Mark Hanzo, CTO of Hanzo Archives, was interviewed by SimpleWeb as part of a series on validating startup ideas. I found his remarks on very practical and insightful and have added some observations of my own.
The following is an edited transcript of Elena Krasnoperova‘s “Learning Hacks for Bootstrappers” briefing at the Bootstrapper Breakfast on Fri-Dec-2-2016. She had a “cheat sheet” she handed out that is interleaved here in her remarks. We have added hyperlinks where they help to clarify or elaborate on her remarks.
I ran into Shane Reiser (@ShaneReiser) at the Intrapreneur Conference in Silicon Valley and was impressed by his new startup (Your Ideas are Terrible) with cofounder Carie Davis to bring lean thinking to corporate innovation. What follows is a Q&A we conducted over email with hyperlinks added for context.
One documentary worth watching to get some context on the history of entrepreneurship and venture capital is “Something Ventured.” It’s a series of interviews with venture capitalists talking about their investments and their risk mitigation strategies in the 1950’s through 1970’s. It’s clear that they paid a lot of attention to “minimum viable products” and pivoting based on new information and asked for business plans. The question is how to have enough of a plan to proceed that includes what experiments you will run to refine your understanding of the product and the market.
Painful cofounder experiences are more common than happy ones, and especially so when the parties don’t know each well to begin with and the business startup fails. Here is a real email exchange that explores some ways to minimize the risks.
An interview with Ben Yoskovitz on his recently launched Highline BETA, a new Toronto “startup co-creation company” that works with large companies to identify areas of opportunity, recruit founders, provide pre-seed capital, and co-create new startups.
This article explores the specific experiences of an entrepreneur (who uses the pseudonym “Hard Drive,” a nickname he earned early in his career for his tenacity and decisiveness) and lessons learned bootstrapping a high-tech software as a service business in the social media space. His sustained efforts enabled him to raise $40,000 in angel funding, pull together a team of part-time contributors working for equity, establish three pilot customers and present to 11 venture capital firms. All of this was accomplished while the founder and CEO held regular, full-time employment at a Fortune 500 high tech firm.
Excerpts with commentary on Bill Watterson’s 1990 Kenyon College address: “Some Thoughts on the Real World By One Who Glimpsed it and Fled.”
Derek Sivers promises that his slim book “Anything You Want” is a one hour read that summarizes 10 years of his entrepreneurial experience into 40 lessons for a new kind of entrepreneur. It’s a practical book that’s well organized and easy to read. It took me much longer than an hour to actually absorb the lessons he offers here–I found myself thinking about it for several days after I read it–if only because he offers profound insights not quick tips. But I knew after I read the first chapter where he summarized his key lessons learned it was a book I would be recommending to other entrepreneurs.
Unreasonable entrepreneur is almost redundant. By definition entrepreneurs want to change the status quo, offering better products and services as substitutes for established and successful ones. This often requires an unreasonable amount of effort and persistence, sometimes to the point of stubbornness, in the face of not only opposition but also a concentrated lack of interest. The lukewarm response initially promises adoption until we realize it was the easiest way to get us to shut up. The challenge is not to become stubborn and parochial but to continue appreciate the realities of your prospect’s situation.
The History Channel’s “Men Who Built America” documentary recaps the history of the creation of key American industries: railroad, steel, petroleum, automobile, and finance. Covering a period from roughly 1850 to World War 2 it offers reenactments of key events in the evolution of American business. It’s worth an entrepreneur’s time to reflect on the lives on Cornelius Vanderbilt, Andrew Carnegie, John D. Rockefeller, Henry Ford, and J. P. Morgan.
I got to know Edith Harbaugh (@edith_h) when she was moderating the Lean Startup Circle Group and published two guest blog posts by her: “It’s Your Execution, Not Your Idea” and “Managing Email Conversations With Customers.” I also invited her to take part in a webinar on Innovator’s DNA: Experimenting Skill. During the roundtable conversation she mentioned some lessons learned from a bicycle trip across the United States–I thought to myself, anyone willing to bike across the country is ready to become a technology entrepreneur. So when she emailed me that she had co-founded LaunchDarkly I reached out to interview her. What follows is an edited transcript.
Matt Wensing On Making the Transition to Growth
Stormpulse has gone from an idea bootstrapped on founder savings and credit cards, to a project funded by friends and family rounds, to a small business strengthened by angel money, to a company that’s raised “meaningful” capital (our last round was just over $2 million). Here’s what I’ve learned since I’ve been able to leave the ‘drowning and can’t work on the important things’ mode.
Matt Wensing in “What I’ve Learned Since Raising Capital“
Steve DiBartolomeo is co-founder of Artwork Conversion Software, Inc., an EDA software firm headquartered in Santa Cruz CA with a development office in Manhattan Beach, CA. Founded in 1989, the company develops CAD translation programs, CAD viewers, plotting software and IC packaging software. Artwork has over 5000 customers worldwide including Alcatel, AMD, Applied Materials, Agere, Bosch, KLA Tencor, Motorola, Ericsson, General Electric, Hewlett Packard, Hitachi, Lockheed Martin, Siemens, Seagate, Sony, TRW..
Q: Can you talk a little about your background and how you came to found Artwork Conversion Services?
I have a BS/MS in Electrical Engineering from UCLA (1978). My founding partner, Antonio Morawski, has a BS from Loyola and a MS from UCLA from around the same time period. I cut my teeth at TRW Semiconductor in Southern Calif starting in 1976 as a student. When I graduated I continued on there until 1980 as an RF design engineer, as did Antonio–we met at TRW.
I took a year and a half off of work and went back to college (UCSB) until I ran out of money and then in 1982 joined Avantek in Santa Clara as an international sales engineer. In 1984 my boss asked me to join a startup, Step Electronics, that would specialize in high tech import/export selling microwave and RF components and subassemblies. One of our first clients was a small software start up, EEsof, which pioneered microwave EDA on PCs. (Prior to that microwave design software ran on a $250K VAX and cost $50K – EEsof’s ran on a $5K PC and cost $7500.) I spent much of the next years selling EEsof tools in Europe (where I lived for a year in 1986) and then later in Asia.
In 1986 I needed a translator for a pattern generator in order to close a large EEsof sale in Germany. EEsof could not do it. I mentioned this to Antonio and he said he knew how to write such a translator. We took the order and delivered it 6 months later.
In 1987 I returned back to the US and tried to sell more pattern generator translators in Silicon Valley. The companies that I contacted were not interested in our translator but had lots of suggestions as to what they did need — so we slowly developed new products (on a part time basis) based on their feedback. At that time (between 87 and 89) Antonio was employed as a consultant at TRW and as a professor at Loyola. He did the programming out of a corner of his small garage.
Finally in 1989 we decided to do this full time. I left Step (which had really been an excellent apprenticeship for learning how to run a small, lean operation) and Antonio left Loyola after completing his teaching contract.
Our primary reason for starting the company was to be “masters of our own destiny” and to work on stuff that was interesting. We really only wanted to make enough money to cover our mortgages and live a reasonably comfortable life.
Q: So what were the early days like?
Between us we put up $10K each and started with that (and two years of experience and a few customers and orders in the pipeline). As mentioned, our largest initial purchase was two fax machines (at $1500 each) and a copy machine ($3000). I worked out of a 500 sq foot office in Santa Cruz and Antonio continued to work out of his garage in Manhattan Beach. We broke even from day one even if the monthly salary was small. Eventually we added a secretary and a programmer and Antonio moved from his one car garage to his father’s two car garage.
I handled all the sales which were almost 100% from Silicon Valley. I basically drove into the valley several times a week and installed and demonstrated the software. I also did tech support, marketing, technical writing … basically everything except programming.
We added employees one at a time and grew slowly but surely.
At the time we started (end of 89), the business we knew best — RF and Microwave components and design — was taking a tremendous hit; the giant build up of the early and mid 80’s (due to Reagan’s military budget) was over and an enormous consolidation was occurring. I’d call an engineer on a Monday to make an appointment and by Friday he’d be gone.
There was not yet any Internet and even cell phones were a tiny market. Things looked especially grim because no one could envision what was going to drive new designs. But somehow we ground through the first couple of years — not making much money but not losing any either and slowly adding a few products every year.
By 1995 we grew to a peak of 14 people – 8 programmers, 1 sales guy, 1 boss (me) and 3 office people. Our maximum revenues peaked at about $3 million dollars in the late 90’s.
Business took a major downturn in 2001 what with the dot-com crash which killed a whole bunch of network and chip startups that were buying our tools as well as hurting just about everybody in the tech business. I recall our shipments dropped 40% one month and stayed down for 18 months before slowly building back up again. By 2004 business was excellent again. Things stayed pretty buoyant until 2007; from that point on it seemed to drift down gradually and, of course, at the end of 2008 the downward drift became disturbingly steep. Most of 2009 was pretty awful and it was not until early 2010 that we saw the green shoots of a recovery.
Q: Where are you today?
Today we are 10 people (7 programmers, 1 sales guy, 1 boss and 1 office person – the internet nature of business no longer requires production of software other than a click). Our goals are not high growth but rather a good profit margin. As a software company we have zero cost-of-goods and the great majority of our expenses is salary. So once you are past “break even” everything after that is profit.
Q: When you look back over the last two decades or so what are the accomplishments that you are most proud of ?
We are very proud of having kept the company going for over 20 years completely on our own. We didn’t borrow a penny and every quarter we showed an operating profit.
We made several major market and technology shifts during those 20 years that kept us going:
- We started by building software for RF and Microwave designers.
- We branched into software directed at PCB designers.
- We branched into software directed at IC designers (back end).
- We moved from translators to display software (viewers).
- We moved from direct sales to end users to OEM sales to other EDA companies.
We have seen many other EDA and technology firms try to change direction, usually in response to major changes in technology or the market that either died or were badly injured in the process.
We were early Internet and web adopters and this enabled us to expand our market from just Silicon Valley to worldwide without a large sales force.
Q: What’s been the biggest surprise?
I think it was more of a gradual realization: most EDA entrepreneurs start as EDA users, run into problems doing their job, come up with a clever solution and are suddenly find themselves an EDA supplier. The surprise comes some years after you are an EDA supplier–you have stopped designing stuff and find that you no longer really understand the “problem” side of the equation and have to pester people to tell you about what problems they need solving. However this reliance on others for your critical input is never as reliable as your own (past) understanding of the problems that need solving.
Q: What were the significant changes in the environment you have had to respond to?
The internet changed everything. We jumped on it early and have benefited from our ability to be everywhere in the world from our desks in Santa Cruz. Nowadays I think WEBEX (and the other screen sharing apps) is one of the seven wonders of the modern world.
We realized that we needed to change from direct sales to OEM partnerships in the late 90’s because the big kahunas–Cadence, Mentor and Synopsys–started sucking the air out of the EDA markets. They each wanted to be all things to the customer and cut the kind of deals (we call them all-you-can-eat) that would cut off any other vendor. So we changed our focus to selling into the big EDA companies with small modules that enhanced their products.
Q: What’s the current challenge you are wrestling with?
Design is following manufacturing offshore. We’ve seen this accelerate since after the dot-com crash. It’s a lot harder for a small US based company to cover Taiwan, China, India and Singapore. The big guys set up design and application center’s in these countries.
Q: Any suggestions for other entrepreneurs who want to bootstrap a software business?
If you want to run a company you can make a living from–in other words you are not writing a business plan where the exit strategy is on the first page–then I think I can make a couple of suggestions.
- Start with a small team with common values and complementing skills – in our case Antonio was the programming guy and I was the sales/applications guy.
- Don’t take any more money–none if possible–from outsiders than absolutely required.
- Create something small and simple and quickly get it out there. You’ll get much better and faster feedback than if you try to go around asking people what they want.
- Refine it based on feedback. Document it. Do it again.
- Grow slowly. Fast growth is very inefficient since you will then have a lot of people on board that have not figured out their job.
- Staff or employee turnover has a high hidden cost since the replacements have to start over.
- Cash is king. Save some of your profits as a cushion against a rainy day.
- Spend a lot of time listening to your customer’s problems. Not every problem is one you can or should solve, but the aggregation of their issues gives you a solid base for making seat-of-the-pants decisions. You’ll never have enough information to make a MBA-style decision on new products or directions. But if you’ve listened to enough customers you’ll have a good “feel” and make better decisions.
- Beware of business plans. Have a look at some business plans that are 3-5 years old of both successful and unsuccessful companies. You’ll have a good laugh at both. The main difference between the successful companies and the dead/dying ones is how they reacted when their assumptions blew up.
Finally and most importantly: people can say one thing and do another. Only act on what people tell you if you see that their behavior is consistent with their talk. People are much better at telling you what they don’t like than at what they want. When we are developing a new product we try to get something into their hands quickly and then listen to them criticize it. The criticisms are usually much more specific and useful to defining a product.
Q: Steve thanks very much for your time.
Matt Oscamou, the founder of Frontier Bites, talked about lessons learned getting a food startup off the ground at the April 15 Bootstrapper Breakfast in Sunnyvale. Here is a short recording of his introduction, the benefits the Bootstrapper Breakfast® has offered him, and how he came to bootstrap Frontier Bites with his brother and persevere after his brother passed away in a rafting accident.
A transcript of his introduction is available at Matt Oscamou talks about founding Frontier Bites, recap from April 15, 2014
Matt Oscamou: I have a food company in Silicon Valley, bucking the tech trend. I was over at Red Rock Coffee working in the downstairs area and I saw “Bootstrappers Breakfast” on the calendar so I figure I would try to find out what that was. This was right when I was getting going. It’s been a helpful group ot bounce some ideas off of. My attendance has been relatively sporadic based on the needs of the business. It’s been good.
I started the Bootstrapper Breakfasts in Sunnyvale in October of 2006. I was fed up with attending events where the only focus was on how to raise money from investors and where aspiring entrepreneurs would talk about what they would do once they raised money but not what they were doing to move their startup forward now.
One of the things that surprised me in the first year was that people would come for a variety of reasons. Some would attend regularly, others would come only once and a large fraction would attend when they had issues that they wanted to discuss. I thought Matt captured that neatly in his intro.
I didn’t know Leonard Smith but I was forwarded a link by John McKenna two days ago to his obituary (originally published in GreenwichTime on Jan. 26, 2014) and I thought it captured the essential personality of people who bring change to organizations in trouble and often start new ones.
Here are some excerpts but it’s worth reading the whole thing (I have bolded a few sentences that highlight key aspects of the entrepreneurial personality):
Leonard Mason Smith, 86, a veteran of World War II and Korea and longtime resident of Pine Island, Florida passed away on November 27th, 2013.
Leonard Smith was a very private man. If you wanted to know his cause of death, he would have told you that it was none of your business. If you asked Penny, his beloved wife, she would tell you that he had cancer, but not to tell anyone. Although his prognosis was dire, he battled on, lived his life and survived several years beyond the experts’ expectations. He did not want his obituary to suggest that he lost a long battle with cancer. By his reckoning, cancer could not win, and could only hope for a draw. And so it was. Leonard Smith hated losing.
He matriculated at the Massachusetts Institute of Technology, where he was president of the Phi Kappa Sigma fraternity and earned an engineering degree. He joined the Army Air Corps after his first term at M.I.T., and attained the rank of colonel, but only on the telephone when facilitating personnel discharges and equipment requisitions. He was discharged as a private. After his graduation from M.I.T., he enlisted in the Air Force during the Korean War, and served in Japan and the Philippines. After the war, he began a career as a management executive. He worked for Bamberg Rayon Company, American Enka, Union Carbide, General Dynamics, Cognitronics and Computer Transceiver Systems Incorporated. By virtue of his education, training and temperament, his assignments tended to be companies and divisions that were experiencing financial or operational deficiencies. He liked the challenge.
He was married to Penelope Self on December 4, 1953 in Asheville, North Carolina. They were married for 58 years until her death in 2012. They raised five children together, living in New Rochelle and Greenwich, Connecticut. After retirement, they resided in Asheville and Pine Island, where they were active with local church groups and charities.
Leonard Smith hated pointless bureaucracy, thoughtless inefficiency and bad ideas born of good intentions. He loved his wife, admired and respected his children and liked just about every dog he ever met. He will be greatly missed by those he loved and those who loved him. In lieu of flowers, the family asks that you cancel your subscription to The New York Times.
Leonard Smith would have thought that this obituary was about three paragraphs too long.
- Willing to take on long odds and challenges.
- Understands how to navigate and negotiate around bureaucracy.
- Not afraid to address financial challenges and operational deficiencies–growing companies break what’s working as often as mature firms are faced with the need to address changes in their environment.
- Guided as much by outcomes as intentions.
- Interested in more than business: committed to family and active in the community.
- In writing, get to the point quickly.
This is a recap of the Silicon Valley Code Camp panel of startup founders who explored what’s really involved in getting a technology startup off the ground in the “Working for Equity Startup CEO Panel.”
There are a number of forms packages now available for entrepreneurs that provide templates for incorporation, investment term sheets, hiring employees and contractors, etc.. And there are several business model canvas tools that are designed to facilitate useful discussions among founders and advisors (and potential investors) about a new startup. But Nathan Beckord‘s Foundersuite is the first to offer not only forms but facilitate workflows and communication among founders, advisors, prospects, investors, and other interested parties.
I used the idea validation module for the BeamWise planning and launch and found it helpful. Nathan is a friend but I am not an investor or otherwise affiliated with Foundersuite. I think it can make you think and save you time if you are in the early market exploration stages of your new startup.
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