a bit of bonhomie: Bootboy: Love and Marriage

a bit of bonhomie: Bootboy: Love and Marriage
www.SuperShaadi.com, is the first matrimony related site which provide all its services absolutely FREE, including email contacts.On SuperShaadi.com you can write personalized email messages also to any of the SuperShaadi.com member, if he/she accepts your initial contact.

How to start a startup ??

What it takes to start a startup

You need three things to create a successful startup:

1. To start with good people,
2. To make something customers actually want,
3. And to spend as little money as possible.

Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

And that's kind of exciting, when you think about it, because all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.

If there is one message I'd like to get across about startups that are it. There is no magically difficult step that requires brilliance to solve.

The Idea

In particular, you don't need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn't take brilliance to do better.

Google's plan, for example, was simply to create a search site that didn't suck. They had three new ideas: index more of the Web, use links to rank search results, and have clean, simple web pages with unintrusive keyword-based ads. Above all, they were determined to make a site that was good to use. No doubt there are great technical tricks within Google, but the overall plan was straightforward. And while they probably have bigger ambitions now, this alone brings them a billion dollars a year. [1]

There are plenty of other areas that are just as backward as search was before Google. I can think of several heuristics for generating ideas for startups, but most reduce to this: look at something people are trying to do, and figure out how to do it in a way that doesn't suck.

For example, dating sites currently suck far worse than search did before Google. They all use the same simple-minded model. They seem to have approached the problem by thinking about how to do database matches instead of how dating works in the real world. An undergrad could build something better as a class project. And yet there's a lot of money at stake. Online dating is a valuable business now, and it might be worth a hundred times as much if it worked.

An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go to VC firms with a brilliant idea that you'll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA.

Another sign of how little the initial idea is worth is the number of startups that change their plan en route. Microsoft's original plan was to make money selling programming languages, of all things. Their current business model didn't occur to them until IBM dropped it in their lap five years later.

Ideas for startups are worth something, certainly, but the trouble is, they're not transferable. They're not something you could hand to someone else to execute. Their value is mainly as starting points: as questions for the people who had them to continue thinking about.

What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can't save bad people.

People

What do I mean by good people? One of the best tricks I learned during our startup was a rule for deciding who to hire. Could you describe the person as an animal? It might be hard to translate that into another language, but I think everyone in the world knows what it means. It means someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive.

What it means specifically depends on the job: a salesperson who just won't take no for an answer; a hacker who will stay up till 4:00 AM rather than go to bed leaving code with a bug in it; a PR person who will cold-call New York Times reporters on their cell phones; a graphic designer who feels physical pain when something is two millimeters out of place.

If you think about people you know, you'll find the animal test is easy to apply. Call the person's image to mind and imagine the sentence "so-and-so is an animal." If you laugh, they're not. You don't need or perhaps even want this quality in big companies, but you need it in a startup.

It's no coincidence that startups start around universities, because that's where smart people meet. It's not what people learn in classes at MIT and Stanford that has made technology companies spring up around them. They could sing campfire songs in the classes so long as admissions worked the same.

If you start a startup, there's a good chance it will be with people you know from college or grad school. So in theory you ought to try to make friends with as many smart people as you can in school, right? Well, no. Don't make a conscious effort to schmooze; that doesn't work well with hackers.

What you should do in college is work on your own projects. Hackers should do this even if they don't plan to start startups, because it's the only real way to learn how to program. In some cases you may collaborate with other students, and this is the best way to get to know good hackers. The project may even grow into a startup. But once again, I wouldn't aim too directly at either target. Don't force things; just work on stuff you like with people you like.

Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear. Even Bill Gates, who seems to be able to bear a good deal of moral weight, had to have a co-founder. But you don't want so many founders that the company starts to look like a group photo. Partly because you don't need a lot of people at first, but mainly because the more founders you have, the worse disagreements you'll have. When there are just two or three founders, you know you have to resolve disputes immediately or perish. If there are seven or eight, disagreements can linger and harden into factions. You don't want mere voting; you need unanimity.

In a technology startup, which most startups are, the founders should include technical people. During the Internet Bubble there were a number of startups founded by business people who then went looking for hackers to create their product for them. This doesn't work well. Business people are bad at deciding what to do with technology, because they don't know what the options are, or which kinds of problems are hard and which are easy. And when business people try to hire hackers, they can't tell which ones are good. Even other hackers have a hard time doing that. For business people it's roulette.

Do the founders of a startup have to include business people? That depends. We thought so when we started ours, and we asked several people who were said to know about this mysterious thing called "business" if they would be the president. But they all said no, so I had to do it myself. And what I discovered was that business was no great mystery. It's not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff.

I think the reason I made such a mystery of business was that I was disgusted by the idea of doing it. I wanted to work in the pure, intellectual world of software, not deal with customers' mundane problems. People who don't want to get dragged into some kind of work often develop a protective incompetence at it. Paul Erdos was particularly good at this. By seeming unable even to cut a grapefruit in half (let alone go to the store and buy one), he forced other people to do such things for him, leaving all his time free for math. Erdos was an extreme case, but most husbands use the same trick to some degree.

Once I was forced to discard my protective incompetence, I found that business was neither so hard nor so boring as I feared. There are esoteric areas of business that are quite hard, like tax law or the pricing of derivatives, but you don't need to know about those in a startup. All you need to know about business to run a startup are commonsense things people knew before there were business schools, or even universities.

If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you'll learn something important about business school. You don't even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you'd do better to learn how to hack than get an MBA. [3]

There is one reason you might want to include business people in a startup, though: because you have to have at least one person willing and able to focus on what customers want. Some believe only business people can do this-- that hackers can implement software, but not design it. That's nonsense. There's nothing about knowing how to program that prevents hackers from understanding users, or about not knowing how to program that magically enables business people to understand them.

If you can't understand users, however, you should either learn how or find a co-founder who can. That is the single most important issue for technology startups, and the rock that sinks more of them than anything else.

What Customers Want

It's not just startups that have to worry about this. I think most businesses that fail do it because they don't give customers what they want. Look at restaurants. A large percentage fails, about a quarter in the first year. But can you think of one restaurant that had really good food and went out of business?

Restaurants with great food seem to prosper no matter what. A restaurant with great food can be expensive, crowded, noisy, and dingy, out of the way, and even have bad service, and people will keep coming. It's true that a restaurant with mediocre food can sometimes attract customers through gimmicks. But that approach is very risky. It's more straightforward just to make the food good.

It's the same with technology. You hear all kinds of reasons why startups fail. But can you think of one that had a massively popular product and still failed?

In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as "ran out of funding," but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.

When I was trying to think of the things every startup needed to do, I almost included a fourth: get a version 1 out as soon as you can. But I decided not to, because that's implicit in making something customers want. The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions.

The other approach is what I call the "Hail Mary" strategy. You make elaborate plans for a product, hire a team of engineers to develop it (people who do this tend to use the term "engineer" for hackers), and then find after a year that you've spent two million dollars to develop something no one wants. This was not uncommon during the Bubble, especially in companies run by business types, who thought of software development as something terrifying that therefore had to be carefully planned.

We never even considered that approach. As a Lisp hacker, I come from the tradition of rapid prototyping. I would not claim (at least, not here) that this is the right way to write every program, but it's certainly the right way to write software for a startup. In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.

Like most startups, we changed our plan on the fly. At first we expected our customers to be Web consultants. But it turned out they didn't like us, because our software was easy to use and we hosted the site. It would be too easy for clients to fire them. We also thought we'd be able to sign up a lot of catalog companies, because selling online was a natural extension of their existing business. But in 1996 that was a hard sell. The middle managers we talked to at catalog companies saw the Web not as an opportunity, but as something that meant more work for them.

How do you figure out what customers want? Watch them. One of the best places to do this was at trade shows. Trade shows didn't pay as a way of getting new customers, but they were worth it as market research. We didn't just give canned presentations at trade shows. We used to show people how to build real, working stores. Which meant we got to watch as they used our software, and talk to them about what they needed.

No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want. The only kind of software you can build without studying users is the sort for which you are the typical user. But this is just the kind that tends to be open source: operating systems, programming languages, editors, and so on. So if you're developing technology for money, you're probably not going to be developing it for people like you. Indeed, you can use this as a way to generate ideas for startups: what do people who are not like you want from technology?

When most people think of startups, they think of companies like Apple or Google. Everyone knows these, because they're big consumer brands. But for every startup like that, there are twenty more that operate in niche markets or live quietly down in the infrastructure. So if you start a successful startup, odds are you'll start one of those.

Another way to say that is, if you try to start the kind of startup that has to be a big consumer brand, the odds against succeeding are steeper. The best odds are in niche markets. Since startups make money by offering people something better than they had before, the best opportunities are where things suck most. And it would be hard to find a place where things suck more than in corporate IT departments. You would not believe the amount of money companies spend on software, and the crap they get in return. This imbalance equals opportunity.

If you want ideas for startups, one of the most valuable things you could do is find a middle-sized non-technology company and spend a couple weeks just watching what they do with computers. Most good hackers have no more idea of the horrors perpetrated in these places than rich Americans do of what goes on in Brazilian slums.

Start by writing software for smaller companies, because it's easier to sell to them. It's worth so much to sell stuff to big companies that the people selling them the crap they currently use spend a lot of time and money to do it. And while you can outhack Oracle with one frontal lobe tied behind your back, you can't outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers. [4]

They're the more strategically valuable part of the market anyway. In technology, the low end always eats the high end. It's easier to make an inexpensive product more powerful than to make a powerful product cheaper. So the products that start as cheap, simple options tend to gradually grow more powerful till, like water rising in a room, they squash the "high-end" products against the ceiling. Sun did this to mainframes, and Intel is doing it to Sun. Microsoft Word did it to desktop publishing software like Interleaf and Framemaker. Mass-market digital cameras are doing it to the expensive models made for professionals. Avid did it to the manufacturers of specialized video editing systems, and now Apple is doing it to Avid. Henry Ford did it to the car makers that preceded him. If you build the simple, inexpensive option, you'll not only find it easier to sell at first, but you'll also be in the best position to conquer the rest of the market.

It's very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you'll own the low end. And if you don't, you're in the crosshairs of whoever does.

Raising Money

To make all this happen, you're going to need money. Some startups have been self-funding-- Microsoft for example-- but most aren't. I think it's wise to take money from investors. To be self-funding, you have to start as a consulting company, and it's hard to switch from that to a product company.

Financially, a startup is like a pass/fail course. The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart move.

The first thing you'll need is a few tens of thousands of dollars to pay your expenses while you develop a prototype. This is called seed capital. Because so little money is involved, raising seed capital is comparatively easy-- at least in the sense of getting a quick yes or no.

Usually you get seed money from individual rich people called "angels." Often they're people who themselves got rich from technology. At the seed stage, investors don't expect you to have an elaborate business plan. Most know that they're supposed to decide quickly. It's not unusual to get a check within a week based on a half-page agreement.

Some angels, especially those with technology backgrounds, may be satisfied with a demo and a verbal description of what you plan to do. But many will want a copy of your business plan, if only to remind themselves what they invested in.

Our angels asked for one, and looking back, I'm amazed how much worry it caused me. "Business plan" has that word "business" in it, so I figured it had to be something I'd have to read a book about business plans to write. Well, it doesn't. At this stage, all most investors expect is a brief description of what you plan to do and how you're going to make money from it, and the resumes of the founders. If you just sit down and write out what you've been saying to one another that should be fine. It shouldn't take more than a couple hours, and you'll probably find that writing it all down gives you more ideas about what to do.

It can be dangerous to delay turning yourself into a company, because one or more of the founders might decide to split off and start another company doing the same thing. This does happen. So when you set up the company, as well as apportioning the stock, you should get all the founders to sign something agreeing that everyone's ideas belong to this company and that this company is going to be everyone's only job.

Once you've got a company set up, it may seem presumptuous to go knocking on the doors of rich people and asking them to invest tens of thousands of dollars in something that is really just a bunch of guys with some ideas. But when you look at it from the rich people's point of view, the picture is more encouraging. Most rich people are looking for good investments. If you really think you have a chance of succeeding, you're doing them a favor by letting them invest. Mixed with any annoyance they might feel about being approached will be the thought: are these guys the next Google?

Usually angels are financially equivalent to founders. They get the same kind of stock and get diluted the same amount in future rounds. How much stock should they get? That depends on how ambitious you feel. When you offer x percent of your company for y dollars, you're implicitly claiming a certain value for the whole company. Venture investments are usually described in terms of that number. If you give an investor new shares equal to 5% of those already outstanding in return for $100,000, then you've done the deal at a pre-money valuation of $2 million.

How do you decide what the value of the company should be? There is no rational way. At this stage the company is just a bet. I didn't realize that when we were raising money. Julian thought we ought to value the company at several million dollars. I thought it was preposterous to claim that a couple thousand lines of code, which was all we had at the time, were worth several million dollars. Eventually we settled on one millon, because Julian said no one would invest in a company with a valuation any lower. [6]

What I didn't grasp at the time was that the valuation wasn't just the value of the code we'd written so far. It was also the value of our ideas, which turned out to be right, and of all the future work we'd do, which turned out to be a lot.

The next round of funding is the one in which you might deal with actual venture capital firms. But don't wait till you've burned through your last round of funding to start approaching them. VCs are slow to make up their minds. They can take months. You don't want to be running out of money while you're trying to negotiate with them.

Getting money from an actual VC firm is a bigger deal than getting money from angels. The amounts of money involved are larger, millions usually. So the deals take longer, dilute you more, and impose more onerous conditions.

You may wonder how much to tell VCs. And you should, because some of them may one day be funding your competitors. I think the best plan is not to be overtly secretive, but not to tell them everything either. After all, as most VCs say, they're more interested in the people than the ideas. The main reason they want to talk about your idea is to judge you, not the idea. So as long as you seem like you know what you're doing, you can probably keep a few things back from them. [7]

Talk to as many VCs as you can, even if you don't want their money, because a) they may be on the board of someone who will buy you, and b) if you seem impressive, they'll be discouraged from investing in your competitors. The most efficient way to reach VCs, especially if you only want them to know about you and don't want their money, is at the conferences that are occasionally organized for startups to present to them.

Not Spending It

When and if you get an infusion of real money from investors, what should you do with it? Not spend it, that's what. In nearly every startup that fails, the proximate cause is running out of money. Usually there is something deeper wrong. But even a proximate cause of death is worth trying hard to avoid.

During the Bubble many startups tried to "get big fast." Ideally this meant getting a lot of customers fast. But it was easy for the meaning to slide over into hiring a lot of people fast.



Same thing Sanjay Tiwari did while launching SuperShaadi.com


Should You?

But should you start a company? Are you the right sort of person to do it? If you are, is it worth it? Sanjay Tiwari asked this question to him self many times before starting up with SuperShaadi.com

More people are the right sort of person to start a startup than realize it. That's the main reason I wrote this. There could be ten times more startups than there are, and that would probably be a good thing.

So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.

I can't say precisely what a good hacker is. At a first rate university this might include the top half of computer science majors. Though of course you don't have to be a CS major to be a hacker.

It's hard to tell whether you're a good hacker, especially when you're young. Fortunately the process of starting startups tends to select them automatically. What drives people to start startups is (or should be) looking at existing technology and thinking, don't these guys realize they should be doing x, y, and z? And that's also a sign that one is a good hacker.

The other reason it's hard to start a company before 23 is that people won't take you seriously. VCs won't trust you, and will try to reduce you to a mascot as a condition of funding. Customers will worry you're going to flake out and leave them stranded. Even you yourself, unless you're very unusual, will feel your age to some degree; you'll find it awkward to be the boss of someone much older than you, and if you're 21, hiring only people younger rather limits your options.

Some people could probably start a company at 18 if they wanted to. Bill Gates was 19 when he and Paul Allen started Microsoft. (Paul Allen was 22, though, and that probably made a difference.) So if you're thinking, I don't care what he says, I'm going to start a company now, you may be the sort of person who could get away with it.

The other cutoff, 38, has a lot more play in it. One reason I put it there is that I don't think many people have the physical stamina much past that age.

Also, startups are a big risk financially. If you try something that blows up and leaves you broke at 26, big deal; a lot of 26 year olds are broke. By 38 you can't take so many risks-- especially if you have kids.

My final test may be the most restrictive. Do you actually want to start a startup? What it amounts to, economically, is compressing your working life into the smallest possible space. Instead of working at an ordinary rate for 40 years, you work like hell for four. And maybe end up with nothing-- though in that case it probably won't take four years.

If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It's not something you have to know about "business" to do. Build something users love, and spend less than you make. How hard is that?


Sanjay Tiwari
www.SuperShaadi.com

How to start a startup ??

What it takes to start a startup

You need three things to create a successful startup:

1. To start with good people,
2. To make something customers actually want,
3. And to spend as little money as possible.

Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.

And that's kind of exciting, when you think about it, because all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.

If there is one message I'd like to get across about startups that are it. There is no magically difficult step that requires brilliance to solve.

The Idea

In particular, you don't need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn't take brilliance to do better.

Google's plan, for example, was simply to create a search site that didn't suck. They had three new ideas: index more of the Web, use links to rank search results, and have clean, simple web pages with unintrusive keyword-based ads. Above all, they were determined to make a site that was good to use. No doubt there are great technical tricks within Google, but the overall plan was straightforward. And while they probably have bigger ambitions now, this alone brings them a billion dollars a year. [1]

There are plenty of other areas that are just as backward as search was before Google. I can think of several heuristics for generating ideas for startups, but most reduce to this: look at something people are trying to do, and figure out how to do it in a way that doesn't suck.

For example, dating sites currently suck far worse than search did before Google. They all use the same simple-minded model. They seem to have approached the problem by thinking about how to do database matches instead of how dating works in the real world. An undergrad could build something better as a class project. And yet there's a lot of money at stake. Online dating is a valuable business now, and it might be worth a hundred times as much if it worked.

An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go to VC firms with a brilliant idea that you'll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA.

Another sign of how little the initial idea is worth is the number of startups that change their plan en route. Microsoft's original plan was to make money selling programming languages, of all things. Their current business model didn't occur to them until IBM dropped it in their lap five years later.

Ideas for startups are worth something, certainly, but the trouble is, they're not transferable. They're not something you could hand to someone else to execute. Their value is mainly as starting points: as questions for the people who had them to continue thinking about.

What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can't save bad people.

People

What do I mean by good people? One of the best tricks I learned during our startup was a rule for deciding who to hire. Could you describe the person as an animal? It might be hard to translate that into another language, but I think everyone in the world knows what it means. It means someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive.

What it means specifically depends on the job: a salesperson who just won't take no for an answer; a hacker who will stay up till 4:00 AM rather than go to bed leaving code with a bug in it; a PR person who will cold-call New York Times reporters on their cell phones; a graphic designer who feels physical pain when something is two millimeters out of place.

If you think about people you know, you'll find the animal test is easy to apply. Call the person's image to mind and imagine the sentence "so-and-so is an animal." If you laugh, they're not. You don't need or perhaps even want this quality in big companies, but you need it in a startup.

It's no coincidence that startups start around universities, because that's where smart people meet. It's not what people learn in classes at MIT and Stanford that has made technology companies spring up around them. They could sing campfire songs in the classes so long as admissions worked the same.

If you start a startup, there's a good chance it will be with people you know from college or grad school. So in theory you ought to try to make friends with as many smart people as you can in school, right? Well, no. Don't make a conscious effort to schmooze; that doesn't work well with hackers.

What you should do in college is work on your own projects. Hackers should do this even if they don't plan to start startups, because it's the only real way to learn how to program. In some cases you may collaborate with other students, and this is the best way to get to know good hackers. The project may even grow into a startup. But once again, I wouldn't aim too directly at either target. Don't force things; just work on stuff you like with people you like.

Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear. Even Bill Gates, who seems to be able to bear a good deal of moral weight, had to have a co-founder. But you don't want so many founders that the company starts to look like a group photo. Partly because you don't need a lot of people at first, but mainly because the more founders you have, the worse disagreements you'll have. When there are just two or three founders, you know you have to resolve disputes immediately or perish. If there are seven or eight, disagreements can linger and harden into factions. You don't want mere voting; you need unanimity.

In a technology startup, which most startups are, the founders should include technical people. During the Internet Bubble there were a number of startups founded by business people who then went looking for hackers to create their product for them. This doesn't work well. Business people are bad at deciding what to do with technology, because they don't know what the options are, or which kinds of problems are hard and which are easy. And when business people try to hire hackers, they can't tell which ones are good. Even other hackers have a hard time doing that. For business people it's roulette.

Do the founders of a startup have to include business people? That depends. We thought so when we started ours, and we asked several people who were said to know about this mysterious thing called "business" if they would be the president. But they all said no, so I had to do it myself. And what I discovered was that business was no great mystery. It's not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff.

I think the reason I made such a mystery of business was that I was disgusted by the idea of doing it. I wanted to work in the pure, intellectual world of software, not deal with customers' mundane problems. People who don't want to get dragged into some kind of work often develop a protective incompetence at it. Paul Erdos was particularly good at this. By seeming unable even to cut a grapefruit in half (let alone go to the store and buy one), he forced other people to do such things for him, leaving all his time free for math. Erdos was an extreme case, but most husbands use the same trick to some degree.

Once I was forced to discard my protective incompetence, I found that business was neither so hard nor so boring as I feared. There are esoteric areas of business that are quite hard, like tax law or the pricing of derivatives, but you don't need to know about those in a startup. All you need to know about business to run a startup are commonsense things people knew before there were business schools, or even universities.

If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you'll learn something important about business school. You don't even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you'd do better to learn how to hack than get an MBA. [3]

There is one reason you might want to include business people in a startup, though: because you have to have at least one person willing and able to focus on what customers want. Some believe only business people can do this-- that hackers can implement software, but not design it. That's nonsense. There's nothing about knowing how to program that prevents hackers from understanding users, or about not knowing how to program that magically enables business people to understand them.

If you can't understand users, however, you should either learn how or find a co-founder who can. That is the single most important issue for technology startups, and the rock that sinks more of them than anything else.

What Customers Want

It's not just startups that have to worry about this. I think most businesses that fail do it because they don't give customers what they want. Look at restaurants. A large percentage fails, about a quarter in the first year. But can you think of one restaurant that had really good food and went out of business?

Restaurants with great food seem to prosper no matter what. A restaurant with great food can be expensive, crowded, noisy, and dingy, out of the way, and even have bad service, and people will keep coming. It's true that a restaurant with mediocre food can sometimes attract customers through gimmicks. But that approach is very risky. It's more straightforward just to make the food good.

It's the same with technology. You hear all kinds of reasons why startups fail. But can you think of one that had a massively popular product and still failed?

In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as "ran out of funding," but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.

When I was trying to think of the things every startup needed to do, I almost included a fourth: get a version 1 out as soon as you can. But I decided not to, because that's implicit in making something customers want. The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions.

The other approach is what I call the "Hail Mary" strategy. You make elaborate plans for a product, hire a team of engineers to develop it (people who do this tend to use the term "engineer" for hackers), and then find after a year that you've spent two million dollars to develop something no one wants. This was not uncommon during the Bubble, especially in companies run by business types, who thought of software development as something terrifying that therefore had to be carefully planned.

We never even considered that approach. As a Lisp hacker, I come from the tradition of rapid prototyping. I would not claim (at least, not here) that this is the right way to write every program, but it's certainly the right way to write software for a startup. In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.

Like most startups, we changed our plan on the fly. At first we expected our customers to be Web consultants. But it turned out they didn't like us, because our software was easy to use and we hosted the site. It would be too easy for clients to fire them. We also thought we'd be able to sign up a lot of catalog companies, because selling online was a natural extension of their existing business. But in 1996 that was a hard sell. The middle managers we talked to at catalog companies saw the Web not as an opportunity, but as something that meant more work for them.

How do you figure out what customers want? Watch them. One of the best places to do this was at trade shows. Trade shows didn't pay as a way of getting new customers, but they were worth it as market research. We didn't just give canned presentations at trade shows. We used to show people how to build real, working stores. Which meant we got to watch as they used our software, and talk to them about what they needed.

No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want. The only kind of software you can build without studying users is the sort for which you are the typical user. But this is just the kind that tends to be open source: operating systems, programming languages, editors, and so on. So if you're developing technology for money, you're probably not going to be developing it for people like you. Indeed, you can use this as a way to generate ideas for startups: what do people who are not like you want from technology?

When most people think of startups, they think of companies like Apple or Google. Everyone knows these, because they're big consumer brands. But for every startup like that, there are twenty more that operate in niche markets or live quietly down in the infrastructure. So if you start a successful startup, odds are you'll start one of those.

Another way to say that is, if you try to start the kind of startup that has to be a big consumer brand, the odds against succeeding are steeper. The best odds are in niche markets. Since startups make money by offering people something better than they had before, the best opportunities are where things suck most. And it would be hard to find a place where things suck more than in corporate IT departments. You would not believe the amount of money companies spend on software, and the crap they get in return. This imbalance equals opportunity.

If you want ideas for startups, one of the most valuable things you could do is find a middle-sized non-technology company and spend a couple weeks just watching what they do with computers. Most good hackers have no more idea of the horrors perpetrated in these places than rich Americans do of what goes on in Brazilian slums.

Start by writing software for smaller companies, because it's easier to sell to them. It's worth so much to sell stuff to big companies that the people selling them the crap they currently use spend a lot of time and money to do it. And while you can outhack Oracle with one frontal lobe tied behind your back, you can't outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers. [4]

They're the more strategically valuable part of the market anyway. In technology, the low end always eats the high end. It's easier to make an inexpensive product more powerful than to make a powerful product cheaper. So the products that start as cheap, simple options tend to gradually grow more powerful till, like water rising in a room, they squash the "high-end" products against the ceiling. Sun did this to mainframes, and Intel is doing it to Sun. Microsoft Word did it to desktop publishing software like Interleaf and Framemaker. Mass-market digital cameras are doing it to the expensive models made for professionals. Avid did it to the manufacturers of specialized video editing systems, and now Apple is doing it to Avid. Henry Ford did it to the car makers that preceded him. If you build the simple, inexpensive option, you'll not only find it easier to sell at first, but you'll also be in the best position to conquer the rest of the market.

It's very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you'll own the low end. And if you don't, you're in the crosshairs of whoever does.

Raising Money

To make all this happen, you're going to need money. Some startups have been self-funding-- Microsoft for example-- but most aren't. I think it's wise to take money from investors. To be self-funding, you have to start as a consulting company, and it's hard to switch from that to a product company.

Financially, a startup is like a pass/fail course. The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart move.

The first thing you'll need is a few tens of thousands of dollars to pay your expenses while you develop a prototype. This is called seed capital. Because so little money is involved, raising seed capital is comparatively easy-- at least in the sense of getting a quick yes or no.

Usually you get seed money from individual rich people called "angels." Often they're people who themselves got rich from technology. At the seed stage, investors don't expect you to have an elaborate business plan. Most know that they're supposed to decide quickly. It's not unusual to get a check within a week based on a half-page agreement.

Some angels, especially those with technology backgrounds, may be satisfied with a demo and a verbal description of what you plan to do. But many will want a copy of your business plan, if only to remind themselves what they invested in.

Our angels asked for one, and looking back, I'm amazed how much worry it caused me. "Business plan" has that word "business" in it, so I figured it had to be something I'd have to read a book about business plans to write. Well, it doesn't. At this stage, all most investors expect is a brief description of what you plan to do and how you're going to make money from it, and the resumes of the founders. If you just sit down and write out what you've been saying to one another that should be fine. It shouldn't take more than a couple hours, and you'll probably find that writing it all down gives you more ideas about what to do.

It can be dangerous to delay turning yourself into a company, because one or more of the founders might decide to split off and start another company doing the same thing. This does happen. So when you set up the company, as well as apportioning the stock, you should get all the founders to sign something agreeing that everyone's ideas belong to this company and that this company is going to be everyone's only job.

Once you've got a company set up, it may seem presumptuous to go knocking on the doors of rich people and asking them to invest tens of thousands of dollars in something that is really just a bunch of guys with some ideas. But when you look at it from the rich people's point of view, the picture is more encouraging. Most rich people are looking for good investments. If you really think you have a chance of succeeding, you're doing them a favor by letting them invest. Mixed with any annoyance they might feel about being approached will be the thought: are these guys the next Google?

Usually angels are financially equivalent to founders. They get the same kind of stock and get diluted the same amount in future rounds. How much stock should they get? That depends on how ambitious you feel. When you offer x percent of your company for y dollars, you're implicitly claiming a certain value for the whole company. Venture investments are usually described in terms of that number. If you give an investor new shares equal to 5% of those already outstanding in return for $100,000, then you've done the deal at a pre-money valuation of $2 million.

How do you decide what the value of the company should be? There is no rational way. At this stage the company is just a bet. I didn't realize that when we were raising money. Julian thought we ought to value the company at several million dollars. I thought it was preposterous to claim that a couple thousand lines of code, which was all we had at the time, were worth several million dollars. Eventually we settled on one millon, because Julian said no one would invest in a company with a valuation any lower. [6]

What I didn't grasp at the time was that the valuation wasn't just the value of the code we'd written so far. It was also the value of our ideas, which turned out to be right, and of all the future work we'd do, which turned out to be a lot.

The next round of funding is the one in which you might deal with actual venture capital firms. But don't wait till you've burned through your last round of funding to start approaching them. VCs are slow to make up their minds. They can take months. You don't want to be running out of money while you're trying to negotiate with them.

Getting money from an actual VC firm is a bigger deal than getting money from angels. The amounts of money involved are larger, millions usually. So the deals take longer, dilute you more, and impose more onerous conditions.

You may wonder how much to tell VCs. And you should, because some of them may one day be funding your competitors. I think the best plan is not to be overtly secretive, but not to tell them everything either. After all, as most VCs say, they're more interested in the people than the ideas. The main reason they want to talk about your idea is to judge you, not the idea. So as long as you seem like you know what you're doing, you can probably keep a few things back from them. [7]

Talk to as many VCs as you can, even if you don't want their money, because a) they may be on the board of someone who will buy you, and b) if you seem impressive, they'll be discouraged from investing in your competitors. The most efficient way to reach VCs, especially if you only want them to know about you and don't want their money, is at the conferences that are occasionally organized for startups to present to them.

Not Spending It

When and if you get an infusion of real money from investors, what should you do with it? Not spend it, that's what. In nearly every startup that fails, the proximate cause is running out of money. Usually there is something deeper wrong. But even a proximate cause of death is worth trying hard to avoid.

During the Bubble many startups tried to "get big fast." Ideally this meant getting a lot of customers fast. But it was easy for the meaning to slide over into hiring a lot of people fast.



Same thing Sanjay Tiwari did while launching SuperShaadi.com


Should You?

But should you start a company? Are you the right sort of person to do it? If you are, is it worth it? Sanjay Tiwari asked this question to him self many times before starting up with SuperShaadi.com

More people are the right sort of person to start a startup than realize it. That's the main reason I wrote this. There could be ten times more startups than there are, and that would probably be a good thing.

So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.

I can't say precisely what a good hacker is. At a first rate university this might include the top half of computer science majors. Though of course you don't have to be a CS major to be a hacker.

It's hard to tell whether you're a good hacker, especially when you're young. Fortunately the process of starting startups tends to select them automatically. What drives people to start startups is (or should be) looking at existing technology and thinking, don't these guys realize they should be doing x, y, and z? And that's also a sign that one is a good hacker.

The other reason it's hard to start a company before 23 is that people won't take you seriously. VCs won't trust you, and will try to reduce you to a mascot as a condition of funding. Customers will worry you're going to flake out and leave them stranded. Even you yourself, unless you're very unusual, will feel your age to some degree; you'll find it awkward to be the boss of someone much older than you, and if you're 21, hiring only people younger rather limits your options.

Some people could probably start a company at 18 if they wanted to. Bill Gates was 19 when he and Paul Allen started Microsoft. (Paul Allen was 22, though, and that probably made a difference.) So if you're thinking, I don't care what he says, I'm going to start a company now, you may be the sort of person who could get away with it.

The other cutoff, 38, has a lot more play in it. One reason I put it there is that I don't think many people have the physical stamina much past that age.

Also, startups are a big risk financially. If you try something that blows up and leaves you broke at 26, big deal; a lot of 26 year olds are broke. By 38 you can't take so many risks-- especially if you have kids.

My final test may be the most restrictive. Do you actually want to start a startup? What it amounts to, economically, is compressing your working life into the smallest possible space. Instead of working at an ordinary rate for 40 years, you work like hell for four. And maybe end up with nothing-- though in that case it probably won't take four years.

If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It's not something you have to know about "business" to do. Build something users love, and spend less than you make. How hard is that?

www.SuperShaadi.com