts each day and spat out each night. Third, there is the New York of the person who was born somewhere else and came to New York in quest of something. Of these three trembling cities the greatest is the last-the City of final destination, the city that is a goal. lt is this third city that accounts for New York’s high-strung disposition, its poetical deportment, its dedication to the arts, and its incomparable achievements. Commuters give the city its tidal restlessness; natives give it solidìty and continuity; but the settlers give it passion.
This division into three parts–natives, commuters, and settlers–is also true in Silicon Valley. Many now commute from bedroom communities in the East Bay and points farther East and South. What the Silicon Valley settlers lack in comparison to those who aim for New York–probably less interest in the arts or finance–they compensate for in their commitment to innovation, science, and technology.
I still worry that Silicon Valley is a nicely furnished room in a house that’s burning down (the State of California). I found White’s essay worth reading 70 years after he wrote it, with these two passages in particular offering insights applicable to Silicon Valley.
Some related posts on Silicon Valley:
Don’t congratulate people for raising money. That was never the goal. The goal is building a successful and meaningful business. When people raise money, instead of congratulating them, wish them luck. Their work is just getting started.
Congratulating people for financing perpetuates a problem that has plagued the startup world. The problem is that that it’s easy to focus on the hype surrounding a company, and lose sight of the fundamentals.
This is why our industry is flooded with […] people whose only ambition in life is to raise money, and then sell their company. They have no real interest in building a meaningful and enduring business. If we let [the people] dominate, we all lose.
This is my favorite startup quote of all time (although I don’t know who said it): “Congratulating an entrepreneur for raising money is like congratulating a chef for buying the ingredients.”
Ben Kaufman in “What Raising Money Means to Me“
Four key points for bootstrappers (from 8 Tips for Evaluating Funding Alternatives)
- Revenue, especially break even revenue, is never dilutive of your ownership.
- Paying customers are real proof that there is demand for your product. Getting funded is proof that an investor thinks there will be demand for your product.
- Your most important investors are your spouse, friends, and family who will provide you with emotional support on the entrepreneurial roller coaster.
- Professional investors don’t want control of your business, they want a return on their investment.
Related Posts on Viable Business Models
VCs and angels may talk about changing the world, but their business model rests on a more prosaic calculation: Buy low, sell high. They invest in companies they think will become more valuable, so they can sell their stake for a sizable profit. From the time that VCs invest in a company, they have five years—10 at the most—to sell their entire position, hopefully for many times more than their original investment. After that, it doesn’t matter to them whether the company survives a year or a century.
To put it another way, the VC model is based on creating wealth for investors, not on building successful businesses. You buy into a company early on and sell out a few years later; if you pick well, you can make lots of money. But your profits don’t accrue to the company itself, which could implode after your exit for all you care. Silicon Valley is full of venture capitalists who have become dynastically wealthy off the backs of companies that no longer exist.
Felix Salmon “For High Tech Companies, Going Public Sucks“
Marc Andreessen’s selection as “The Man Who Makes the Future” in a recent Wired cover and interview highlighted five key idea and related project or companies he started as a result:
- 1992: Everyone Will Have the Web (Mosaic at NCSA)
- 1995: The Browser Will Be the Operating System (Netscape)
- 1999: Web Businesses Will Live in the Cloud (LoudCloud)
- 2004: Everything Will Be Social (Ning)
- 2009: Software Will Eat the World (Andreessen Horowitz)
It’s interesting that there is no mention of Jim Clark recruiting him to start Netscape, he does have an interesting aside as to how ephemeral even significant products can be:
Andreessen: One of the first times Zuckerberg and I got together, in 2005 or 2006, he stopped me in the middle of conversation and asked: “What did Netscape do?” And I said, “What do you mean, what did Netscape do?” And he was like, “Dude, I was in junior high. I wasn’t paying attention.”
Felix Salmon offered a less enthusiastic endorsement than Wired:
“In many ways, Andreessen’s entire fortune has been built on the greater-fool theory: if you build something trendy enough, there’s probably going to be a huge lumbering company out there somewhere willing to overpay for it. Hence the buzziness of the Wired interview — clouds! social! SAAS!”
Felix Salmon in “The Problem with Marc Andreessen“
Salmon’s assessment echoes Chris O’Brien 2009 profile, “The Curious Case of Marc Andreessen” written just prior to the launch of Andreessen Horowitz, which triggered a Curious Case of Marc Andreessen Part 2. Some excerpts
And then there’s Marc Andreessen, the businessman, who seems to me to be — how can I put this charitably? — a bit of a dud. […]
I don’t want to imply he’s a failure, because he’s not. But when I look at Andreessen’s business track record, I’m less interested in his checking account than the financial statements of his companies. As far as I can tell, Andreessen has never started or operated a profitable business, with one exception: Netscape turned an annual profit, back in 1996 when it posted a $19 million profit. Of course, that was when the company still charged you $49 to buy a copy of Netscape Navigator. Once Microsoft started giving its Explorer browser away for free, that was all she wrote. Andreessen and Netscape couldn’t figure out another business model, and vanished a couple of years later in a complex deal with Sun Microsystems and AOL that was announced November 1998.
Andreessen’s reputation has only risen as he has emerged as a leading angel investor for the Web 2.0 industry, advising or investing in companies like Facebook and Twitter. These companies reflect the philosophy of service and technology over revenues and profits.
Of course, at some point, these priorities have to change. A company has to actually make money. Innovation can’t be sustained by creating a venture-backed Ponzi scheme where one money-losing start-up is sold to another, which is then sold to another.
Losing money indefinitely isn’t just a financial failure. It represents a failure to truly understand how a service or product is creating value for a customer, how to communicate that value, and how to persuade the customer to pay above and beyond for that value.
That, all too often, is where the valley still falls short: Failing to innovate around the business to the same degree it innovates around the technology.
Three years after O’Brien’s article his assessment seems prescient.
One of the few times in my life I have had a hardwall office (bedrooms and conferences rented by the hour don’t count) was when I started Full Circle Connections. I printed out posted a number of quotes on one of the walls starting with this one. I have bolded the sentences that resonated directly with my life experiences. You can take more than one day a year to contemplate your life.
“There are no few of us who find ourselves washed up on the shores of middle age wondering what happened to that bright promise, asking ourselves why we could never fit in the usual corporate slots, why we have always been our own worst enemies–yet knowing, as we’ve always known, that we are destined to make our mark…somewhere.
Here in Silicon Valley we celebrate entrepreneurship. Rightly so, history may well call this place the greatest entrepreneurial explosion in human history. But in celebrating, we often forget the cost: the dark obsessions, the wrecked families, the career failures. Most of all the terror–the daily depressions and nightly sweats, wondering why, why, you can’t fit into corporate life, why you have to shoot your mouth off and go and do the impolite just because you know its right; then wondering if you really have the courage to risk everything to go it on your own.
The most disturbing and least admitted truth of Silicon Valley is that no one wins all of the time and most of us never win at all. That means someday, perhaps every day, each us of will be battered and tired and running away from our destiny, from what matters most to us.
Just what our destiny is–starting our own company, changing our careers, devoting ourselves to our families–only our hearts can tell us. A spring morning, like this Good Friday, with its hum of redemption and renewal, is a good time to start listening.”
Excerpts from Michael Malone’s “A good day to contemplate the rest of life.” April 17, 1996 San Jose Mercury News
I was in the process of re-assessing my life 16 years ago when I first read Malone’s column. It was good advice then and it’s good advice now. The life I have chosen as an entrepreneur is never easy and it’s never dull. But it doesn’t mean that I don’t also strive to become a better father or a better husband or a better brother or a better son or a better grandfather or a better uncle and or a better friend and or a better neighbor. Because I need to better at all of those roles as well.
The full column is available in Malone’s The Valley of Heart’s Delight: A Silicon Valley Notebook, 1963–2001
“Entrepreneurs start businesses because..they have no choice. Passion and energy drive them on good days and sustain them on bad days.”
Barry Moltz in “You Need To Be a Little Crazy“
Saturday March 24, 9-11am
Ground Floor Silicon Valley, located at 2030 Duane Avenue, Santa Clara,
We are launching new Mastermind groups in response to several requests from entrepreneurs who wanted to form an advisory board of peers with a deeper understanding of each other’s businesses and shared accountability.
Come to the meeting and see if you feel comfortable with the other folks that we invite and we will work out times and locations. There will certainly be one group that meets on weekends, there may be others that meet on a workday.
The difference between these mastermind meetings and a Bootstrapper Breakfast meeting is that anyone is welcome to drop in to a breakfast, this will be the same group meeting and holding each other accountable for goals and commitments. Over time, because these entrepreneurs are more or less in the same stage of their business and meeting multiple times they will get to know each better than the average breakfast attendee.
There is no charge for this open house but if you decide to join a facilitated small group there is a small monthly subscription. Want to be notified of future open houses join Bay Area Mastermind meetup.
If you are looking to rent a desk or conference room by the hour, day, week or month here are four tools you can use to search. All of them cover Silicon Valley and other metropolitan regions as well
Implications for the future of startups and small service firms:
- It’s interesting that same forces that are making fractional leases on computing capability available in the cloud seem to be at work enabling the ad hoc provisioning of workspaces.
- Coupled with the pervasive availability of wifi in coffee shops and eating establishments and transition to laptops or even smaller form factor tablets and smartphones for computing support, the old assumptions that an incubator provided value offering office space, Internet connectivity, and space in a co-located datacenter are defunct.
- For startups with less than a dozen people, both their computing and physical office configurations are becoming increasingly virtual.
I think this will enable new opportunities for firms to provide professional services, knowledge work, and clerical support in a variety of new forms and delivery modes by interacting either in virtual on-line spaces and/or virtual office space on demand.
Update Thu-Feb-09: A commenter suggests evenues.com also provides information about meeting rooms and event venues. I took a quick look at the site for Meeting Rooms San Jose and learned about a number of new venues to consider. The site also had an interesting blog post on “A Brief History of Coffee Houses as Meeting Places” which reminded me of this RSA video of Steve Johnson on “Where Good Ideas Come From.” In it he explains that coffee houses were one of the first co-working establishments that allowed people to mix and recombine different thoughts to form new ideas.
Update Fri-Feb-10: I came across Cloud Virtual Office (tagline “Virtual Offices & Touchdown Space”) researching “Going Bedouin” a term coined by Greg Olsen that I had written about previously on “Bootstrapping Startups: Bedouin, Global, Incessant, and Transparent” Related blog posts:
- the original blog post by Greg Olsen is no longer available but a copy that admits an image that contained his recipe for a Bedouin startup is still up at “Going Bedouin” on GigaOm
- “The Long Hallway” by Jonathan Follett
Update Mon-Apr-2 a reader suggested DesksNear.Me as another tool for this list.
A post on Matt Wensing’s blog alerted me to an atypical post on TechCrunch by Mark Hendrickson “Startup School and the Instigation of Entrepreneurship.” It’s an insightful critique of the startup mythology of Silicon Valley. Some excerpts:
“We are experiencing a generation of entrepreneurs who prioritize the phenomenon of entrepreneurship over its justification; we ought to be concerning ourselves as a community with teaching folks not only how to get into the entrepreneurship game but how to find their purpose as well.”
I think the dominant myth of Hollywood is to be part of a movie. Silicon Valley’s default aspiration is to be part of a venture backed startup. How do you know you are in a venture backed startup? You secure investment from a venture firm and are celebrated in the pages of TechCrunch. This detracts from a focus on value creation, as Jeff Nolan observed in January 2009, writing in “Why the TechCrunch Economy Will Falter” (bold in original): “…a fundamental flaw in the startup economy promoted by a wide swath of pundits and proponents, that starting is more important than sustaining.”
Hendrickson continues, using the phrase “deliberate practice” which echoes Anders Ericsson‘s “The Role of Deliberate Practice in the Acquisition of Expert Performance”
We should develop and promote a more deliberate practice of discovering passions worth pursuing and problems worth solving in a less haphazard way. […] But without it, institutions like YC and its Startup School will likely continue receiving and channeling ever-more entrepreneurs who may be well-versed in tactics but who lack anchoring values that drive their efforts. And that will be a shame not only for those individuals but the investors and customers who await the fruits of their labor, which otherwise could have amounted to so much more.
Tim O’Reilly has also suggested to entrepreneurs that they “Work on Stuff that Matters.” Alas this is easier said than done but essential to making a significant contribution. In “Overnight Success” I recommended that “if you define success as making a lot of money quickly you should go into sales and cut out the middleman”.
It’s easy to lecture other people about their shortcomings, or at least your perception of their shortcomings. I think the celebration of financing events as accomplishments instead of as a sometimes necessary precursor to the start of real efforts is one problem that Jeff Nolan, among many others, has already touched on. One of the differences between the 80’s and today is a condensed time frame caused by a “built to flip” mentality that focuses on “cashing out” in a year or two instead of five to ten years building a real company.
I am reminded of the movie “Hoop Dreams” which documented how an entire generations of inner city boys are aimed at a few slots in the NBA. Most that miss are left with few if any marketable skills or fallback options for earning a living. But all along the way they are encouraged by coaches, scouts, and others who are paid to fill the pipeline with new recruits. I worry that a lot of what passes for entrepreneurial advice is given by folks who profit from their participation in the venture ecosystem and it is encouraging an “entrepreneurial lifestyle” that bears little resemblance to what’s needed to create and manage a going concern.
People ask me why we work with bootstrapping entrepreneurs and how we make any money at it. I like the orientation that most bootstrappers have toward creating value for their customers (it’s the only way they can get paid so it’s also a matter of enlightened self-interest). We run our practice on a “low intensity long duration” model that assumes success is going to require perseverance, intelligent experimentation, and a commitment to solving problems that will make a difference in people’s lives (a shorter answer is that we make less than we might serving other firms but we enjoy it more so it balances out).
Silicon Valley is a nicely furnished room in a house that’s burning down, the state of California.
- From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week.
- For all of last year, we saw an average of 3.9 events per week.
- Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.
The same tracking system has been in place throughout the three-year period.
The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.
Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars.
From Joel Kotkin’s “The Golden State’s War on Itself” in the Summer 2010 issue of City Journal:
California has long been a destination for those seeking a better place to live. For most of its history, the state enacted sensible policies that created one of the wealthiest and most innovative economies in human history. […]
Recently, though, the dream has been evaporating. Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent. […]
Since the financial crisis began in 2008, the state has fared even worse. Last year, California personal income fell 2.5 percent, the first such fall since the Great Depression and well below the 1.7 percent drop for the rest of the country. Unemployment may be starting to ebb nationwide, but not in California, where it approaches 13 percent, among the highest rates in the nation. […]
Silicon Valley, for instance—despite the celebrated success of Google and Apple—has 130,000 fewer jobs now than it had a decade ago, with office vacancy above 20 percent. […]
And Cisco, whose fortunes rose supplying the “picks and shovels” of the Internet revolution plans to shed 10,000 employees, or about 14% of its workforce by laying off 7,000 and getting 3,000 to accept early retirement according to a report by Ashlee Vance “Cisco said to plan cutting up to 10,000 to buoy profit”
Cisco Systems Inc. (CSCO), the largest networking-equipment company, may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans.
The cuts include as many as 7,000 jobs that would be eliminated by the end of August, said the people, who asked not to be identified because the plans aren’t final. Cisco is also providing early-retirement packages to about 3,000 workers who accepted buyouts, the people said.
And Joint Venture Silicon Valley noted on Valentines Day 2011 that “Structural flaws in local government budget threaten to sabotage the regions gains.”
A growing crisis in state and local government finance is undermining the economic recovery in Silicon Valley, according to the 2011 Silicon Valley Index released today by Joint Venture: Silicon Valley Network and Silicon Valley Community Foundation.
The comprehensive yearly study on the economic strength and overall health of Silicon Valley shows signs of a slow comeback from the deep recession, but it also reveals a precarious road ahead for cities, towns and counties in the region as public revenue drops while the demand for services climbs.
“Silicon Valley’s economy is making slow but noticeable progress recovering from the major blow delivered by the recession,” said Russell Hancock, CEO of Joint Venture, “but unless we address the fundamental structural issues in our local governments we cannot sustain continued growth.”
As entrepreneurs we have to identify and pursue the opportunities that are available, not lament the loss of earlier ones we may not have taken full advantage of. But I wonder if we paid a little more attention to local and state government policies and decisions, it might pay a significant dividend in improvements to the economic environment that is the necessary platform for our new business efforts.
Update July 14: I have reflected on this post and realized how difficult it can be to restrict your focus to those issues you can control or at least affect. As Stephen Covey points in “7 Habits of Highly Effective People” under the first habit of “Be Proactive” your circle of awareness is much larger than your circle of influence.
It’s not my intent to start a political discussion or to to start a round of “Ain’t it Awful” but I worry that these structural issues were identified by independent observers with a stake in California’s ongoing economic prosperity, not people trying to complain or generate page views. I take them very seriously. I worry that the challenges they have identified will not be easy to address much less fix, and that for the most part the situation continues to deteriorate. Without thoughtful and concerted action a new equilibrium may be reached that looks closer to today’s Michigan than the California of the last few decades.
Update Sep-24-2012: a report from the Manhattan Institute, “The Great California Exodus: A Closer Look“, by Tom Gray and Robert Scardamalia documents a migration of 3.4 million residents out of the state since 1990. Some excerpts:
For decades after World War II, California was a destination for Americans in search of a better life. In many people’s minds, it was the state with more jobs, more space, more sunlight, and more opportunity. They voted with their feet, and California grew spectacularly (its population increased by 137 percent between 1960 and 2010). However, this golden age of migration into the state is over. For the past two decades, California has been sending more people to other American states than it receives from them. Since 1990, the state has lost nearly 3.4 million residents through this migration.
This study describes the great ongoing California exodus, using data from the Census, the Internal Revenue Service, the state’s Department of Finance, the Bureau of Labor Statistics, the Federal Housing Finance Agency, and other sources. We map in detail where in California the migrants come from, and where they go when they leave the state. We then analyze the data to determine the likely causes of California’s decline and the lessons that its decline holds for other states.
The data show a pattern of movement over the past decade from California mainly to states in the western and southern U.S.: Texas, Nevada, and Arizona, in that order, are the top magnet states. Oregon, Washington, Colorado, Idaho, and Utah follow. Rounding out the top ten are two southern states: Georgia and South Carolina.
California has an opportunity deficit that shows up in its employment data and its migration statistics. We can understand the nature of that deficit clearly when we compare the Golden State with those that lure its residents away. In such a comparison, as we have seen, one fact leaps out: living and doing business in California are more expensive than in the states that draw Californians to migrate. Taxes are not the only reason for this, but we have highlighted their effect because taxes—unlike rents, home prices, wages, or electric bills—can be changed through sheer political willpower.
California has cut taxes in the past, most dramatically with 1978’s Proposition 13, and when it has done so, prosperity has followed. Ballot propositions this November aim to do the reverse, raising taxes on business owners while the state is still struggling to hold its own against more aggressive, confident rivals. The results will send a strong signal, whichever way they go: the state’s voters will be deciding to continue on the path of high taxes and high costs—or to make a break with the recent trend of decline.
In the meantime, California’s leaders are not powerless to stem the state’s declining appeal. For example, they certainly can do something about the instability of public-sector finances, which is likely one of the key factors pushing businesses and people toward other states. They can also rethink regulations that hold back business expansion and cost employers time and money. And though there is no changing the fact that California is more crowded than it used to be and is no longer as cheap a place to live as it once was, policies can make the state more livable. One reason that land is costly now is that much of it is placed off-limits to development. Spending on transportation projects where they are really needed—in congested cities—can ease life on freeways that now resemble parking lots.
California’s economy remains diverse and dynamic; it has not yet gone the way of Detroit. It still produces plenty of wealth that can be tapped by state and local governments. Tapping that private wealth more wisely and frugally can go far to keep more of it from leaving.