Where Ideas Come From

I remember interviewing for a position and I was asked, in reference to a startup project I was working on full-time, "That's a GREAT idea.  How do I know it's not going to hit in 1 month and you're going to leave?"  To which I answered, "You don't.  But, it's not about finding the right idea.  Once you start looking at the world through an entrepreneurial lens, you see them everywhere."

Everyone has problems.  But, entrepreneurs can quickly identify which ones are general enough to make a business out of and which ones are too niche.  They also see minimum viable products that provide value and don't take a ton of time / effort / money to build.

That brings me something that happened a few weeks ago.  I don't recall what I was doing, but I got a text message stating something like, "You just won $1000 gift card to walmart, click-thru to this url (which had walmart in the name) to redeem your prize."  I whois looked-up the domain and found that it was owned by some sort of hosting / advertising company and this was clearly some sort of lead-gen scam or worse.  I put together a 140 character response and took to my twitter account.  I sent tweets of a possible scam to various @walmart accounts and heard nothing.  I was so shocked, not because I didn't hear back (though that made me upset), but because I never considered how a company that big would ever manage my message, regardless of how important it was.  

I thought about the idea for a while and this past weekend, I started building failrecovery.com.  I don't know whether or not this will turn into anything, but that's where my inspiration came from.  So my advice to anyone looking for an idea is to become an observer.  Keep your eyes open, talk to your friends, co-workers, whoever.  Eventually, if you are paying attention and channeling your inner-entrepreneur, and idea will come out of nowhere, like a phishing / link-bait scam.

Is This Offer Fair - The Real Risk of Joining A Startup

It's no secret, startups are sexy again.  I've been getting calls from friends and helping them evaluate offers.  Since I just finished reading Mark Suster's TechCrunch article on dilution, which you should also read,  I'm writing this post to illustrate my POV on equity, as an entrepreneur-who one day hopes to be hiring and divvying it out.

My framework is loose, but valid in explaining non-investor risk among *venture-backed startup* operators (in both actual and perceived terms), so here goes.

*Venture-back startups are, by definition, companies that have to have to return 10X or better to be considered successful*

Founders:

The greatest risk applies to the founding team.  They have left real jobs, are working unpaid (for some period of time), get to draw a significantly less than market rate salary upon raising a seed round, don't have cash on-hand to cover salaries and operational expenses for more than 3-6 months (if lucky) and are compensated for their risk with more lottery tickets, so long as they stay around and keep hitting milestone.  If you don't get passed the seed stage and go broke, the experience gained is only incrementally valuable to a handful of companies in the market at large.

Employees hired after the first priced round:

This area is dicey, because you need top talent and can't pay premium prices.  As a founder, I couldn't hire someone that early without telling them upfront how many months I can guarantee their below-market salary;  the longer I can pay them, the less risk.  There is a resume risk b/c the startup is (usually) unknown and unproven and there is an opportunity cost, which incrementally tick up the amount of risk the first (few) hires are assuming, which has to be fairly compensated.  However, most early hires are exposed to valuable experience and are assuming titles that garner both respect and greater consideration / compensation if & when they leave the startup venture, not to mention they get veteran consideration in the startup community if they choose to move on to their own venture.  And oh yeah, institutional investors are really quick to snatch up these guys and move them to other portfolio companies.

Admittedly so, quantifying and rewarding these hires is tricky.  However, generally they are brought on for comparable, if not higher, equity to the packages received by seasoned / experienced, VP-level post A / B round...which sounds like a decent benchmark for fair.


Engineer 6+ or anyone that comes in after a $3-5 A round:

Effectively, you have no significant risk, besides a below-market rate salary risk, if you are getting paid below market rate at all.  And, since your equity is priced, you know you are being compensated for the gap and an average bonus as soon as you do the math on the equity offer...but you are also getting a better work environment, solving problems you are passionate about and greater marketability later.  So, I'm not sure what the bitching is about?

Most of the posts I see or personal inquiries I get seem to revolve around perceive risk and not real risk, since most people fall into that 6+ or post $3-5 A round category.  Just because the company may not be around, you will most likely have a job for 12-18 months (minimum).  You are not entitled to get rich, a big nest egg, or anything in return (beyond the aforementioned non-monetary compensation). In the likely event that you're not apart of a home run, you worked at a really cool small business.  Newsflash, if my argument doesn't convince you a startup is worth joining, don't do it.

For everyone that is joining a company at or around series B level...that's not a startup.

Here's the good news, if the company hits the home run that it promised it would when it accepted VC money, everyone gets paid more then they were actually worth...that's the whole point.  Equity is gravy...the sooner you get it, the better off you'll be.

If you have ever seriously entertained a thought like, "If I can get a bigger piece, in the event of a not so hot exit, I'll still get PAID", while negotiating with as engineer 6+ / $3-$5 mil A round, don't make the leap. You just don't get it and the mentality won't help the team that's extending you an offer.

As you saw from the infographic in the aforementioned article, deals aren't usually optimized for not-so-hot exits...and they shouldn't be.  But then again, equity is designed to motivate for the BIG EXIT.  In the event of a fire-side sale or flat exit, you'll be lucky to be made whole in-cash, but the experience gained will ease the pain.  But then again, you knew going in what the risks were.

Facebook Let's You Increase Security, If You Don't Use Chrome

Edit: After being schooled for shooting off a hasty post, this clearly isn't a Google specific problem.  I will keep up the previous post and Mea Culpa as a reminder for next time.  However, the larger issue is that in order to enable this security feature, which could cause you to lock yourself out of FB, instead of warning the user why this could cause problems or building a forgot your password recovery tool, FB chose to create require me NOT to clear my cookies.  It is a little ironic that by enabling device level security the trade off is allowing FB to track my activity via web/mobile device?

Facebook and Google don't like each other.  It's nothing new and it isn't going away.  In a big dollar, Highlander world, you do what you have to do.

Today, I was reviewing my privacy settings after the new FB release and I wanted to enable "Login Approvals", under the general settings>security tab.  After all, it's probably a good practice to ask for credentials when logging in from an unrecognized device.  By default, this setting is set to "Approval is not required".

After checking the box to enable the feature, I got this message:

After closing the box, the setting remains unchecked.  

I get it, I really do.  Facebook makes privacy hard because they don't believe we need it & it's bad for business.  I was unfriending people today and laughed when I realized FB didn't use check boxes to allow me to unfriend in mass.  To make it worse, I had to mouseover a box, scroll to the bottom of the list which was one space from a list of ~4 options, click & then confirm (via pop-up) each unfriend.  It's no secret security settings have always been unnecessarily difficult, but saying, "Want security?  Can't use Chrome!"  Sure, it's a swipe at Google, but it's a big FUCK YOU to all of us...your users...the ones that made you what you are today.  

Message to FB: I'm apart of the vocal minority that care about my privacy and browser choice, so ignoring me doesn't seem like a big deal.  There are 650+ million other users, who you are trying to earn revenue off of and most of them don't care.  But know this, I'm on every new social network, evangelizing and seeding the nascent community, just like I did for you FB.  I'm not asking for default privacy, b/c you err on the side of openness and that's your choice.  But this kinda shit drives me crazy and keeps me looking for somewhere better.

  

Yahoo! Fix? - It's Not About the Chief, It's About the Indians

Yahoo is all the rage again, this time it's b/c Carol Bartz is out and everyone has an opinion on how to fix Yahoo's problem...For all of those who think a product visionary (Steve Jobs) is the answer...it's not about the chief, it's about the indians.  The tech community talks a lot of shit about how Yahoo! is done.  They aren't.  They've got the biggest email user-base in the US (where they do well in content), are in fantastic positions in several markets abroad (in content and email) and make tons of money.  The next CEO needs to figure out how to retain, excite and recruit guys like Paul Tarjan (Yahoo! Resignation Video below).

Approximately 2.5 years ago, every day TechCrunch was flooded with who's leaving Yahoo! now articles.  Some people left for Facebook/other startups, some founded their own ventures and others jumped to other tech giants.  People jumping around isn't new or necessarily news worthy.  After all, certain types of people always leave big companies, they just don't fit and can't stay.  Their thrill comes from figuring out solutions, as opposed to executing/maintaining established systems.  With some of those types, even if you have cool projects in the pipeline, a lot them just like changing things up or want to launch their own venture.  On the other side of the spectrum, many people will never leave the company they work for.  They are good / great at their job, settled into their responsibilities and work-to-live, as opposed to those who live-to-work.  There is nothing wrong with either types of employees or their professional proclivities.  What we saw with Yahoo!, and the sign that their culture was broken, was when the movers-and-shakers, the creative/quirky people, the ones who epitomize your culture (the stereotypical company XYZ employee we refer to when we talk about your company) and those management wanted to cultivate into future company leaders, up and left, in droves.  That exodus was the sign the culture was broken and no one with the power to do so cared enough to fix it.  When the culture that brought them to Yahoo! was gone and it became clear it wasn't returning, everything got tainted and they could only stomach it so long, before they left.  

What's left is a money making machine, that's not beyond repair.  However, greatness comes from your companies culture and Yahoo! has to get that back internally, before they can project an external image that attracts the types of people that left, back in the future.

How can they do that?  They have to break a few eggs.  Yahoo! has a lot of talented engineers, why not empower and motivate them to start solving problems?  Yahoo needs to spend a small fortune (how about the $10 million they don't have to pay Bartz for disparaging them?) on an all-hands event that expresses their appreciation for their current employees,  rallies the troops, forces product managers to experiment on their products and ends with announcing a new initiative that rewards and allows individuals to incubate Yahoo!'s future products.  Then, hold a small-group Hackathon, see what floats to the top and support the most promising projects.  Then, hold the hackathons every month (keep them themed.  One month is new features for existing products, then mobile, then deals, then whatever) and keep supporting the best projects.  That will build morale, buzz and excitement & that's what'll attract others to Yahoo!.  Oh yeah, you'll probably get some great products / features out of it too (and don't forget to tip your innovators).

Kinda sounds like a place I'd like to work.

  

The Law of Sexual Chemistry & Google+ - My Review

The tribal knowledge surrounding the casual dating scene is filled with wisdom.  For example:

1) Gain Their Attention - successfully approaching a potential interest and carrying on an interesting, balanced and engaging conversation with her and her friends.

2) Stay Out of the Friend Box - use appropriate touching to make your intentions known to the person of interest w/o freaking them out.

3) Separate the Sheep from the Herd - if interest is reciprocal, a soft suggestion is all that's necessary to get the person one-on-one...keeping rhythm -> would you like to dance, I'm stepping outside for X -> I'll go with you.

Failure to execute on any of the previous steps can be a powerful de-selector, though not impossible to recover from.  However, before any of the aforementioned can come into play, one must address the Law of Sexual Chemistry.  

The Law of Sexual Chemistry states that, "A person of the opposite sex knows instantly whether or not they want to have sex with you."  This law speaks specifically the high correlation between initial attraction and willingness to close the deal and not to whether or not you can overcome a lack of initial animal magnetism (IE: The Art of the Slow Play, The Last Call Exemption, Getting Out of the Friend Box - The Underdog Story).  

What does this have to do with Google+.  Google's nascent attempts in social were akin to the smartest kid in high school going to college.  For those of you still with me...

I won't talk about Orkut b/c I've never used it (I'm US based).

Buzz - This product had a double dose of confidence.  Unfortunately, it felt like Google's answer to twitter...which no one was asking for.  The nerdy kid got the courage to approach the group of girls, led with, "What did you get on your SATs" in hopes they would in turn ask him back and be impress with his 1600.  However, he got 3 faces staring at him and smiling awkwardly and then started to wet himself.  However, after studying the case, Google learned the power of integrating social w/ gmail and what that did to initial user adoption.

Wave - A heavily anticipated next attempt at social, more geared towards social collaboration in a professional environment (my opinion). This was an interesting twist and probably related to a sophisticated understanding of what % of gmail users used gmail for work, as well as an attempt to better position Google's b2b offerings.  The buildup leading to Wave, as well as the types of problems Wave attempted to solve, showed a refinement and understanding of the right type of confidence.  However, upon first logging into Wave, I had no earthly idea what the fuck they wanted me to do with it, I didn't know where to start and whatever problem Wave attempted to solve for me wasn't bad enough for me to invest anymore time into trying to figure out.  After mastering the approach and interesting, casual conversation, the young man started racking up female friends like it's nobody's business, but that's not gonna get your laid. 

Google+ - This offering is different and Google is making sure everyone knows it.  First, it speaks succinctly to the growing feeling that one network is better than nothing, but filtering / grouping is more trouble than it's worth (currently).  The current solution is that we have a professional network, a social network, a short-form / asymmetric content discovery network, etc.  To make matters worse, companies are popping up all the time that want to give us even more networks...politics, health, hobbies, family, close friends, etc.  The average user balances the number of networks they are willing to maintain, with the amount of spam they are willing to sift through.  For most of us, there has been a noticeable degrading return to our existing social experience.  Google+ is trying to be a better way to manage the people in our lives, as well as facilitate more meaningful interaction with those we choose to, when we want to.  The message is clear.  It has become obvious to all parties involved who fancies whom and exactly what his intentions are.

What remains to be seen is whether or not Google+ gets it right.  As someone who is eagerly waiting my invite, watched all the demos and read all the reviews, I have the problem they are trying to solve.  And from what I've heard, I'm not the only one.  After mastering the first two steps, separating the sheep from the heard is the current focus and it doesn't look like it'll be much of  a problem...she's biting her lip and playing with her hair.

However, I couldn't help but notice in the time leading up to the announcement, Google has made some changes.  There has been a noticeable commitment to design.  First, whispers of Google hiring designers,  even better Google Doodles, and visually compelling / meaningful commercials / videos.    Then, changes to plugin placements in my gmail, which let me know that my gmail can be the center of my online experience.  Finally, the screen shots of Google+ & demo videos with simplicity, color, panache and an impressive UX...that is both visually appeals to and leads the user through the experience (and name-dropping the guy who is responsible for it).  No one is really sure exactly when it happened, but the socially awkward, nerdy, skinny guy put on some muscle, got a new wardrobe and his confidence projects in a way that people respond to.

If you've made it this far...this analogy has gotten a bit uncomfortable.  All that's left to figure out is if he's gonna close the deal...Methinks he might.

The Myth of the Early Stage Pitch Deck

Do you know why there is so much information about how to craft the perfect early-stage pitch deck?  Because, people believe a good deck will get them investment...the secret is, it won't.  To make matters worse, it's damn near impossible and let me tell you why.

First of all, no matter how good your slides are, you're only guessing what the person across the table wants to see.  I realize that many VCs, like Sequoia and Dave McClure (500 Startups) via How to give a VC a Hardon, tell entrepreneurs what they want to see.  However, that's just a guideline at best.  Depending on whom you actually get face time with, even within the same firm, they all have different experiences, knowledge bases, skill sets and triggers...not to mention getting VCs interested is about getting them excited, not-not boring them to tears.

Second, public speaking is hard.  Most people can't land a joke successfully when all eyes are on them.  Think about how many conferences you've spent staring at your phone or picking at your terrible meal, instead of listening to the speaker.  In the world of entrepreneurs pitching VCs, I guarantee that no VC has ever invested in an entrepreneur they've tuned out.  But, don't worry.  You don't need to spend years perfecting public speaking.  But, before I tell you my thoughts on what to do, I'm sure some of you are wondering, "How do you know if I'm a talented speaker?"  If you haven't spent years dazzling crowds, or if you don't feel guilty about all the great events you have to turn down speaking requests from, it's unlikely that you are a great public speaker.

The good news is, you don't have to be.  Check out Sergey & Larry at early Google.  The secret is to let your passion come out.  Focus on what you have going for you, which is the problem you're solving, your solutions to the problem (ie product) and the empirical evidence you've gathered that tells you it's going to be a winner.  The best pitch meetings I've ever had started with a demo (core use case, not EVERY SINGLE FEATURE) and then I shut my mouth.  The interested ones wouldn't let me through the demo without lots of questions and comments (that's a good thing).  After you get through the product / use case, then it gets down to the evidence.  This is where you should use your prepared slides.  If you get through the details and the conversation turns turns to "How much are you looking to raise?" or "What can I do to help?", that's the best possible outcome...no pitch from a deck required.

The caveat is if you aren't pitching the right person in the firm, the aforementioned doesn't apply.

Then why do so many people ask for decks?  Theoretically, a deck is faster to thumb through than a executive summary and you can direct submitters to touch on important topics.  All that means is, if you are part of the unfortunate masses that haven't invested the time into directly networking with investors or people investors respect, when you get put in the never-empty inbox, you have a better shot at getting thumbed through.  But, do you really want anyone seeing your slides un-narrated?  NO!

If you get a seat at the right table, let your passion, hard work and external validation shine through.  There is nothing worse than having your pitch stopped or watching people you've spent months trying to get to-check their email.  Realizing you blew is like a punch in the stomach.  Pitch decks are only for products that have gained traction (specifically in the minds of investors).  If the person you are pitching isn't already a fanboy, and they're usually not (odds are they haven't even looked at your product, even though you are on their calendar), you have to make them a believer.  To do that, you must make them believe, in this order:

1)  users will use it.
2)  that someone will pay for it.
3)  that they can make a big return by backing it.

Most investors invest with their gut and justify with facts.  Once you've crossed the threshold of worthy of their time (their most valuable resource), they'll be more forgiving.  However, for most of us, running them through a slide deck during your 1 bite at the apple, isn't going to do it for you.  The good news is, now you know that is.

What Startups Can Teach Big Companies About Hiring

I've read so many posts about interviews.  Whether you are trying to learn what questions to ask or how to answer the hard questions, the practice seems to be converging towards a standard song and dance, as opposed to a true assessment of how an individual will meld with your company's culture and what type of value they will bring to your company when they get there.

First, screen candidates for actual business needs. Every interview should have some standard for general competence, because we've all seen resumes that take liberties.  However, if you are hiring a developer / engineer, give them a real world problem and ask them how they'd solve it.  Better yet, tell them about problems you've actually encountered.  Then, ask them how they would go about solving the scenario.  Then, have them start coding it.  Throw them some curves on the fly and see how they deal with it.  There is more value in seeing someone psuedo-code a solution (free from a scrutinizing eye saying "that'll cause a runtime error") to How would you programmatically parse a sentence and decide whether to answer "that's what she said"?   than there is in knowing the difference between obscure algorithms (for 95% of your engineering team).

Next, interviewers are sales people.  There job is identifying hot leads and figuring out how to close.  It is a skill, so don't send them out unprepared.  Every interview I've been on, as a candidate, ends with me asking:

"What is your company / group's short-term goals?

"How do they measure progress towards achieving those goals?"

"What does your company value and how do they live those values?"

"Someone from your company said your company is looking to move in direction X.  What tangible steps have been taken to support that directive?"

From a startup perspective, those questions are critical to recruiting people and keeping them happy when they join your team.  As an interviewer for a larger company, you should make it a point to mention these things; they aren't just important for startups trying to recruit.  I learned to ask those types of questions because the information never comes up unprompted.  Surprisingly (or not), most of the time, the people conducting interviews can't answer those types of questions anyway.  Not bringing those types of things up, and certainly not being able to answer those types of questions, is a sure sign that your house isn't in order.  And your house has to be in order to attract the right type of candidate.

That leads me to my final point. HR representatives should know the open roles they are responsible for, the teams looking to fill those roles and the projects they are currently working on, cold. However, they should also know what other open reqs are out there AND have a standard for finding roles for 'the right people'.  All too often, candidates interview for a position and would be a better fit somewhere else.  It's a miscarriage of HR's responsibilities not to be able to spot this when it happens.  Since most larger companies have an arduous process for requisitioning new personnel, I'll stop short of saying that a great company always has a place for talented employees.  But, they really should.  At a small startup, the people trying to build a company based on a vision are conducting the interviews.  They would never let 'A' talent out the door because the role wasn't a fit.  At a larger company,  recruiters should pretend that the CEO, COO or SVP of something or other, is behind a two-way mirror.  Believe me, 'A' talent in a new role is better than experienced / I fit the job description perfectly 'B' talent every day of the week.  And let's face it, you have to hire 'A' talent when you find it.