Shanti’s Dispatches

New article up over at On Web Apps.

This is something I wish more people understood, at least when you’re talking to them about your startup or startup idea. “Dunkin’ Donuts’ CEO Jon Luther says his company is helped by its rivalry with Starbucks: “[It’s] created an awareness for the category, and we’re benefiting.”

The chain’s success illustrates a little-advertised truth of business. Too often the financial pages read like the sports section, filled with winners and losers. Reality is more complex. In many markets, business is not a zero-sum game, and competitors create opportunities.

Full Article. Via: 37 Signals

Too often you tell someone what you’re doing, and even if they don’t say it out load (sometimes they do), they’re thinking it. “Oh, you’ll get crushed by X.”

There are way too many examples to list here of underdogs or new spins on ideas that took off and crushed (or simply carved out a niche) formerly owned by a dominant 400lb Gorilla in a space.

Reading Founders at Work only reinforces that point.

Just a few examples (though the landscape has changed since then) from the book:

Early spreadsheet market: First pioneered by VisiCalc, which got crushed by Lotus 1-2-3, which eventually got crushed by Excel.

Early OS/PC market: IBM’s game to lose, of course. They got owned by Apple, who eventually got owned by Microsoft.

Just goes back to my mantra on small business and startups:

This article talks about what makes software projects so hard.

There are a number of reasons.

But the people / books / etc. that all claim to have a monopoly on knowing why software is late, or why their consulting practice / paradigm will solve the problem, are often-times selling a pipe dream.

Next time you hear a horror story about how late a software project is — all you have to know is this:

That’s the “Big Secret” about software dev. Not too complicated.

If Thomas Edison was a software developer, working on his “filament project” for someone:

Dear Edison,

We’re sorry - but your filament project is 200% over budget.

We’re cancelling your project — and truth be told — I never saw the need for any technology more sufficiently advanced than that great classic invention — The Candle, anyway.

Sincerely,
Your PM

Excerpted from “Great Software Failures of the 1800s” by Simon & Schuster

Aaron has a great post about what it’s like to work at Wired now that reddit has been acquired by Conde Nast.

It seems like there are usually three reasons why companies (well, it’s always people, somewhere, at the companies, who make the decision) want you working in an office:

1. Camradarie, team bonding
2. Rapid convergence on a feature set or UI functionality
3. Making sure you’re “working” and not, you know, goofing off
4. A very real explicit reason why you have to be onsite - like, you’re a Bank Teller, and they don’t make offsite vaults just yet

Startups usually have the first two reasons - which are very valid. (though, you don’t need to be in a shared workspace 100% of the time to accomplish this)

The third one falls amazingly short, and seems to be a major reason why many big companies have you working in an office. It’s sad that managers or CEOs think that if they just have a bunch of “warm bodies” in the office, that things are actually getting done.

A lonely, dark, quiet night from 9pm - 5am can be about 3x as productive for me as some days of a regular 9-5pm. Heck, make that 10x, or infinity-times (due to a division by zero error) as productive compared to those days that you just can’t seem to get much of anything done.

I’m probably just a “bad programmer” in this way, but I try to explain to my lovely girlfriend Abygale, how some days it’s hard to even get the ball in gear and start coding. She doesn’t have this problem - she can show up at work and start doing loan stuff (I still haven’t figured out exactly what she does, but it involves a lot of paperwork).

I guess this post was making the rounds this week while I was busy coding up a storm. Ironically, I was implementing a billing system so that we can charge cards at Sprout.

Hello. It’s never a good time to start a company without the intent of making money.

You don’t have to make a lot to begin with… Overture started by making pennies (literally) and went on to be acquired by Yahoo for $1.63 billion.

Evaluating Business Ideas

Whenever someone tells me about a new business idea, the first thing I ask about is the business model.

Here are some simple business models

- Buy widgets at $2, sell them for $4. (Wal-Mart)
- Offer a free, limited service to attract clients. Also offer a premium service and charge for it. (Sprout, 37 Signals)
- Blog about interesting things, sell advertising. (Weblogs Inc.)

It doesn’t take a rocket scientist to do some back of the envelope calculations to figure out how much dough you can potentially make with your business model.

If the model gets much more complicated than any of the above… I’m usually a little skeptical about its potential viability.

When to realize you’re in a Web 2.0 circle … you know what

99% of the population has never even heard of Web 2.0. Even in the tech industry in non SF Bay Area cities. (you’d be surprised)

These people:
- don’t have a gmail account, nor do they even know it exists (they are still using some crappy hotmail 2mb limit acct they opened 4 years ago)
- don’t read blogs
- especially don’t read TechCrunch (let alone know what it is)
- have never heard of Ruby on Rails
- Ajax? are you kidding? they think it’s a cleaning detergent

I’m not a part of the whole SF Bay Area thing (yet), but we do need to keep some perspective here… Pets.com isn’t going public again like it’s 1998. A few lucky (+ highly-skilled & passionate) guys in their garage got bought out for $15-30 mil. The rest of us have to actually bring in the Benjamins, with uhh, you know, paying customers n stuff.

Me-too companies… What’s the bfd?

Commenters on the Caterina post belittle all the ‘me-too’ companies coming out of the gates. I don’t really know what ‘me-too’ means exactly… Yes, there are some ‘me-too’ companies, but that’s really just a sign of competition and innovation.

The weaker ones will be weeded out, though, when hosting only costs $10 a month, what’s the bfd? Throw some AdSense on there and you’re all set.

Of course, if you’ve taken $5M in VC and your business model is “throw some AdSense on there,” well, you better have a lot of targetted content + traffic. They only make so many Yahoo/Google acquisition lottery tickets.

I’m subscribed to an email newsletter from Nightingale Conant. A really great article from them just dropped into my inbox. Since I’m not sure if it’s reprinted on the web anywhere, I’ll quote it liberally here. It’s by Denis Waitley:

Setbacks and failures mean little or nothing in themselves. The whole meaning of any setback - or any success, for that matter - is in how we take it and what we make of it.

It has been said that failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead-end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.

It may motivate you more toward your own goals to know that some of the most famous and well-known people in modern times had to overcome obstacles as difficult as anyone’s before they finally reached the top. It takes persistence and total commitment to your goals, but it’s possible.

Edison: probably the king of all failure

Thomas Edison’s father called him a “dunce.” His headmaster in school told Edison he would never make a success of anything.

Henry Ford barely made it through high school.

…

Joe Paterno, head coach of the Penn State University football team, was asked by the media how he felt when his team lost a game. He rapidly replied that losing was probably good for the team, since that was how the players learned what they were doing wrong.

Setbacks and failures mean little or nothing in themselves. The whole meaning of any setback - or any success, for that matter - is in how we take it and what we make of it.

We often look at high achievers and assume they had a string of lucky breaks or made it without much effort. Usually the opposite is true, and the socalled superstar or “overnight success” had an incredibly rough time before he or she attained any lasting success.

I love hearing these kinds of stories. Famous writers almost always have an “almost didn’t make it but instead became a huge success” story:

You may not know the background of a certain laundry worker who earned $60 a week at his job but had the burning desire to be a writer. His wife worked nights, and he spent nights and weekends typing manuscripts to send to publishers and agents. Each one was rejected with a form letter that gave him no assurance that his manuscript had even been read. I’ve received a few of those special valentines myself through the years, and I can tell you firsthand that they’re not the greatest self-esteem builders.

But finally, a warm, more personal rejection letter came in the mail to the laundry worker, stating that, although his work was not good enough at this point to warrant publishing, he had promise as a writer and he should keep writing.

He forwarded two more manuscripts to the same friendly-yet-rejecting publisher over the next 18 months, and as before, he struck out with both of them. Finances got so tight for the young couple that they had to disconnect their telephone to pay for medicine for their baby.

Feeling totally discouraged, he threw his latest manuscript into the garbage. His wife, totally committed to his life goals and believing in his talent, took the manuscript out of the trash and sent it to Doubleday, the publisher who had sent the friendly rejections. The book, titled Carrie, sold over 5 million copies and, as a movie, became one of the top-grossing films in 1976. The laundry worker, of course, was Stephen King.

I have mentioned The Business Experiment before here previously.

Robert May has posted a lengthy explanation of some of the issues they are facing as they attempt to incorporate their first venture.

Why can’t we incorporate like a regular startup?

Most regular startups incorporate as a C corporation. The rules governing this were laid out in the securities acts after the market crash of 1929, to protect investors. Ownership in a C corporation is considered a security. It is illegal to advertise securities for sale under most conditions. As a general rule, securities must be registered with the Securities and Exchange Commission. However, there are several ways around this . Unfortunately, we don’t meet any of the requirements, except the ones that still require a disclosure document (i.e. a $15,000 preparation). We could get an exemption if

a)we keep incorporation to fewer than 35 people

b)we keep all the owners in the same state, and the total value to less than $1 million

c)every owner is an “accredited investor,” meaning a net worth of $1million or more or yearly income of 250K

Read more here

In less than 30 hours, I’ll be moving on from my current employer.

It’s been a fun little ride, but other opportunities have presented themselves and it’s really just the perfect timing for me.

I’d like to give a big shoutout to my pals here at the office — Thomas, Ed, Jim, Ron, Scott, Eric and the whole gang. Sorry I won’t be continuing with ya’ll, but Ruby on Rails, web app development, and early-stage startups are where my heart lies at the moment.

Starting Small, Finishing ….. ? with Sprout

I have the domain name StartSmallFinishBig.com, which I haven’t decided quite what to do with yet. Maybe a small biz blog, or local small biz networking group, who knows.

The thing I dislike about the term small business, though, is that it can:

1) Imply that what you’re doing is small. When clearly small teams can do big things.

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. - Margaret Mead

2) Imply that you’ll always be small. This is obviously not the case, but the picture I have of a “small business” is one in which the owner is struggling very hard to get things off the ground.

That first 1-2 years can be incredibly difficult and many (or most - I think like 80%) do not make it.

I hazard to guess that two years of struggle, stress and just barely making ends meet … is not the reason small business entrepreneurs went into business for themselves.

The Ideal Small Business

My ideal small business would be 100% automated, or backed up by a dedicated team of on-call support reps. So that, you know, I could take 2-month long vacations in Fiji and the Virgin Islands. Then stop off in Vail for a nice little snowboarding session.

E-mail and Internet access would be used to login and see the latest stats — how many new clients had signed up or how many new sales were made. (Oh, another $2,236 today, w00t!)

So, small is just a state of mind. It’s a stepping stone. That’s all.

The Big Act - Sproutit’s Weblog

You can follow along with our journey over on The Big Act - Sproutit’s weblog on small business, technology, our software and doing what you love.

Funny, we were just talking about this at the office the other day.

Bruce Eckel’s The Ideal Programmer is making the rounds on del.icio.us/popular.

Bruce is unable to point to the exact source of this folklorish anecdote, but says:

My favorite, because it’s such a wake-up call, is that 5% of the programmers are 20 times more productive than the other 95%.

If you do know the source — of an actual scientific study confirming something along these lines — please drop a note in the comments section!

I do believe that something to this effect is true - but perhaps it’s just the top 1% or 0.5%, whatever.

My point (to my buddies) was that: Ok, presuppose it’s true, which doesn’t seem like that big of a stretch. There are always those people who are way off the charts at both ends of the bell curve.

Enter: Magic Geodesic Dome of Productivity Measurement

Let’s suppose there was a magic geodesic dome you could throw people in and measure their productivity, even all those immeasurables like people skills.

The computer says, “Alert, Alert! Larry von Lutzhowzer, your new senior programmer, is 20x as productive on an individual basis as Billy, Joe, Bob, Nancy and Chuck, who’ve all been given great marks but have roughly the same salary as Larry.”

Do you think Larry would even remotely get a bump in pay commensurate with his measured output levels (20 times, with lower bug incidence rates!)?!?

Of course not. He’d be lucky to be making twice as much, even after they determined beyond all reasonable doubt that he was 20x as productive as some of the other team members.

Please note: there are always those under-appreciated Catalysts of the team, who might not output as many Lines of Code or bug fixes, but provide invaluable glue and motivation. Their loss can spell certain doom to a project that’s already teetering on the edge.

So — What’s your point, smart ass?

Go work for a startup, or start one yourself.

That’s the only way you can leverage your skills beyond a paycheck + linearly increasing annual raise.

Turn that 5, 10 or 20x productivity into better products and services. Go all out and hit those High Notes instead of settling for second best.

ps. I know, I know. This is nothing that hasn’t been said before. Sometimes we all need a little reminder.

This time on How to Do What You Love.

To do something well you have to like it. That idea is not exactly novel. We’ve got it down to four words: “Do what you love.” But it’s not enough just to tell people that. Doing what you love is complicated.

If you know me or have read this blog for a bit, you’ll know this is something I also feel passionately about (along with sleep schedules, that is :)).

On School and Tedium

The part on school being tedious reminds me of a story about a friend, now a member of the rock band Ludo, when he was in grade school.

He went to a Montessori School, and from everything I’ve heard about these new agey schools, I really wish I had had the opportunity to go to one for a while.

Andrew Volpe, for an entire month straight, simply counted to a million. When he went to bed at night, he noted down how far he had gotten. When he woke up, he continued on his quest to a million. I guess it took him about a month.

Not really sure of the point of that story, other than an example of doing what you love (or maybe just what you want to do), as opposed to traditional boring/tedious schoolwork.

I went to college with Andrew for several years until he finally dropped out and just went for it with his band, living out of their van and crashing at random houses on the road. You da man, Andrew.

On Prestige

Prestige doesn’t really appeal to me so much as Respect does. These days, especially in the webapp / Web 2.0 world, “respect, yo” as Ali G would say, is hard to come by.

The competition is just insane. Everyone and their grandma, it seems, are building a new whiz-bang Ruby on Rails / Ajax powered, social-networking whirly-gig.

On Money

I fall into this trap, too.

It seems like ages ago, but for a while there, I really thought that I was hot stuff for selling a website and having a fat chunk of stock in a publicly-traded company. Boy, how naive. (the stock was restricted at the time and is now worth next to nothing)

When you honestly believe you don’t have to worry about where the rent money / etc. will come from for the next 6-12 months, the feeling of freedom is incredible.

That’s when I started the networking group / Human Capital Investment Group, Menlo Park 2.0. It was fun while it lasted, and it’s still an idea I hope to revisit if the opportunitity presents itself.

What I’ve learned since starting MP2 is that idealism, ambition and dreaming big are one thing (they are awesome & a pre-requisite for ‘going big’), but, at the end of the day, unfortunately money still talks. Not to mention pays the bills.

SproutIt.com’s Suite of Web Apps: Enablers of Doing What You Love?

Only time will tell. But that’s what appeals to me most — the vision of a suite of hosted web apps for small businesses.

And of course, starting your own small business is all about doing what you love, no?

Over on Sprout’s blog The Big Act: Charles Jolley talks about Mailroom and doing what you love.