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MIT Startup Bootcamp 2011: Notes and Musings

Posted by Dharmesh Shah on Mon, Sep 26, 2011

 


This past weekend was the 3rd annual MIT Startup Bootcamp. It's one of favorite startup events in the Boston area (I spoke at the first one in 2009. Video of my talk available). I didn't get to attend in person this year, but watched most of the sessions remotely. Thankfully, my friend Andy Cook (co-founder of Rentabilities) attended and volunteered to capture some notes from the sessions. [Disclosure: I'm an investor in Rentabilities, but Andy would have volunteered anyways, he's a great guy]describe the image

These are not polished or edited, but still should be useful. Enjoy.

I've also taken the liberty to add in some of the tweets I posted while watching the live stream. They're included inline below.

Paul English (Kayak)

Twiter: @englishpaulm

How Kayak recruits - Hire for team first, customers second, and profit third.

Kayak evaluates potential employees on bandwidth, attitude, diversity of experience, and lack of dysfunctional behavior.

Bandwidth – Smart, fast, and can do things quickly. Need to have one minute conversations and GSD.

Attitude – Aggressive, focused on output, producing result. Can ship product and close customers. Have experience and working with teams. Look for people who enthusiastically talk about success with past teams.

Diversity – Look for people who are successful at something. You want someone who has been successful. It doesn’t matter if they have the current skills. Hired a rowing Olympian and a chessmaster. If they could achieve at that level, then they must be good. Chessmaster. You want people who got stuff done. Creates a well rounded team.

Lack of dysfunctional behavior – No something? Rule. If you find people who are very team positive and in your face in a fun way, you’ll end up with a good team. Find someone who is focused on having fun at work and creating a good product.

How investors evaluate startups - 70% team, 20% market, 10% on what you actually do.

Look for people who have been successful, aggressive, ethical, and work hard. Have confidence but humility to ask questions when they don’t know.

A large market that is going through transformation gets investors excited.

What you build doesn’t matter as much because VC and investors assume you know how to operate and compete in the market.

Don’t spend money on marketing at first. It’s much more important to build a product first that is so compelling that the 10 users who use it first will buy it, then that’s a time you’ve proven theirs a spark and your ready to raise money.

Make sure your cofounder is someone who when you’re facing dark days, you need someone who is going to aggressive when you’re done. Play off each other in terms of confidence.

Don’t outsource your tech if you’re a tech based company. Find a CTO who has shipped something. If you’re a tech founder, think about what function you need the most. You can hire a firm to do all the other stuff, but finance is the most important.

You need speed and team to out compete your competitors. If you believe in your idea, if it’s really important to you, then they won’t be able to execute as well as you.

Leah Culver (Convore)

Twitter: @leahculver

Reasons @leahculver sold her startup: Big competitor, market downturn and team was not doing great.  Pretty good reasons.  @dharmesh

Made a solitaire game in college. Like hobby coding and built stuff in her free time.

When working on her first start-up, she was happy and doing what she loved. Was able to create something from scratch that she loved working on, and it is totally worth doing your own thing and trying it.

You only get one life and one opportunity to do the things you want.

Learn to cowboy code. You’re willing to do code that isn’t perfect but works. You need the ability to write things quickly and implement them fast, so it’s great to do it when you’re not afraid to write bad code. Hire people who can get stuff done instead of over-optimizing.

Leah’s Secrets to Success

Show up – Successful rock bands show up to their gigs (her dad’s advice). Actors go to Hollywood so you should go to the Valley. (I disagree with this…). She met Kevin Rose, her first cofounder, at a party.

Be nice to other startups and say congratulations. It’s important to have a strong ecosystem for you to rely on.

Luck is important

Iterate - Most start-up founders don’t stick with the exact idea they had in the beginning. Be prepared to fail then try again.

Andrew Sutherland (Quizlet)

twitter: @asuth

Don’t do market research. If he did, he would have found the crappy products out there and used those. Instead, he built something for himself and what he wanted, and now their site is 10 times bigger than it’s competitors.

Observations by me:

Demo – Make sure your product works before demoing, and make it sure it’s interesting. Andrew made it interesting by being funny and super geeky. He didn’t know if audio would work, but luckily it did. If audio didn’t work, then it wouldn’t have been a good demo.

Quizlet puts a lot of personality into their product. GraveDigger backflip for a 100% on a quiz,

Andrew had been hacking on Quizlet for 3 years, but had never spent all of his energy working on it. Left MIT because Quizlet was growing so big and needed so much attention that he had to make a decision. It was a fork. He could give it away, or go full time. It was worth it to leave school because it’s been intense and fun. When leaving MIT It wasn’t a decision made in a short period of time like two days. It was over the course of 2 weeks.

Copied Wufoo’s fanaticism about feedback by building an internal feedback system. They get almost 100 feedback messages a day from users. Everyone at the company does support. When everyone does support, there’s no one guy who makes decisions and is overly concerned about one feature.

In the beginning, the people building the product were using QuizLet differently than the actual users. That created a dilemma because they can build new features and verify they are working as planned, but that doesn’t mean they are helping students actually learn.

The Quizlet team decided to start a Spanish class in office. Hired a Spanish teach to come in once a week, and gives them homework. It forces them actually use their product. (Eat your own dogfood). They realized a lot of issues when they started using their own product. Right away they fixed 10 or 15 small things that were obvious once they started using as a user would.

Naveen Selvadurai (FourSquare)

twitter: @naveen

Worked at two startups before starting FourSquare. Got to code on real products. Got to get a sense of how they work on team, how to deploy code, etc.

“When you’re in a big company, you’re physically fit. When you’re a startup founder, you’re the opposite. You’re mentally fit, but not physically.” (FourSquare 15)

Random observation by me:

He just had a slide that said “hi.” and started talking. Apparently he was clicking through the slide on the TV, but didn’t know the weren’t changing on the project. No one even noticed until it was pointed out. He spent some time trying to get it to work and stopped talking. IMO – It would have been better if he had just kept talking because his story was so compelling.

Naveen’s rules for sucess

1. Keep good company. Hang out with great people who are smart. Have good friends. Have people you can talk to about stuff you’re trying to figure out. Start-up hubs are powerful because the more you get to talk about ideas, the better you’ll understand it and the better stuff you’ll build. Even the people you hang out with shape your product.

2. Make something people want.

3. Build around an atomic action – Facebook = status update. FourSquare = check-in. Square = swipe. Focusing around the action will narrow how the app will look and keep it simple.

4. Seek mentors early – Have someone you can relate your stories, tell your problems and get feedback.

5. At first, hunch, then data.

6. Balance unknown with knowns – Creating a startup is an emotional rollercoaster of ups and downs. There is no steady pace. Balance your life with steady friends, exercise, diet, etc.

7. Always be recruiting – A huge part of your job as a member of the founding team is to find great people. Encourage your current people to always find more great people. Engineers want to work on great problems and they want to work with really smart people.

In the beginning, FoureSquare only hired friends, and then friends of friends. Hiring trusted people has added benefits, such as the ability to trust people to not steal your ideas or create a competitive company.

Charlie Cheever (Quora)

twitter: @ccheever

It’s important to work with people who you have really high bandwidth communication between each other. You’ll be able to understand how the other person is thinking and be able to resolve it fast. When you don’t have to spend time articulating problems and just know what your cofounder is thinking, you’ll get more done.

It makes sense to invest in technologies and systems when you know what you’re doing. Quora created a framework for coding only when they were ready to build something usable.

Find the wave of change to help propel your startup. You can’t just outwork people or innovate better. You need to find a compelling market and change it.

In response to Naveen - Qualitative data is an important middle ground between hunches and aggregated data.

Any opportunity that is interesting, there’s going to be a bunch of competitors. Google beat all other search engines by making a better product and out executing.

Stand for something – Quora stands for great design and user experience. They want to help anyone who needs to an answer to a question connect with the person in the world who knows it.

Good engineers did not want to work at Quora until they had a good product and traction. Up until that point, it was all people they knew.

Drew Houston (Dropbox)

For the record, @drewhouston from Dropbox has one of the best accomplishment:ego ratios I've ever seen.  Smart and super modest. @dharmesh  

Everything big starts small. Drew though that creating a startup is like climbing Mount Doom, with everything being big, scary, and insurmountable.

The reality is that every founder starts in the same place and at the same point, which is completely clueless. Apple, Google, Yahoo, Oracle, Facebook and many others were started by first time founders in their 20’s. Facebook was just a project that Zuckerbug was hacking on, and he didn’t’ set out to redefine the face of communication.

You need to get out of your comfort zone. In the beginning, everything is about code. But quickly, you’ll have to learn communication skills and how to design a system of people to build something at scale. History says that it usually starts as a hacker who turns into a great entrepreneur and not an MBA who becomes a great engineer. Most founders started out as super awkward, but then were able to build great companies.

“The technology and product is just one piece of a much bigger picture.”

“You get good at understanding startups by joining or starting one. It’s the most efficient way to learn the ropes.”

Dropbox’s journey to where they are now started with them being complete noobies. Dropbox joined YC, got Sequoia interested, and when they wanted to invest, they didn’t even know how to do a wire transfer.

“Along the way of startups, you’re going to keep running into problems that you just have to figure out. The only thing I knew about wire transfers I had learned from James Bond.”

“Make something (a lot of) people want. One of the great things about the internet is it doesn’t cost much more to serve a problem for a million people instead of ten people.”

Starting a company is one of the best ways to change the world.

The only thing @drewhouston knew about wire transfers was what he learned from a James Bond movie (Golden Eye) @dharmesh

Alex Polvi (CloudKick)

“We were not trying to sell the company when we sold it. When you don’t want it is when you get all the attention. “

CloudKick did a pilot with RackSpace, and then one day got a phone call to discuss something strategic.

“If anyone high up at the company says the word strategic, they mean acquisition.”

Period of figuring out the details for the acquisition was about 45 days.

2nd pro tip – “No matter what they offer, stop, count to ten in your head, and then seem as disappointed as you possibly can.”

“Once someone starts sensing an acquisition, everyone else starts sensing it. They got three acquisition offers.”

When you have leverage and talking to a VP of Corporate Development, you can get them to the actual numbers really quick. (pending acquisitions create a sense of urgency)

Motivations to think about being acquired

- Do you like the company you’re working with and can you grow with them

- Timing – What is your IRR for the acquiring company.

- Personal choice for the team.

They had one employee who only owned a quarter of his vested stock. Everyone else owned nothing up to that point. Part of the deal was that they were able to fully accelerate every employee on the team. Was fine with investors, founders, and RackSpace. The founders wanted to make sure the team was treated right.

have no retention mechanisms on the team except regular salary. Everyone on the team is still there because they all wants to be there. 0 attrition from RackSpace so far by the CloudKick team. They were able to pull this off because RackSpace believe heavily in culture.

“Don’t forget where you came from. If you have the opportunity to give back to your family, you should.”

“Best negotiation positions you can be in is a position of truth. If you’re building a product that people want a technology that is real, you’re set. Investors and acquirers will show up.”

Anthony Volodkin (HypeMachine)

twitter: @fascinated

Think of all the things you want to make, and if getting capital will really help you. If you’re a pharmaceutical company, then getting capital will definitely help you. If you’re a consumer company, then getting capital may not help you.

Prototype must be useful to you, but not perfect.

You don’t need anyone’s permission to make stuff.

Chances are when facing a tough decision, you already know what to do. You started your own company and no one knows it like you do. Listen to advice, but find your own way.

If you start with different inputs, you automatically get the same results. Most competing companies do not start with the same inputs, so the results will be dramatically different.

“TechStars? YCominbator? Just fucking make something.”

When thinking about selling your company, you need to think about why you started it, and if selling it will help you accomplish that.

Nathan Blecharcyzyk (airbnb)

twitter: @nathanblec

"The kind of people who ask for advisor shares are typically the kind that have less to offer." @nathanblec @dharmesh

The first 5-6 months of airbnb were pretty much flat.

Plans in 2008 – Forget hotels, extra rooms, save money and experience local culture, focused on overflow housing, no sustained traction.

In 2009 – Ebay for Space, all types of unique properties, vacation rentals are broken, focused on NYC, meet users, understand the levers, do things that don’t scale.

They were able to raise money from Sequoia for the following reason

Problems with Deck in 2008 – Drew analogies of things that were different but similar. Went top down which was suspect, and thinking too small. The site could have been interesting for a niche audience, but not distruptive.

Success with Deck in 2009 –

eBay of space + new name. - eBay = large thinking.

Booking a vacation rental online is nothing like booking a hotel.

Fragmented industry leaves property owner without a marketplace.

$17B vacation rental market + other large industries

Demonstration traction in a graph that made it look badass

$250,000K reservations, 10% commissions (demonstrated traction and stong revenue)

Wanted to be the world’s largest hotel chain without the overhead.

Investor + Advisor Advice

It’s important to only take money from the best investors. You want investors who are value adding.

Mentors and advisors are incredibly important. (it sounded like one of the reasons they’ve been successful is the network they procured from YC).

When evaluating investors - Ask other portfolio companies if these are guys that add value and help you solve your problems. The kinds of people who ask for advisor shares typically have less to offer. Start casual conversations by just engaging people.

Proactively send updates to show advisors that you are doing something to keep them interested.

Took $600K with $3M post money from Sequoia. Wanted the brand name. Also paid a premium to be in YC because the advising was worth it.

For marketplaces - You have to have enough things in inventory to have demand. They have a number of ways to attract sellers who own properties. Then they improve the quality of that inventory.

250 employees – Half is customer support. Engineering = 18 employees. 6 at beginning of the year. He was the only engineer for the first year.

Once an investor invests in you, they have a stake in your business and can make a great mentor @nathanblec by @dharmesh

----

That's it for Andy's notes and observations.  What insights did you pull from the sessions?  Any reaction to some of the above notes?



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Lessons Learned From StartupBootcamp 2010

Posted by Jason Baptiste on Tue, Sep 14, 2010



/* 

This is the first article from Jason L. Baptiste, a new writer at OnStartups and local Boston entrepreneur. You should follow him on Twitter (@jasonlbaptiste) or say hi via email.  Expect to hear a lot more from him in the future.  He's awesome. -Dharmesh

*/

On Saturday, MIT hosted Startup Bootcamp to provide a diverse group of lessons to hopeful founders and those teetering on the edge of jumping into a startup. The tagline for the event was actually "Starting a company is easier than you think." The videos will be online soon as well if you want to relive the experience. I thought it would be useful to sum up the important lessons from each talk instead of doing a direct play by play. mit logo onstartups

You can also check out more coverage at:

1) Startup Bootcamp Take Aways

2) Why I'm Going To Get A Dog, Lose My Ego, And Just F'Ing Do It

Chris Wanstrath (GitHub) - Your Customers Are Your Best Sales Team

The story behind GitHub and how the team got there always amazes me. Github started out as a side project and morphed into a monster primarily by using their customers as a strong distribution+sales channel.

Let Your Product Help Customers Shine

  If your product helps customers shine, they will attach it to their work and give you increased visibility. GitHub helps developers show their code off and have a better experience. Through this, hackers/founders share the product with others.

Build For More People

  Build your product to leverage Metcalfe's Law (THE Metcalfe of Metcalfe's law also spoke btw), and grow in strength when more people are added to the system. The key to Metcalfe's law is the ability to GROW UTILITY when more people are added. Make sure you aren't DECREASING utility.

Spend Face To Face Time With Your Customers

  It's always good to spend face to face time with your customers. Sure tweets and emails get the job done, but that's not personal enough. Go spend time with your customers. Body language and that open level of communication make for an understanding that can't be had through any other medium.

Mick Mountz - Seek Funding Through Your Customers (Kiva Systems)

We funded my first startup through the product stages via an actual customer. That's why I love the B2B space as a large market will often let you fund the company through early customers that are begging for your product.

Funding Through Customers Should Be Priority One

Funding through larger channels such as angel or VCs can come later on, but they are not a given. Funding through customers? That's called revenue and is the lifeblood of any company. By discipling yourself to raise money from your customers, you put yourself in a position of power from early on.

Customers Provide Benefits Outside of "Revenue"

Customers pay you, but they will also provide you other valuable information. They will tell you what works and what does not work. Don't over-engineer the first concept. Get to customers fast and let them give you feedback. That hour of feedback in the early days will be worth more than their LTV in dollars.

Ayr Muir (Clover Food Lab) - Know Thy Customer

I'm a customer development junkie. Listening to your customer and getting inside their head can give you insights to solutions you would have never seen before. 

Get Inside Their Head

Ayr started working at a Burger King to fully understand the food business. I think this is the entrepreneurial version of method acting. Don't be afraid to get your hands dirty. It lets you truly understand their pain and understand what product they want.

Experiment, Fail, Learn, Repeat.

Ayr suggests that entrepreneurs should experiment on the cheap and be fast while doing it. Many things will fail fast and that's a okay. From there, the goal should be to learn as much as possible. Sometimes it's just as important to know what NOT to do rather than what to do.

George Bell (Excite/General Catalyst) - Build For The Long Haul

George's talk works really well in conjunction with Stephen Wolfram's. George is a VC at General Catalyst now along with being the former CEO of Excite.

Culture Helps You Endure

Building a great culture for the long term will help you endure for the long term as a startup. A strong culture makes an enjoyable environment that people grow attached to and will not want to leave behind.

Listen. Listen. Listen

Listen to your employees and build around them. You may have your own vision as a founder, but each company may have 3-4 founders maximum. Beyond those 3-4 individuals you need to build a company for hundreds and maybe even thousands time that. By listening to not only your employees, but the market you can position your company to endure time. Your original market will fade and listening can keep you prepared.

Bob Metcalfe (3Com/Polaris Ventures) - It's Not About You, It's About The Company

Bob is at Polaris Ventures now, but he is a legend by all standards. He invented Ethernet and founded 3COM. Not only is he a genius, but he is just someone that radiates love for the game. Even though I'm sure he gets praise all the time, the fact that he almost teared up at someone thanking him for ethernet says a lot.

Build A Synergistic Team of Geeks and Suits

We need each other and I'm glad a geek like Bob brought this forth to the crowd. As a geek, it's sometimes hard to realize you need someone with a good sales+marketing background. Without a good product, you have nothing to sell and without selling, your good product means nothing.

Sum Of The Parts Is Greater Than The Whole

It's about building a company with smart people that share the same vision as a whole. Bob has taken roles at 3Com from marketing to engineering. Don't lock yourself into one role and gain experiences so you can hire people smarter than you for those roles. Don't have an ego and don't think you're above a role.

Bill Clerico (WePay) - How To Endure

Startups are not for the weak at heart. Everyone tries to do attribute startup failure to business forces or some other error. I personally think the biggest reason for failure is due to the fact that it is just tough. Not everyone that tries to be a Navy Seal makes it through training. Not everyone that tries to be an entrepreneur makes it through until the end. Bill shared some good lessons on enduring as a startup founder.

Think About the Bigger Picture

Bill brought up the fact whether or not you would regret doing the startup 50 years in the future. Jeff Bezos says the same thing with his regret minimization framework. I also noticed an underlying desire to focus on creative things / quirks in order to forget about the abyss in front of your face.  For example, they have a company dog in order to keep them going every day.

Roll The Dice

They gambled their last dollars to make up for the rent they were $500 short on. They ended up making $600 and enjoying a good dinner too. Rolling the dice is risky and not always something you should do, but sometimes it's all you have. If you aren't about taking risk then the startup game probably isn't for you.

Product Changes The Game

Product changes absolutely everything. Until you have a product that users can play with and hopefully pay for, you are fighting a completely uphill battle. Don't worry about raising money or other things until you have a product that the market can play with, even if it is "ghetto".

James Lindenbaum (Heroku) - Be a Machete

Heroku is a beast of a company with a ton of users and a large number of paying customers as well. When looking at the live stat counter I think it caught James off guard as it increases so much everyday he didn't know what the exact number was. Very candid and very inspiring moment.

What is a machete?

A machete is a simple straight forward tool that allows you to accomplish and be many things while staying simple. The same could be achieved with a swiss army knife, but that's bloated and really 50 things crammed into one. A machete is really one thing that can serve AS 50 things. What can you discover from your product and through customer development?

Throwing Things Away

In order to be a machete, you have to be ultra lean and able to stay simple. In order to do this, you need to be able to throw things away that aren't necessary to your customers. Don't have too much emotional attachment to a product or feature.

Alexis Ohanian (Reddit/YCombinator) - The Time Is Now

This was by far my favorite talk of the day. Alexis has seen things from both sides of the table as a young 20 something entrepreneur and now as an angel investor via Das Kapital Capital / YCombinator.

Angels Are Everywhere

The recent influx of super angels and costs to get a startup off the ground have made capital widely available to smart entrepreneurs. With ideas costing a fraction of what they used to and more angels available, the number of startups in the wild should be able to increase dramatically. I suggest raising revenue over raising capital, but if it's needed, there is more of it at the early early stage level than ever before.

Live Cheap And Go Far

For the most part, the audience was filled with current college students and some recent graduates. Instead of taking super big salaries from traditional jobs like wall street, you should go start a startup. Now is the best time as the burden of responsibilities are just insanely low. Your standards are also low as well. The difference between ramen profitable for an out of school entrepreneur and an entrepreneur with a wife, mortgage, and 3 kids is vastly different.

Entrepreneurs Are Superheroes

This last point has motivated me a ton over the weekend. Alexis' last two slides referenced the fact that startups can save our country. I truly believe this is the case and in some ways entrepreneurs are like superheroes. We have a higher calling and civic duty that can help save the world. We can create new jobs, provide a rewarding life for our team members, and solve the problems of the real world. We also have a higher tolerance for pain than the normal human. You have to be able to have a high threshold as an entrepreneur, the same way Wolverine has regenerative powers. Get up, get out, and create a company. Now is the time and the world needs you.

Stephen Wolfram (Wolfram Research) - Control Your Destiny Without Funding

Many startups focus on raising capital and putting themselves on a timer to be primed for an exit of some sorts. Sadly, that exit often comes in the form of a small M&A acquisition instead of building a long term enduring company. Wolfram showed that it was possible to control your destiny and build a company that can last for decades.

It Starts With Something You Understand

Wolfram started Mathematica after having a deep understanding of the field and the need for its existence itself. When you create a startup that you want to see in the world, you grow a certain attachment to it. This attachment is akin to something a fanatical customer might feel. You're less likely to throw the company away on a "flip acquisition" due to your attachment and caring for the product with the hope that it won't go away.

Be Weary Of Managers That Are Hired

Wolfram has done a number of startups and some came before Wolfram Research. His biggest mistake was hiring managers that weren't in the same stage of life and/or on the same wavelength as him. This created a disconnect in product vision and his desire to stay with the company. Surround yourself with peers that you would want to spend time with for a long time.

You Can Do Cool Exploratory Things When You Own The Company

WolframAlpha may have never existed if Stephen Wolfram did not control the company himself. It is a big undertaking with huge capital and human resources being required. By controlling the company you will want to stay with the company for the long haul as the possibility of incubating and creating "startup-like" projects can be done.

Kevin Hale (Wufoo) - Awesome Customer Support Is Your Secret Weapon

If you haven't seen Kevin give a talk, then you're missing out. I originally saw Kevin give a talk at BarCamp Miami back in 2009. I made sure I was back from the break early not to miss his talk as I had a hunch it would focus on the overlooked, but very important aspect of customer service for startups.

Build As If You Had To Support It

Thinking about adding a radical new feature with crazy complexities and absolutely amazing effects? With those crazy new complexities and absolutely amazing effects will come an onslaught of customer service inquiries. Think about the customer support funnel and how that will be impacted by the features you are adding.

Measure Emotion

Measuring emotion is critical when asking a customer to fill out a support inquiry. Wufoo added a box that asks a customer to identify how they are feeling when submitting a support inquiry. They didn't think too many people would fill it out, but over 80% did. This was on par with how many people filled out what browser they were using.

Adding a Personal Touch Goes a Long Way

Wufoo team members still write thank you letters by hand to customers that have been with them for a short while. In a world where the expected customer service experience is usually something negative, a small personal touch can go a long long way. Surprise your customers with a personal touch. I'm aware Wufoo does this, but seeing it again always blow me away.

Ric Fulop (A123 Systems) - Focus On The People.

Ric is a hardware guy, which is often foreign territory for web app entrepreneurs like myself. He was previously the co-founder of A123 Systems. From day one you should be focused on the people involved with your startup.

Plant The Seed With 1-2 People

Every startup begins with 1-2 other people. Building that team at first is the key to the long-term DNA and product of your company. You're not doing this to be a small company for the long haul and you can scale up your organization later on.

Find Relevant Advisors

Hardware startups are especially difficult. How do you break into the hardware side of things or any other difficult territory where credibility is a must? Find advisors who have relevant domain expertise and credibility that you can borrow. Once you have that credibility, it can then be used to provide momentum to the business as a whole.

Focus On The Person Making The Investment

Money is the common denominator when raising capital. All investors have it and all dollars are green. What really matters is the person at the firm and their relevant domain expertise. I don't have any plans of doing a hardware startup, but if I did, Ric would be on my shortlist of people to approach. Your startup is solving a very specific problem and the investors on your side should be able to bring access to relevant domain knowledge and other people inside the sector. This is the true definition of "Value Add Investing"

David Cancel (Compete/Performable) - Data Provides A Reality Check.

David Cancel of Performable closed out the show with a useful, but well needed reality check for hopeful entrepreneurs. Too many times we come away amped from reading a press article about startup success or going to a conference with successful speakers. This energy can often make us forget to listen to reality itself and take a look at objective facts. When your energy is high, you often feel as if nothing else matters. Here are the key things that matter:

Business Plans and Demos Are Useless

BPlans and Demos are controlled environments with no customer interaction. They can't survive in the real world and will never work out there. No one cares about them and neither should you.

Evoke Emotion

You don't want to be stuck in the emotion and get hit with "that's interesting" from an investor. You want customers, investors, or any potential partner to be fired up with emotion.

Listen To The Data

Stop reading TechCrunch and listening to the end-game / feel good stories. What should really get you amped up is the data coming in from your customers. Have a company-wide dashboard, measure your analytics, and get to know your funnel. Want to test something? Listen to the data, not the praises or hatred from the press.

I hope the summaries give some motivation and insight into starting a company for hopeful entrepreneurs. As entrepreneurs we are lucky and very fortunate. Right here, right now is the best time in the history of civilization to start a company. More on that soon.



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Dharmesh On Startup Marketing: Video From MIT Startup Bootcamp

Posted by Dharmesh Shah on Mon, Nov 16, 2009



I recently had the opportunity to speak at the MIT Startup Bootcamp held at the MIT Kresge Auditorium (a great venue that President Obama spoke at just a couple of weeks later). This was a fantastic event with a packed house (1,000+ people in the live audience) where some great entrepreneurs had a chance to share their experiences and insights. 

I was a little nervous in the beginning (as usual), but once I warmed up, I think I did OK.

Here's a recorded video of my talk.  

 

Hope you enjoy the video. Would love to hear your comments and questions.



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Students and Startups: Notes From Talk at MIT Underground 2008

Posted by Dharmesh Shah on Sun, May 04, 2008

 


I did the opening presentation at MIT's Underground 2008 event yesterday for student entrepreneurs. My hat's off to Albert Park and his colleagues for organizing a great event. We need more of this kind of stuff in the Boston/Cambridge area to bring student entrepreneurs together with others.

Here are some quick notes and points that I made from my presentation. My favorite part about it was the fact that there were no PowerPoint presentations allowed. When the organizers told me that, it made my day. [For reasons, see "Why I Hate PowerPoint"].

Note: If you were at the event, please note that I didn't get to all of these points during my talk (just wasn't enough time), but this is all the stuff I wanted to say.

Some Ideas for Student Entrepreneurs

1. It's alright if your idea is sort of crappy: Most startup ideas start out kind of crappy. The good news is that once you get started, you'll start learning more and your ideas will get better. But you have to get into the game and start doing things in order for your idea/startup to get better. Don't sit on the sidelines waiting for the perfect idea. Get started early and improve the idea.

2. Don't try to raise VC funding too early: Most student entrepreneurs (or recent grads) with early stage companies should not try and raise venture capital. The odds of succeeding are low and for most, it'll be a waste of time and energy. Instead, work on the product/offering and work on finding some great people you'd love to do something spectacular with.

3. If you do hit the VC circuit...remember that there are two possible outcomes: One. You spend months being miserable and depressed instead of doing what you love (working on the company). Or two, you spend months being miserable and depressed and you get some cash.

4. Modest goals are just fine. Too many folks think that startups are all about buying your ticket in the $1 billion outcome lottery (and be the next Facebook or YouTube). You don't have to do that. I think it's sub-optimal for a first-time entrepreneur. Look for successive wins -- even if they're modest. The only people that tell you that you have to build a huge company are VC investors. The reason is that they need all of their entrepreneurs building gigantic businesses (so that at least one or two will actually do that and give them the gains they need). The example I used: If this is your first company (you haven't had a "liquidity event" yet), then shooting for a 10% chance at a $50 million outcome (E.V. = $5 million) is much better than a 1% chance at a $1 billion outcome (E.V. = $10 million). The reason is that for you personally, the value of the extra millions above a certain point diminishes quickly. Trust me.

5. Find Your Co-Founders: Student entrepreneurs are in a unique position in their careers where not only are they starry-eyed optimists (we all should be), they're around other starry-eyed optimists. Find the best and brightest of these folks and start something. Join up!

6. You don't need a business plan: Nobody cares about business plans. Investors won't read them. They take a lot of time. Just work on the idea, work on the team and work on getting customers (or understanding why you're not getting customers).

7. Don't overestimate the risk: If you're just about to graduate (or have recently graduated), you might tend to overestimate the actual risk in a startup. Sure, it's not going to pay you what you'd get at a big company, but the odds of you being able to find some job later, if things just go horribly are pretty high.

8. GET STARTED NOW: It doesn't take much effort to get a company started (though granted, actually growing one successfully is non-trivial). But, the first step is really, really easy and there's no reason not to take it. Your best lessons, ideas and opportunities will start showing up after you've started a company. So go do it.

That's it. If you made the event, thanks for coming. If not, hopefully the above notes helped. In either case, I encourage you to join the two startup communities I (loosely) manage online and connect with other folks (you might find your co-founder there):

LinkedIn: http://linkedin.onstartups.com (7,000+ members)

Facebook: http://facebook.OnStartups.com (900+ members, but more features)

Looking forward to connect with you folks. And Albert, if you're reading this, hit me up to be one of the sponsors next time. It's a good cause that I'm passionate about.



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Speaking to MIT Students in 15.390 - New Enterprises

Posted by Dharmesh Shah on Sun, Sep 16, 2007

 


Brian Halligan (my co-founder at HubSpot, and MIT classmate) and I are scheduled to speak tomorrow to the "New Enterprises" class at the MIT Sloan school tomorrow.

New Enterprises (or more fondly known as 15.390) is a course focused on entrepreneurship.  Both Brian and I took the course while grad students at MIT -- though during different terms.  HubSpot was kicked-off, in part, during the New Enterprises class in Spring 2006, so the course has particular significance to us.

The focus of our talk tomorrow is supposed to be "sales and marketing for startups" (a topic that we both happen to be passionate about).  However, we're also planning on weaving in some other topics that we think should be fun and interesting (like raising capital, founder dynamics, etc.)  As it turns out, Howard Anderson and Ken Zolot (the guys that teach the course) are not going to be in class tomorrow, so Brian and I have the whole class period to do with what we want.  The students are at our mercy.  <diabolical laugh here>

In any case, if it turns out that you are a current MIT student and are taking 15.390 with Anderson and Zolot this Fall, please leave a comment and introduce yourself.  For the rest of you, I'll plan to write a quick summary post about what we talk about later this week, in case you are curious.



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Commercializing Web 2.0: Hype vs. Reality

Posted by Dharmesh Shah on Mon, Nov 27, 2006



I’m scheduled to speak at the 9th annual MIT Venture Capital conference on December 2nd, 2006.  The title of the panel session I’m participating in is “Commercializing Web 2.0:  Hype vs. Reality”.  Details of the conference can be found here:  http://www.mitvcconference.com

Regular readers of OnStartups know that often the best content on this blog is not the material that I’ve written, but the ideas and commentary submitted by other readers.  I’m hoping this article drives some interesting comments and ideas from you (some of which I’d like to use in my presentation at MIT).

So, in order to kick-off the discussion, I’ll begin with some of my personal ideas on the “Hype vs. Reality” topic.  Based on readership interest and feedback, I’ll plan to post an article on a few of these themes later this week.

Commercializing Web 2.0:  Hype vs. Reality

First off, I’m going to refrain from trying to spend time defining what Web 2.0 is (and isn’t).  I’m not particularly fond of the term, but I didn’t pick it and have now gotten used to it.

So, here are some my thoughts on how we might determine whether this is hype or reality – and as you might guess, the answer turns out to be a little bit of both.

1.  More Internet Users = Larger Opportunity:  Compared to the time of the dot-com bust, there are many more users now on the Internet.  More users means more potential traffic and in theory, more revenues.  One could argue that some of the Internet startups that crashed during the last bust were simply ahead of their time.  But, one could also argue that although the potential audience has grown (i.e. the demand-side of the equation for web-based content and services), so has the “supply-side” – there are still lots of startups hoping to grab the attention of this audience.  The question is, has demand grown faster than the supply?   

2.  Advertising As Revenue Model Now More Viable:  The online advertising industry has evolved significantly.  Systems like Google’s AdSense make it possible for even websites with minimal traffic to participate in online advertising revenue.  You no longer have to be generating hundreds of thousands of pageviews before you can start making any money through online advertising.  In fact, many startups can start making some money within a few days.  What gets forgotten, however, is how little this money is (generally < $1,000 month for most startup websites until they really start getting some traffic).  Also, I’m still not convinced that websites planning to generate significant revenues through advertising will be able to do so with the simplicity of something like AdSense.  I believe most of the higher-end Web 2.0 companies are striking independent deals with major advertisers or advertising networks and reaching well beyond Google and the more recent Yahoo Publisher Network.  Nothing wrong with this, but once again, it requires resources on the part of the startup to find the right advertising partner and negotiate deals.   

3.  Economics Of User Generated Content:   Though advertising has been a reliable way to make money in traditional media like print and television for a long time it has always had one irritating quality to it.  Creating content that drives a sufficient a significantly sized audience has been expensive.  It also requires that the media companies constantly invest in creative talent in the hopes of locking in ratings or subscribers.  With Web 2.0, it is now possible to take one of the biggest components of cost out of the equation.  Let the users create the content!  Nowhere is this more visible than YouTube, which was recently acquired by Google in a well publicized transaction amounting to $1.65 billion (yes, that’s billion with a “B”).  Though user-generated content is clearly working for folks like YouTube, one thing I’m concerned about is the sustainability of this model.  I would argue that there is a non-zero probability that over time, users become savvier and savvier and ultimately become unwilling to simply give away their content (particularly the type that drives lots of revenue) to startups or large commercial enterprises.  Similar to what happened with Google AdSense and blogs, I think the economic incentives will begin to kick-in and users will start demanding a cut of the action.  This will dampen the “easy money” scenario that is prevalent in so many user-generated content business models.  But, that’s just my opinion, I could be wrong.

4.  Lack Of Big Technology Disruptions:  Unlike the first wave of the Internet where there were some major leaps in the technological landscape, this time around, the changes are a bit more subtle.  The only two real technological factors associated with Web 2.0 right now are AJAX and “web as platform” The benefit of AJAX is clear.  It makes browser-based applications almost tolerable from a user experience perspective.  The “web as platform” model or “mashups” is taking multiple existing web applications exposed as services and combining them into creative new applications.  The benefit of the “web as platform” is that it opens up an abundance of new opportunities for innovation.  In theory, this is true.  In practice, once you actually start trying to build one of these mashups, you don’t really begin to appreciate the challenges of unreliability, lack of service level agreements, lack of clear (or any) pricing and in many cases (like with most of the Google web services), lack of ability to create any commercial applications at all.  Point is, the “web as platform” is a powerful concept, but the implementation is still very, very early and nobody has really figured out how to divvy up the revenue that is generated (if there is any revenue).

5.  Better Marketing and Distribution:  Gone are the days where startups have to spend hundreds of thousands of dollars launching and promoting their new product.  It is now possible to get a fair amount of visibility (at least within early adopters) very early in the process via blogs and search engine marketing (like Google AdWords).  A great example is TechCrunch which has emerged as an efficient path for smart, innovative entrepreneurs to get profiled and get immediate exposure to tens of thousands of interested early adopters and investors.   

6.  Capital Efficiency:  One of the great things about software startups (even before Web 2.0) was that they’ve been relatively capital efficient.  Now, in addition to more efficient distribution channels as described above, several other factors have come together to drive the capital required to launch a Web 2.0 startup even lower.  Hardware is cheaper.  Infrastructure and bandwidth (via an abundance of hosting providers) is cheaper.  Systems software like operating systems, databases and development tools can now all be had at minimal (if any cost) via open source options.  And finally, the availability of a global talent pool has driven some of the product development costs lower as well.  All in, it takes a lot less money to launch a web-based startup these days than during the Internet boom years in the late 90s.  This capital efficiency is great news for entrepreneurs.  It is now possible to get a new startup off the ground without raising any institutional capital.   

7.  Tighter IPO Market:  Unlike the frenzy we saw during the last bubble, there is no longer a pool of retain investors sitting on the sidelines waiting to jump on the next hot technology stock.  In fact, the IPO market is relatively tight.  As such, there’s no longer that incentive for VCs to pour money into questionable startups and ultimately get their return by pushing these companies into the public markets.  Now, the most likely path is some type of M&A transaction with a larger player (as we have seen with MySpace and YouTube).  This dramatically reduces the chances of this being Bubble 2.0 because acquirers are generally much more diligent about assessing value than retail investors.  Deals like YouTube will continue to be reasonably rare.

So, what do you think?  Putting aside whether you like the term “Web 2.0” or not, do you think we are in (or entering) a new Bubble?  Or, have enough of the dynamics of the Internet industry changed to sustain some of the patterns we are now seeing these startups exhibit?  Are venture capitalists “ahead of the game” in their understanding (hence more and more money getting invested in these deals) or are we already seeing over-funding?  Would love to read your thoughts and ideas in the comments.  Thanks in advance for helping me get ready for my presentation at MIT.



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