Don’t Waste Time Painting Tom Sawyer’s Fence: Proving Someone Wrong Is A Poor Motivator

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

Ben stopped nibbling his apple. Tom swept his brush daintily back and forth – stepped back to note the effect – added a touch here and there – criticised the effect again – Ben watching every move and getting more and more interested, more and more absorbed. Presently he said:

“Say, Tom, let me whitewash a little.”

Tom considered, was about to consent; but he altered his mind:

“No – no – I reckon it wouldn’t hardly do, Ben. You see, Aunt Polly’s awful particular about this fence – right here on the street, you know – but if it was the back fence I wouldn’t mind and she wouldn’t. Yes, she’s awful particular about this fence; it’s got to be done very careful; I reckon there ain’t one boy in a thousand, maybe two thousand, that can do it the way it’s got to be done.”

“No – is that so? Oh come, now – lemme, just try. Only just a little – I’d let you, if you was me, Tom.”

Mark Twain “The Adventures of Tom Sawyer”  Chapter 2

In “You Can’t Do It is a Powerful Motivation” Rand Fishkin recounts accurate advice he receive and ignored:

  • “You can’t build a big company in the SEO space,” said plenty of business people I talked to. “Stick with consulting–it’s what you know and you’ve got a great brand.”
  • “You need to hire a head of product and build a product team.”
  • “You can’t build a search engine sized web index on $1 million.”
  • “Don’t try to raise money now – you won’t get any.”
  • “The self-service / web app model is wrong. You need to build an enterprise sales force / charge more for your product / create embedded software so it’s not so easy to quit.”

Most of this is implementation advice from folks with considerable implementation experience. No one was arguing about customer need, except perhaps the last one is about value proposition. He needs to turn this into a positive narrative. The Germans have an aphorism: “Stubbornness is the energy of fools.” He should reframe this as a persevering focus on his prospect’s needs.

Sam Walton suggested an approach Rand might consider in his ten rules for building a successful business:

Rule 10: Swim upstream. Go the other way. Ignore the conventional wisdom.
If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction. But be prepared for a lot of folks to wave you down and tell you you’re headed the wrong way. I guess in all my years, what I heard more often than anything was: a town of less than 50,000 population cannot support a discount store for very long.


Advice on Crowdfunding from Matt Oscamou, Mark Palaima, and Noah Dentzel

Written by Theresa Shafer. Posted in 1 Idea Stage, Crowdfunding, Startups

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.


Mentor at B2B Startup Weekend

Written by Theresa Shafer. Posted in Events, Silicon Valley, Startups, Workshop

Startup Weekend logoCome 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.

Office Hours: Schedule Time to Review Your MVP Readiness

Written by Theresa Shafer. Posted in Startups

Office Hours ButtonAre you a startup founder or an innovator at a tech company with burning questions looking to get some great advice on your venture or idea from an lean startup expert for B2B startups?

SKMurphy functions as a startup advisor to help you understand the process of building a business.  We offer a no-cost, no-obligation MVP Readiness Assessment.

Request a consultation during our MVP Readiness Office Hours at

Improve Your Sales Pitch

Written by Theresa Shafer. Posted in Sales, Startups, Workshop

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 Register Now
May 21&22, 2014 “Great Demo!” San Jose, CA Register Now
October 15&16, 2014 “Great Demo!” San Jose, CA Register Now

Tips for Choosing a Logo

Written by Theresa Shafer. Posted in 1 Idea Stage, Startups

  1. Text Treatments: text logos are simple, the company name is always right there. Most high tech logos are text treatments, they are clear and simple. With text logos you have instant impact, customers don’t need to decipher anything. Another benefit of text treatments are logo aspect ratio comes naturally with words. They always seem to work whether you are shrinking or stretching them. Examples are Google, IBM, Intel, and eBay.
  2. Icons: symbol logos can be recognized faster, our brains process images quickly than words alone. But they require more  work and $$$ on branding and presence before people have the connection between symbol and company. Examples are Nike‘s swoosh, Apple‘s apple and Linux‘s penguin. Notice these logos have nothing to do with the companies product: they are about being different and being memorable. They are also very simple designs.
  3. Keep it Simple:  like many other types of design, the best logo designs are elegantly simple. They shrink, stretch, or twist without losing their intangible emotional resonance. Color may add to the design, but they still look great in black and white. In fact, most logo designers use grayscales to do the initial design, then move it to color. They have to look good on your business card, on literature, and on your website.

I have used TheLogoCompany and LogoWorks and were very pleased with the results. My favorite is TheLogoCompany, they have a good article about colors. Others have been very happy with 99Designs.

LSC Workshop on Engineering Your Sales Process

Written by Theresa Shafer. Posted in Events, Sales, Startups

If you missed SKMurphy and SalesQualia at Lean Startup Conference’s workshop, Sean Murphy and Scott Sambucci led an interactive workshop on developing and debugging your repeatable and scalable B2B sales process. In the workshop, we worked a number of sales issues that the attendees from lean startups had:

  • Can’t get potential customers to call back
  • Won’t make a decision
  • Prospects like the beta, but they will not buy
  • Deals stall

Quick Summary

Engineering Your Sales Process workshop will help you learn from common sales problems by using conscious planning and experimentation. Traditional sales training stresses “every no moves you closer to a yes.” Our approach to engineering your sales process says instead, “What looks like noise is often actually data.” Designing and debugging a repeatable sales process is key to a sustainable business, and we’ll address how to diagnose common problems to determine likely root causes. You will leave with a scientific approach to understanding your customers’ needs and their buying process so that you can scale your business in harmony with it.

You can view the slides at

Also here is the link to a readable version of the sales map in mindomo

Workshop feedback

Recap of “Work For Equity” A Startup CEO Panel at SVCC 2012

Written by Theresa Shafer. Posted in Events, Founder Story, Startups

If you missed our “Working for Equity” panel at Silicon Valley Code Camp 2012, Theresa Shafer and the four CEO’s on the panel had a lively conversation about what’s really involved in leaving your day job and striking out on your own or with partners.

Quick Summary

Panel discussion with four software startup CEOs offering their perspective on the practical realities of starting and growing a company. This session is for both aspiring and active entrepreneurs, it will outline important tips and issues to consider if you are investing your time in a startup. Each panelist gave a 5 minute lightning talk on background and lessons learned, followed by a Q&A session with the audience.

Panel of startup founders:

Here are slides in PDF format

Tools for Finding a Physical Workspace: Deskwanted, LiquidSpace, Loosecubes, OpenDesks

Written by Sean Murphy. Posted in Consulting Business, First Office, Silicon Valley, Startups

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

Updated: Also consider Evenues and Cloud Virtual Office, see below for details.

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 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.

Three Useful Tools: MyPermissions, SocialMention, HackerFollow

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

MyPermissions: Checks for third party application access to your Facebook, Twitter, Google, Yahoo, LinkedIn, Dropbox, Instagram, and Flickr accounts.

SocialMention: Allows you to do keyword and phrase search across more than one hundred social media sites including Twitter, Facebook, FriendFeed, YouTube, Digg, Google, etc…

HackerFollow: follow comments and posts by your favorite Hacker News contributors

Slides from “Working For Equity” Panel at SVCC 2011

Written by Sean Murphy. Posted in Events, Founder Story, skmurphy, Startups

Here are the slides from today’s “Working for Equity” panel at Silicon Valley Code Camp. It was a standing room only crowd of over 70 that made for a very interactive session with the panel:

  • Liz Fraley founder of Single-Sourcing Solutions.
    Before founding Single-Sourcing Solutions, Liz Fraley worked in both high-tech and government sectors, developing and delivering technical design and strategy of content creation, management, and delivery. Specializing in practical development and deployment, she continually looks for new ways to share information and strengthen the ecosystem of professionals around her.
  • Apurva Mehta founder of RecordBox.
    RecordBox is a virtual notebook for music students which makes the creation, storage, organization, and annotation of educational recordings easy. Before RecordBox, Apurva worked as a systems engineer in the Cloud Platforms group at Yahoo! in Sunnyvale. He has been programming enthusiastically since his early teens and has only recently taken up the entrepreneurial challenge of transforming products into businesses.
  • Carl Ludewig CEO of  Ludewig Multimedia.
    Carl wants to change the way applications are developed by empowering designers and business users. In a world where the cloud, mobile and desktop need to fit together, Ludewig Multimedia looks to take a holistic approach with the next generation of software design tools. Carl’s prior venture was the mobile advertising company Ad Infuse, which was sold to Velti in 2009. Carl is a software engineer and musician who believes that creative talent is the key to success.

Restlessness & Discontent, Gumption & Sisu

Written by Sean Murphy. Posted in Quotes, Startups

“Though Felsenstein foresaw the rise of personal computers, he’s still waiting for the kind of democratization that he hoped would accompany it, when cheap computers in the hand of “the people” would allow everyone to take information, manipulate it to better reflect the truth, and distribute it widely.

“It’s beginning to happen, but not the way that I had assumed,” he says, “Lincoln Steffens once commented, ‘I have seen the future and it works,’ but I’m with the guy who changed that to, ‘I have seen the future and it needs work.’”

From the “Afterward 2010″ chapter of “Hackers” by Steven Levy

Lee Felsenstein was one of the prime movers behind the Homebrew Computer Club and one of my inspirations for the Bootstrappers Breakfast. I have had the chance to meet him and hear him speak several times–Silicon Valley remains a very small place despite what you may hear–and he remains an energetically discontent engineer. People who are content or phlegmatic rarely try to change things.

I think one risk for an entrepreneur is to be perpetually discontent:  the fellowship and community of other entrepreneurs can help you to renew your gumption.

“Restlessness and discontent are the first necessities of progress.”
Thomas Alva Edison

See also

Saras Sarasvathy’s Effectual Reasoning Model for Expert Entrepreneurs

Written by Sean Murphy. Posted in 1 Idea Stage, 4 Finding your Niche, Customer Development, skmurphy, Startups

Update Feb-24-2011: Since I first wrote this in 2010 the Effectuation.Org site has been considerably upgraded and contains a lot more information on Saras Sarasvathy’s research.

Recapping ideas, papers, and books that had changed my life yesterday reminded me of Saras Sarasvathy’s Effectual Reasoning Model from her 2001 paper “What Makes Entrepreneurs Entrepreneurial” (There is an annotated version on the Khosla Ventures site at )

What follows are some quotes from “What Makes Entrepreneurs Entrepreneurial.”

Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.

Effectual thinkers are like explorers setting out on voyages into uncharted waters.

All entrepreneurs begin with three categories of means

  1. Who they are–their traits, tastes,and abilities;
  2. What they know–their education, training, expertise, and experience
  3. Whom they know–their social and professional networks.

In our “Idea to Revenue” Workshop we talk about three kinds of capital that startups begin with: intellectual, social, and financial. We don’t call out what she refers to as “human capital” or “who they are–their traits, tastes, and abilities” as a resource but instead encourage teams to “begin in phase two.” That is, to build on prior accomplishments and long term interests so that early customers view the startup as a continuation of earlier efforts and focus.

But I like this model of bootstrapping entrepreneurs as foragers: living off the land as hunter-gatherers until they can find a market to homestead. Bootstrappers have to start from where they are and search for opportunities. Pasteur advised that “Chance only favors the prepared mind” so you have to open yourself up to possibilities and be prepared to be surprised (which is another way of saying you have learned something new). Some more quotes from her paper:

Using these means, the entrepreneurs being to imagine and implement possible effects that can be created with them. Most often they start very small with the means that are closest at hand and move almost directly into action without elaborate planning.

Plans are made and unmade and revised and recast through action and interaction with others on a daily basis. Yet at any given moment, there is always a meaningful picture that keeps the team together, a compelling story that brings in more stakeholders and a continuing journey that maps uncharted territories.

Eventually certain of the emerging effects coalesce into clearly achievable and desirable goals–landmarks that point to a discernible path beginning to emerge from the wilderness

Seasons entrepreneurs, however, know that surprises are not deviations from the path. Instead they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through the jungle. The unexpected is the stuff of entrepreneurial experience and transforming the unpredictable into the utterly mundane is the special domain of the expert entrepreneur.

One of the reasons that we run the Bootstrapper Breakfasts as 90 minute unconferences–where folks introduce themselves and put issues on the table they would like to discuss–is that it keeps everyone in an entrepreneurial frame of mind:

  • When you hear someone describe a challenge that they are facing, it gives you much better insight into their thinking and allows you to evaluate what they might be like to work with.
  • Often as not they are describing a common problem, or aspects of a common problem. Hearing their perspective just on the problem can give you new insights into how to solve it.
  • It’s good practice to learn how to ask for advice and insight. Entrepreneurs need to do a lot of that in the early market especially.
  • Explaining how you managed an issue or situation can deepen your understanding of you solution, it forces you to put it into terms others can use and understand. This is good practice for scaling up (e.g. adding your first employee).

Sarasvathy stresses the cooperative nature of entrepreneurship in the paper, a perspective that I share. Often an entrepreneur is attempting to obsolete an aspect of the status quo, but they have much less competition and much more opportunity for collaboration than is appreciated.

Markets are stable configurations of critical masses of stakeholders, who come together to transform the outputs of human imagination into the forging and fulfillment of human aspirations through economic means.

Effectual reasoning may not necessarily to increase the probability of success of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.

Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it–it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.

She highlights three key differences between effectual reasoning and traditional startup management models:

  • Risk taking
    • Traditional: expected return, work the plan to deliver results to your investors (“Ready Aim Fire” can become “Aim–not big enough–Aim–not big-enough–Aim…”).
    • Effectual: affordable loss, make many small mistakes as early and cheaply as possible to speed learning (“Ready Fire Steer“)
  • Focus:
    • Traditional: competition
    • Effectual: strategic partnership (especially with early customers)
  • Value Creation
    • Traditional: rely on pre-existing knowledge to aim for a known market you can dominate and exploit
    • Effectual: leverage contingencies; create opportunities as you map a new market

She goes into some detail on the “affordable loss principle” and offers extracts from an interview with an expert entrepreneur’s approach to a new market:

While managers are taught to analyze the market and choose target segments with the highest potential return, entrepreneurs tend to find ways to reach the market with minimum expenditure of resources such as time, effort, and money. In the extreme case, the affordable loss principle translates into the zero resources to market principle. Several of the expert entrepreneurs I studied insisted that they would not do any traditional market research, but would take the product to the nearest possible potential customer even before it was built. To quote but one of them, “I think I’d start by just… going… instead of asking all the questions I’d go and say.. try and make some sale. I’d make some… just judgments about where I was going — get me and my buddies — or I would go out and start selling. I’d learn a lot you know..which people.. what were the obstacles.. what were the questions.. which prices work better and just DO it. Just try to take it out and sell it. Even before I have the machine. I’d just go try to sell it. Even before I started production. So my market research would actually be hands on actual selling. Hard work, but I think much better than trying to do market research”.

In finding the first customer within their immediate vicinity, whether within their geographic vicinity, within their social network, or within their area of professional expertise, entrepreneurs do not tie themselves to any theorized or pre-conceived “market” or strategic universe for their idea. Instead, they open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.

This is also an approach that favors older entrepreneurs to the extent that they have larger social networks (based on more shared work experience with more people) and deeper professional expertise. The one caveat is that they have to be open to new possibilities and not be blinded by what they “know” to be true in the face of new information.
This 2001 paper offers another perspective on bootstrapping entrepreneurship that is independently derived and predates “Four Steps to the Epiphany (2003)”, “Blue Ocean Strategy(2005)”, and the “Sales Learning Curve (2004).” But all four are clearly addressing different aspects of the same core paradigm that takes a scientific or hypothesis driven approach to new products and new markets.

I will leave with two final quotes from the paper which highlights the value of establishing enduring relationships.

Expert entrepreneurs [...] are actually in the business of creating the future, which entails having to work together with a wide variety of people over long periods of time.  [They fill their future] with enduring human relationships that outlive failures and create successes over time

This is largely ignored in our entrepreneurship curricula which tend to focus on market research, business planning, new venture financing and legal issues. As far as I know no entrepreneurship programs offer courses in creating and managing lasting relationships or stable stakeholder networks, nor on failure management.

Related Posts

Federated Entrepreneurship 2

Written by Sean Murphy. Posted in Community of Practice, Events, skmurphy, Startups

Recapping on my earlier “Federated Entrepreneurship” post from January 5.

A federation is a union of partially self-governing units with a constitution that does not allow unilateral changes by a central governing body. I think it’s also a good model for what’s required to create an economically dynamic region. One parallel would be to a barn raising or Finnish talkoot, where a community comes together to solve an urgent problem that is beyond the means of a member or family in the community. As one of my old clients once remarked “it takes a village to raise a startup” and I think it takes a federation of entrepreneurs to improve the economy in a region.

Justin Bacon described this as a goal for his Minnesota Lean Startup Group in a comment on the LinkedIn Group

What we all hope to learn, the encouragement and advice that we give and/or receive, the lessons learned that we share and the relationships that we build, are as much about building this kind of community here locally as it is about helping us foster our own bootstrapped tech-startups.

Two other well known entrepreneurs have shifted their focus to entrepreneurial education.

Sramana Mitra outlined an ambitious New Year’s Resolution for 2010

Through the Entrepreneur Journeys project, I have come to conclude that the most vulnerable phase in an entrepreneur’s life is the pre $1 million revenue stage. This is where numerous ventures fail. Once the $1 million revenue milestone is crossed, entrepreneurs find it easier to find additional customers, manage working capital, and access funding, whether it is credit or equity.

In my roundtables, the vast majority of entrepreneurs I work with are in this rather vulnerable pre $1 million revenue stage.

Thus, I have come to the conclusion that if I could help a million entrepreneurs globally reach $1 million in revenue (and beyond), that would be the foundation of a robust, distributed, and sustainable economic value creation that would add up to a trillion dollars in global GDP. It would also result in creating at least 10 million jobs around the world.

Through my efforts — blog, books, columns, roundtables — I am trying to develop a scalable entrepreneurship education system that entrepreneurs from every corner of the world can access. I am sure, in 2010, this work will gain further momentum.

But I do need your help in getting the word out that this resource base is available for entrepreneurs who wish to access it. Each of you — if you believe in this vision — can directly or indirectly influence, perhaps, another hundred entrepreneurs, and help them clear the all-important $1 million revenue hurdle. By using bootstrapping, crisp positioning, and laser-sharp focus, entrepreneurs can, each in their individual domains, build small businesses with solid foundations.

Eric Ries also outlined a desire to move Towards a New Entrepreneurship in his first post of 2010:

When I started writing about the lean startup, my aspiration was to do more than just share a handful of tips and tricks that work for consumer internet startups. I believe the only way to improve our chances as entrepreneurs is to develop a working theory of entrepreneurship.

Like other industries – from publishing to automobiles – entrepreneurship is in the process of being disrupted by globalization. On the whole, this is a good thing for America and for our civilization. The cost of creating new companies is falling rapidly, and access to markets, distribution, and information is within the reach of anyone with an internet connection. The result is a profound democratization of the digital means of production.

In a subsequent post today Eric did a roundup of Lean Startup Resources; there is also this list of Meetups.

Related posts:

  • “Continuing Education in Entrepreneurship” from October 2006 suggests networking offers “knowledge that isn’t written down” (and not to be found in Mr. Google’s basement):
    “I had this epiphany that I had spent the last dozen years or so, since I started attending Software Entrepreneur Forum (now SDForum) and Churchill Club meetings, in this ad hoc program in continuing entrepreneurial education. Books are valuable, and not enough entrepreneurs do enough reading, but there is also a category of knowledge that hasn’t been written down yet. And you can gain wisdom from listening to someone who has played the game–even if it’s just their mistakes–that you would otherwise have to gain from your mistakes experience.”
  • Breakfast with Tom Anyos of Technology Ventures Corporation” Between 2002 and 2008 TVC offered a set of six monthly classes twice a year in Silicon Valley:
    • Entering the Entrepreneurial World
    • Market Research & the Marketing Plan
    • Financial Management
    • Preparing & Presenting the Business Plan
    • Operations Startup, Monitoring & Human Resources
    • The Term Sheet & Lessons Learned

Federated Entrepreneurship

Written by Sean Murphy. Posted in Community of Practice, skmurphy, Startups

“Federated Entrepreneurship” was a phrase that William Krause used to explain 3Com’s model for management and innovation when he was CEO. Federation comes from a Latin word foedus for covenant or treaty and describes a union of partially self-governing units with a constitution that does not allow unilateral changes by a central governing body. It was a good model for the entrepreneurial business units at 3Com to pursue opportunities both independently and in concerted action.

I think it’s also a good model for what’s required to create an economically dynamic region. One parallel would be to a barn raising or Finnish talkoot, where a community comes together to solve an urgent problem that is beyond the means of a member or family in the community. As one of my old clients once remarked “it takes a village to raise a startup” and I think it takes a federation of entrepreneurs to improve the economy in a region.

Justin Bacon described this as a goal for his Minnesota Lean Startup Group in a comment on the LinkedIn Group

What we all hope to learn, the encouragement and advice that we give and/or receive, the lessons learned that we share and the relationships that we build, are as much about building this kind of community here locally as it is about helping us foster our own bootstrapped tech-startups.

I like the concept of simultaneously bootstrapping a startup and building a community. Many regions around the world aspire to improve the level of innovation and dynamism in their local economy. But the Silicon Valley model of technology entrepreneurship combined with risk capital is more than 100 years old: it can be traced to the founding of Federal Telegraph in 1909 (it’s noted by California Historical marker 836). Today’s efforts build on prior practices and institutions. See “Steve Blank on the ‘Secret History of Silicon Valley’“ for more details and the Silicon Valley Historical Society.

I think this means that each region needs to leverage its unique strengths new industries and local entrepreneurial activities. Put another way, Silicon Valley has already been invented, now we need to invent the regional models that will replace it.

It’s interesting that a number of the engineers behind the semiconductor revolution were from Midwestern Congregationalist Church backgrounds that emphasize a lack of hierarchy and a commitment to education and hard work. Some excerpts from Tom Wolfe’s “Robert Noyce and His Congregation” (a re-write of his earlier “The Tinkerings of Robert Noyce.”):

ROBERT NOYCE, INVENTOR OF THE silicon microchip and co-founder of Intel, grew up in Grinnell, Iowa, one of countless small towns in the Midwest that had been founded in the 19th century as religious communities by so-called Dissenting Protestants: Congregationalists, Presbyterians, Baptists, Methodists, and many others. What Dissenting Protestants dissented from was the Church of England and its elaborate ties to British upper-class life. […]

The Congregational Church had no hierarchy. Each congregation was autonomous. A minister was a teacher rather than a holy shepherd with a flock. Each member of the Congregation was supposed to be his own priest, in direct communication with God. […]

This attitude had a fascinating corollary in education. Back East, as in Europe, engineering was an unfashionable field for any truly gifted student to go into. It was looked upon as nothing more than manual labor elevated to a science.[…]

An extremely bright student, the one possessing the quality known as genius, was infinitely more likely to go into engineering in Iowa, Illinois, Michigan, or Wisconsin than anywhere Back East. As a result, the way to today’s Information Superhighway, more recently known as the Digital Revolution, was paved entirely by geniuses from the Midwest and farther west. […]

A decade later at Intel, Noyce decided to eliminate the notion of levels of management altogether. He and Moore ran the show; that much was clear. But below them there were only the strategic business segments, as they called them. They were comparable to the major departments in an orthodox corporation, but they had far more autonomy. Each was run like a separate corporation. Middle managers at Intel had more responsibility than most vice presidents Back East.

Joel Kotkin’s “Little Startup on the Prairie” has a section on “The Rise of the Brain Belt” (which builds on his earlier “The U. S. Brain Belt“) that outlines some other sources of opportunity:

“The Rise of the Brain Belt”

Perhaps even more important to the revival of the Heartland may be the growth of high-technology services and communications, energy production, manufacturing and warehouses as the critical levers for new employment and wealth creation. Only 10 percent of rural Americans live on farms and only 14 percent of the rural workforce is employed in farming. The area’s future clearly lies in the continued expansion of other industries.

The key to this growth is not merely cheap energy or labor; it’s the quality of the workforce. Although these areas are often seen as lacking in educated workers, many rural regions of the country—from New England to the Great Plains and even parts of the Sierras—actually have a surplus of skilled labor. The basis of this surplus lies in the high level of education among young people in many Heartland states. In virtually every measurement, students in key rural states—particularly the Dakotas, Iowa, Nebraska and Kansas—tend to perform better than those in more urbanized ones, as measured by graduation rates, college attendance and enrollment in high-level science and education programs.

[…] The Internet is rapidly diminishing the traditional near monopoly of information that throughout history has belonged to the metropolis; today a farmer, a securities dealer, a machine shop proprietor or a software writer in a small town enjoys the same access to the latest market and technical information as someone located in midtown Manhattan or Silicon Valley. “

Nanette Collins: Startup Culture is Critical

Written by Sean Murphy. Posted in 3 Early Customer Stage, EDA, skmurphy, Startups

I am happy to be able to offer another guest blog by Nanette Collins, her first was on “Volunteering, Lessons Learned from the Trenches.”  Nanette is an entrepreneur in her own right, she is the principal at Nanette V. Collins Marketing and PR with offices in Boston and San Francisco and one the web at

It’s All About Corporate Culture by Nanette Collins

In the 15 years that I have owned a marketing consulting business, my focus has been on working with entrepreneurs and startups in the EDA and semiconductor area. This has given me a ringside seat to grand successes, gut-wrenching failures and plenty of case study material. I have seen a lot and learned a few things in the process.

If an entrepreneur were to approach me for advice on the first steps to starting a business, I’d recommend thinking carefully about the kind of culture he or she wants to create. This effort will set the tone and help lay a foundation for success. A corporate culture based on a strong value system and an implicit understanding of ethical business practices will engender loyalty from the team, customers and various other stakeholders.

Corporate culture is much more than Six Sigma, the business management strategy du jour, or Quality Circles implemented by many large companies in the 1980s. It’s also more than the detailed corporate identity list of must haves –– name, logo, tag line, website and so on.

Instead, it’s a careful assessment by a company’s management on how it should operate and be perceived, based on a standard set of ideals that reflect its goals and objectives. The corporate culture should be fluid enough to be able to integrate attitudes, behavior, experiences and personal and cultural values.

A great example is a long-gone EDA startup called Viewlogic that hired the Boston Public Relations firm where I worked as an account executive in the mid 1980s. What quickly became apparent was the thoughtfulness and care the five founders –– Sal Carcia, Alain Hanover, Will Herman, Ron Maxwell and K.S. (Sri) Sriram –– had placed on building the company’s corporate culture. Maybe it was instinct. It may have been good management skills. More likely, it was the experience that they gained from working for a large corporation before going off on their own.

Whatever the motivation, it was the right thing to do, but it took a year’s worth of meticulous planning before they launched themselves. This company taught me many things, but the most valuable insight was the need to pay attention to corporate culture.

As a regular visitor to this company long acquired by a larger vendor, it was clear to me that the focus on corporate culture instilled a set of shared values with employees. The entire team seemed to have a set of customs and traditions that was this company’s and none other, which made it a terrific client and business partner.

Employees were dedicated, focused and all had a sense of purpose. That’s because they understood where they fit within the culture and knew what was considered appropriate behavior. During new employee orientation, Will Herman proudly carried into the session a three-ring binder with the presentation on the company’s corporate culture. This emphasis helped the company navigate through tough times and encouraged the team to keep going. After all, even with a well-conceived corporate culture, it wasn’t immune to the vagaries of a new business.

As the company grew in size and got more successful, a plaque was hung in the reception area outlining its five-point value system, underscoring the corporate culture. Many of the specific points seem to have been forgotten over time, but there are a few that stand out:

  • The first is an emphasis on professionalism and personal integrity that started with the founders who set the example for all.
  • A focus on ensuring a return to all stakeholders –– investors, employees, customers and partners –– may seem obvious, but well worth articulating to the entire team.
  • Providing value to customers may seem obvious as well, but who hasn’t experience lousy quality support from a formerly valued vendor? In recent years, many a large consumer company has been resoundingly criticized for their lack of customer service. A corporate culture focused on successful customers has to be a winning strategy.

I have worked with more than 30 startups and see too few founders give enough consideration to the culture of the firm that they are building, an unfortunate miscalculation. Too many entrepreneurs seem to think this is trite, quaintly old fashioned or don’t consider it at all. And yet, the benefits are numerous, from employee recruiting and retention to loyal customers and repeat business. With a strong corporate culture, there will be no ambiguity about behavior or ethics or what a company stands for.

Just as every startup has a product strategy and roadmap, it should also develop a set of corporate guidelines. It may be the blueprint for success.

I have included a 1985 article on Viewlogic for some background for readers who may be unfamiliar. The company was a pioneer in EDA but does not have a Wikipedia page or definitive history on-line that I could find. It’s from “D&T Scene,” IEEE Design and Test of Computers, vol. 2, no. 3, pp. 10-15, May/June 1985, doi:10.1109/MDT.1985.294730

Viewlogic unveils first CAE product at show Viewlogic Systems, a start-up company formed in October 1984, will show its first product, a desktop CAE system based on the IBM PC, at this year’s Design Automation Conference. The company also announced it has received $1.5 million in first-round financing, provided by company founders and venture-capital firms.

Viewlogic was founded by Alain Hanover, Salvatore Carcia, Ronald Maxwell, Sri Sriram, and William Herman, all from Digital Equipment Corporation. The company claims that its software addresses key elements of a design engineer’s desktop needs, providing facilities for design, documentation, and communication.

An open architecture approach gives users access to a reliable electronic design automation system that fits into existing CAE environments.

Sriram, Viewlogic’s director of marketing, says that the key benefit of the system is that it is priced at a level that allows each design engineer to have a system at his desk, where it is always accessible. The PC-based system is powerful enough for many applications, but the software, written in C, is also available in a version that runs on a DEC VAX operating under VMS for more demanding applications.

The software is currently being evaluated at five beta sites.

Startup Maturity Checklist Session Sun-Oct-4 1pm at SV Code Camp

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

Athol Foden‘s encouragement I have submitted the following session (links added) for this year’s

Silicon Valley Code Camp has now finalized the session schedule and my Software Startup Maturity Checklist session is set for Sunday, October 4 at 1pm in Room 5501. The description follows:

This session is for both aspiring and active entrepreneurs. We will walk through a 36 point checklist that covers Product Development, Customer Development, and Business Operations. You will leave with a better understanding of where you are today and what some logical next steps are for each of these stages:

Primary focus is on bootstrapping, there will also some discussion of what is required for a business to deserve outside investment. If you are thinking about doing a startup or you are underway and looking for a quick diagnostic on what to focus on next, this session will offer practical guidance based on the specifics of your situation.

This session does not require but will build on Athol Foden’s session on “From Code to Complete Product to Brand.”

The Startup Maturity Checklist is the first module in our “Idea to Revenue” workshop, which is next offered in January 2010 (Sign up to be notified).

Code Camp takes place Saturday October 3 and Sunday October 4 at Foothill College 12345 El Monte Road (Parking Lot 5) Los Altos Hills, CA 94022

As the description indicated, my session is a companion to Athol’s “From Code to Complete Product to Brand” which also looks good:

Before you can go out and market your code, you need to productize it. Whether it is for a small downloadable utility or an enterprise application, software seldom sells itself. Even for Open Source, it has to be packaged, promoted and presented correctly… and that is the start of your branding for the long term. For startups, product and company may both be dependent on this proper execution. This overview session will give you the highlights and a check list to do a proper product packaging and launch. For startups, continue this subject with Sean Murphy’s startup checklist talk

Update Sep-30: I got an E-Mail this morning from Peter Kellner, the Silicon Valley Code Camp coordinator, which clarifies what registration means for a session:

We have gotten a lot of questions regarding what “Plan to Attend” means so I thought I’d take this opportunity to explain what that means to us.  First, we are very grateful to Foothill College for providing such a great facility for us.  They let us use about 20 rooms for every session time.  These rooms can handle from 35 to 120 people at a time.  We use the “Plan to Attend” information to allocate sessions to rooms at each time period.

For the past 3 code camps (this is v4), we have come close, but still, there have been some rooms that filled up and we had to turn people away to other sessions.  We have no reservation system so it’s first come first sit.

We are sorry if you can not attend a session you want, but are proud in that we have many other sessions people can go to.

So if you plan to attend please register for the session, you might be advised to arrive a few minutes early as well.Please note that it’s in Room 5501.

Negotiate the Level of Reference in Parallel with Price and Others Terms and Conditions

Written by Sean Murphy. Posted in 3 Early Customer Stage, Rules of Thumb, skmurphy, Startups

Steve Bengston is the Managing Director of Emerging Company Services (ECS) at PricewaterhouseCoopers, a frequent explainer of the PWC MoneyTree report, and the host of “PricewaterhouseCoopers Startup Show.” He is also a nice guy who is knowledgeable and very approachable. He was interviewed by Anthony Nassar in April 2004 and had some good advice for entrepreneurs on negotiating a reference at the same time they are negotiating the rest of the contract.

I advise entrepreneurs to secure a referenceability clause when entering into beta agreements with customers, and perhaps refrain from entering into a beta agreement if the customer is unwilling to serve as a repeat reference with investors or prospects.

I have had three conversations in the last two weeks about the fact that there are many levels of reference, so I have put the following list together to document my perspective. It starts with an agreement with an individual (potentially at a company that refuses to allow any mention of their use of your product) and work up to a full endorsement with a logo.

  • Basic: Your customer agrees to take calls from new prospects. We normally specify a maximum rate (e.g. one a month, three per quarter) as this forces us to prioritize and not waste folks’ time on low probability events. You may mention their name, title, and company verbally and share contact info verbally or in an e-mail to a serious prospect.
  • NDA only: You can use name, title, and company on a slide that’s part of a presentation that’s delivered under non-disclosure.
  • LinkedIn: for service firms you can ask for a reference on LinkedIn.
  • Web Release: You can use name, title, and company on your website with a testimonial statement.
  • Press Release: You can issue a press release with an agreed upon quote or set of quotes.
  • Other (Public) Document: e.g. a case study, white paper, joint paper for a technical conference. Consider other ways that a happy customer can support you and help to evangelize your shared success. These documents normally sidestep an highly territorial PR or corporate identity or branding group who will pay more attention to what’s being messaged directly to media and analysts.
  • Joint Press Release: You and the customer issue a joint press release. This is a very big deal with a public company and can be difficult for an early stage firm to secure. We have helped clients do this but you need to start this negotiation as a part of the purchase as Steve Bengston advises above and be prepared to make concessions on price and other terms.
  • Logo: Using a customer’s corporate logo is normally involves more effort than securing an endorsement or testimonial from an individual employee. It carries with it a stronger level of endorsement. It may be NDA only, or agreed to on a case by case basis for a particular web page or collateral piece. This is a very strong endorsement that we don’t normally try and negotiate as part of an initial purchase, although it’s very appropriate for other kinds of joint ventures and partnering activities.

You should start discussing the form of a reference as soon as it becomes likely that you are involved in a serious evaluation. One way to approach this issue indirectly is to ask how they supported or acted as a reference for other suppliers/partners. With a large company you may want to pursue a two track negotiation model where you at least secure a private agreement from your direct customer to act as a reference and answer some number of calls and e-mails. Normally your customers will want you to be successful: they don’t want to pay for all of your development efforts but see them spread across other customers. If your prospect has never acted as a reference for a vendor/supplier/partner at least at a phone call or e-mail level or is unwilling to do so it may be wise to invest effort elsewhere: if you can’t substantiate your success it gets hard to talk about it.

We never ask for a positive reference as a part of a negotiation, only an accurate one: the prospect will more readily agree to tell the truth than shill for you and it’s up to you to convince them with your performance and results that your product is worth bragging about to strangers.

After the fact we try and encourage the customer to be as positive as they feel, but in their own words. We do this by interviewing them and ask them for their perspective on a client’s performance and results delivered. This can sometimes be negative, in which case the issues have to be addressed directly and forthrightly to the customer’s satisfaction. There can be a temptation to “put words in the customer’s mouth” whereby they regurgitate your preconceived advantages. We have come into the middle of several situations where this didn’t end well: when the customer was called by a prospect they offered their real perspective, not the press release phrasing. This created a serious perception mismatch that stalled or killed the sale.

“Better” is the Enemy of “Good Enough”

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

This phrase is attributed to Sergey Gorshkov, the commander in chief of the Soviet Navy from 1956 to 1985, who managed it’s dramatic expansion during the Cold War. Perfectionists get this wrong, siding with “Better.” Entrepreneurs who prosper, for the most part, side with “Good Enough” and keep improving.

I was reminded of this quote when I read a recent blog post “Vaporware” by Chris Crawford, who is working on new start-up called Storytron in the interactive storytelling space.  I have a lot of respect for Chris Crawford, who is an innovator in the computer gaming field. I subscribed to his “Journal of Computer Game Design” and took away a number of useful insights.

In particular his 1992 article “Lessons from Patton Strikes Back” outlines several useful concepts that most early stage and niche software companies should keep firmly in mind, what follows is a lightly edited summary of his five lessons:

  1. Start with a clear mission statement. The essence of game design is decision-making; a designer makes thousands of decisions during the course of a project. Your choice is always between options with different merits. This is one advantage of the clear mission statement: it simplifies the decision-making process. Instead of asking, “Which option is better?” you need instead ask only, “Which option better fits my mission statement?” This latter question is more precise, more specific, and therefore easier to answer. More important, it is faster to answer. The bulk of a game designer’s important work is making decisions about what to include and what to pass up; anything that makes this difficult process faster and more reliable is worthwhile.
  2. Plan then code at a program level, code then plan at a feature level. Hacked code is so brittle that, over the long run, it takes more time to debug and maintain than properly structured code. [Planned, well structured code] can be easily modified and corrected after it has been written. The early stages of a game project have us writing code that we know will change considerably later on. However, there is another time scale to consider: the short-term time scale in which we write up a single feature. Most game programming is in some way experimental; any feature that is fully understood is probably obsolete in our fast-moving industry. You can’t plan such code in advance; you just have to wade in and hack until you figure it out. The conclusion I came to is this: hack first, then recode it right.
  3. Don’t be seduced by the cleverness of your own ideas. This was the single biggest mistake I made. I came up with a truly clever idea…and I was justifiably proud of it. But it caused too many problems. [It] turned out to be clumsy to use. Most players eschewed it. I should have had the courage to dump a clever idea that, in the final analysis, created more problems than it solved. I didn’t, and the game suffered for it.
  4. Bake the cake first, then add the icing. Publishers sell games in the same way that bakers sell cake. The customer doesn’t taste the cake until he gets it home; all he sees in the store is the icing. So bakers don’t sell cake; they sell icing. In the same way, most publishers don’t give a damn about gameplay (cake); all they care about are the graphics and sound (icing). With Patton Strikes Back, I baked the cake before I even showed it to any publisher. I designed and developed the game first. I finished all the basic game structures, wrote and tuned the artificial intelligence, even got much of the play balance worked out. Only then did I show it to publishers. Guess what they wanted? More icing! At that point, it was easy. Having finished the cake, it was easy to pile the icing on.
  5. Make sure there is a market for your product before you develop it. Patton Strikes Back was a “wargame for the rest of us.” It received excellent reviews. Unfortunately, it has not sold well. It would seem that “the rest of us” aren’t buying computer wargames. The aficionados certainly hated it. Without their support, the game withered…I will never make a significant income from the game. Lesson #5 is, I think, the most important lesson to learn from Patton Strikes Back.

Real candor and some valuable lessons. Two I take to heart are to stay clear on the mission and to guard against being seduced by my own “clever ideas.”

I am of two minds about Chris Crawford’s Storytron effort. It’s possible that they will make a huge breakthrough, certainly he has done several very innovative interactive games to date. His 1982 book “The Art of Computer Design” is out of print but still worth reading on-line for it’s insights into how to create engaging interactive environments, appropriate for anyone developing advanced analytics or social software. But it increasingly looks like an effort that’s suffering from “mission creep.” What follows are some selections from his “Vaporware” post, highlighting the team’s issues with traction and “making things better” (bold text in original):

Perhaps you have noticed that Storytron seems to be suffering from a bad case of the vapors. Our very first business plan called for us to publicly launch everything on January 1st, 2008. That didn’t happen. We pushed the launch date back to March 15th…and we pushed back the launch date to May 15th…once again I went back to the drawing board and came up with major changes… despite the fact that our official launch date has been pushed back repeatedly, our progress has been relentless.

It’s easy to stand on the outside and criticize, so let me just make what I hope is a constructive observation. If you have slipped four times you need to start to radically shrink the mission and focus for your first version.

The website. The Storytron website has quite a few special capabilities that require some custom programming. There’s nothing earth-shattering, to be sure, but it is not a collection of HTML pages. There’s a lot more going on underneath the hood. Louis has been doing lots of coding to make all this work properly, and Pati and Laura have been deeply involved in organizing the overall effort.

If a simple collection of HTML pages would make a “good enough” impression I would consider pushing out a dynamic website to a later version of the product/company. A basic demo has to be central to the mission, but they may be aiming much too high for their initial release.

The reference material and tutorials. This pile is huge. Worse, the technology it explains has been constantly changing. We made changes in April and May that required Pati to completely rewrite large portions of the tutorials. All in all, the content of the materials on the website adds up to about the size of a book — which Pati and Laura have generated in a matter of months.

It’s not clear what the changes were, but it doesn’t sound from the context they are keeping their focus on a simple app and demo for their first release. Again, hindsight is easier but if you find yourself re-writing the manual significantly before the product is in customers’ hands you should consider sharpening your focus and deferring features.

So how much longer will Storytron remain in vapor? How much longer will we give you promises that we later break?

If you find yourself worrying that prospects no longer believe you–and therefore no longer trust you–you need to change methods. Trust is hard to earn and too easily lost. I would think that they could sort their early users by risk tolerance and relevant technical skill levels and release the current “deficient” version to those it’s unlikely to turn off.

The board of directors discussed this matter at length at its recent meeting, and we hammered out the details of how we’re going to handle the launch. This time, though, we really want to be sure about our promises.

Again, you always want to be sure about your promises. One of Gerald Weinberg’s key observations for consultants and other change agents–and make no mistake about it, Chris and the Storytron team are trying to trigger a revolution in interactive entertainment–is that “people don’t tell you when they stop trusting you.” And once you’ve lost their trust, there is little basis for the kind of relationship that’s needed to convince early adopters to work with you.

Therefore, all we are saying at this time that the launch will NOT occur before August 18th. We are HOPEFUL that it will occur by September 1st. And that’s the best we can say at this time.

It’s better to give a “blood date” (vs. one written in pen, pencil, or crayon) and then work to beat it. It doesn’t sound like the team has a date that they are committed to hitting. This can be the death of many of promising start-up.

Please do not conclude that we couldn’t meet a deadline to save our lives. In every case, we have deferred the launch in order to improve the quality of our products. We could in fact have launched on January 1st, 2008, as originally planned — and the product we had ready at that time was better than what was originally planned.

This may be a slow death by good intentions. No development team ever slips a product to make it worse (in their own mind).

However, we deemed it to be unacceptable, so we pushed the deadline back.

As a rule of thumb the second time this happens you have to start to reduce the scope of your efforts and the mission you are trying to accomplish. In particular, bootstrappers have to sell what they have. Gordon Bell writes about the “Schedule Fantasy Factor” which he defines as the ratio of the time allocated to a particular task divided by the time it actually took. His belief is that a ratio above 1.2 puts a project in trouble: if it’s above 2 he believes that you are doing research, not product development.

The same thing happened in mid-March; Swat and Storyteller were better than we had expected back in January — but they still weren’t good enough. The changes we have been making have dramatically improved our technology. Yes, it’s frustrating to have to wait. You think you’re frustrated? However much you’re frustrated, I’m frustrated a lot more. But we only get one chance to show off to the venture capitalists, and we want to make this our best shot.

Normally the venture capitalist’s question is not “can you make this work?” but who wants to buy it, how much will they pay, and how many of them are there? Remember lesson 5, the real risk is not that you can’t ultimately do what you have set out to do, but that once you have a working technology you  will discover that the market you anticipated for it does not exist. It’s a risk that many innovative start-ups face.

Update Dec-31-2008: the Vaporware blog post is still up on the Storytron blog site but none of the permalinks for the individual posts resolve correctly. To read the post go the blog and look for July of 2008 in the archives.

Common Questions about Advisory Boards

Written by Theresa Shafer. Posted in Rules of Thumb, Startups

What is an advisory board?

An advisory board is a formal or informal group of advisers who give advise, contacts, and feedback. Unlike the board of directors they do not have a fiduciary responsibility but are critical for start-ups. Also see Forming an advisory board.

How can they help me?

There are three broad ways that an advisory board can help you. The first is domain or technology knowledge. Secondly, industry knowledge advisors will understand the real ins and outs of how your market works and what the market needs are, they may also be able to open doors. Domain or technology folks maybe able to open door to potential partners and suppliers, but market knowledge folks maybe able to bring in the prospects or at least have you talk to people that prevent strategic misfires as you go into the market. And thirdly, if neither of the other two groups have been in a start-up before, it’s good to have at least one person either on your team or as an adviser who has rapid growth. So, if you are fortunate and you start to really takeoff, you have some somebody that helps you make decisions in a timely way and understands what to look out for and how to scale the company.

What do I give them?

Normally advisors which add credibility to your firm in a variety of ways, will trade expertise or services for equity.You typically are going to give them founders’ equity stock which is coming out of your pocket. It is frankly a negotiation, how much time they give you or how much equity they get, and that brings anywhere from 0.1% or 1%, in some very rare cases perhaps 2%, that’s the negotiation. Usually there is some kind of vesting schedule maybe on a 2-year or 3-year schedule with a 3 month or 6 month cliff. Because you want to make sure that things are working out, you don’t have a values’ conflict or getting value, you normally have a 3 or 6 month cliff. If things do not work out, then they walk away and they don’t get anything. You can consider those early few months a probationary period that allows you to make a final mutual assessment.
How do I use them?

You want to actually bring them together as appropriate to do at least a quarterly meeting, might be a phone call, might be a nice dinner. This time you can brief them on your business, dry run your demo, and get feedback on your plans.  you would like to be to able get some introductions. They are a great source for contacts for employees, partners, prospects, or investment partners.

What do I ask of them?

  • You are looking typically for 2 hours a month, 4 hours a quarter. Schedule either monthly, or twice a quarter, once a quarter formal meeting where you present a briefing for them.  These become a proxy for your real board meetings until you have a real board of directors, this is a board of advisors.
  • You want to be able to call them when urgent things come up. They are busy people, so you only want call for urgent things, but when urgent things come up, you want to be able to reach out to them.
  • You want to negotiate use their name. You would like to announce in a press release that they have joined you, would like to be able to use their name on your website, you would like to be able to have folks call them to get their opinion of you, it might be investors or it might be a major prospect you are talking to.

Normally about two-thirds of that value is the advice they give you and one-third is the doors they open and the value that their reputation sheds on your company.

VentureHacks has three relevant posts that are more focused on VC related issues than bootstrapping but still worth reviewing:

Quick Links

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