Author Archive
February 17th, 2010
I blogged last year that a trade show is fundamentally a stag hunt:
(see “cultivating a community” for more on this paradigm) It’s an effort by a collection of firms to create a larger shared opportunity that even when divided yields them a larger benefit than if they prospected separately. Any one hunter or set of hunters can defect from the larger hunt and either hunt on their own or form a smaller hunting party, but if they would have been better off with a smaller share of a larger pie, at some point they will return…
Here is a non-technical definition from the Game Theory Dictionary
The French philosopher, Jean Jacques Rousseau, presented the following situation. Two hunters can either jointly hunt a stag (an adult deer and rather large meal) or individually hunt a rabbit (tasty, but substantially less filling). Hunting stags is quite challenging and requires mutual cooperation. If either hunts a stag alone, the chance of success is minimal. Hunting stags is most beneficial for society but requires a lot of trust among its members.
So I was very intrigued when I caught an announcement for an interesting new event that is designed to foster collaboration among entrepreneurs. It’s Anuj Singhal’s Game Club
I had a chance to talk to Anuj this afternoon and he was kind enough to drop a short note afterward:
The inaugural Game Club workshop is being held tomorrow in San Francisco from 5:00pm-10:30pm with dinner, register online for $65, full details here: http://www.thegameclub.org/events/ . Along with inspirational entrepreneur stories, the speakers will be sharing their current challenges in their present venture and inviting participants of the workshop to contribute. Topics of discussion will include hiring, fundraising, marketing, personal development and building teams, all areas of importance to bootstrappers.
Anuj hopes develop a framework for entrepreneurs to cooperate to create greater shared value. He is inspired by the “Stag Hunt” paradigm from game theory and techniques developed in the microfinance industry to foster entrepreneurship.
February 16th, 2010
George Grellas has been practicing business law in Cupertino since 1984. He had some brief remarks relating to formation issues at today’s breakfast and then he opened it up for questions. What follows is an edited transcript of his opening remarks.
Startups are interesting. It’s a rather grim time in a macro-economic sense but for early stage startups it’s a pretty amazing time because the infrastructure has been built out. There is a lot of opportunity to launch companies creatively without the capital intensive needs that were there a decade or two ago.
Of course there are many situations where you have capital intensive needs and that occupies the traditional VC realm. But there is a huge and expanding area in the last decade, and the last few years in particular, where with creativity and innovative focus on areas like enterprise people can leverage very interesting business models in ways that used to be unthinkable without a lot of money.
So today is a time of expanded opportunities and many many people are venturing into startup mode. When they do there is always a desire to keep costs low on the legal side–which is a legitimate desire obviously–but I think that sometimes leads teams to ignore some strategic issues that they should focus on.
There are some distinctive elements of startups that set them apart from standard small businesses. Most of them have to do with the fact that most of the value is largely associated with intangibles like intellectual property. So when you form a startup you can have tax issues that arise from intellectual property that standard small businesses won’t see.
You have capital combined with entrepreneurial innovation. If they match at the same time you can have service income attributable to the entrepreneur unless it’s planned right. These are reasons to incorporate earlier rather than later.
Just to illustrate: if you have a new venture that you are launching as an entrepreneur and someone is going to put in 100K for 10% of the company, if you do that at the same time for the same class of stock you can have potential service income attributable to the entrepreneur or founding team, as much as 900K in that hypothetical situation.
The other major attribute of a startup is that you want some “strings” on the stock for the same reason: the value being contributed by each founder is often tied to the services they are providing going forward. So usually instead of outright stock grants you have restricted grants. Meaning that the founders stock is subject to repurchase at the original price if the relationship with the company should terminate.
So, when people do these “insta corps” on-line they will often have a founding team and not factor these issues in as they are trying to save money. They will get the kit and issue stock and then you have a situation where founders can walk away and keep their stock instead of having to earn it.
The other thing that people tend to forget about is capturing intellectual property (IP) properly. They are working together as a founding team, they haven’t formed the company yet, and they are not focused on the fact that everyone working on the venture, in so far as they are doing things that may be generating IP, that IP does not belong to the venture it belongs to the individuals. They don’t factor in the need for an IP assignment agreement in exchange for stock in a corporation.
Related Links:
January 9th, 2010
We had someone come to the Milpitas breakfast yesterday who was interested in bootstrapping a consumer products startup. They had an electrical engineering background and several ideas for different innovative products, here are a few of the suggestions they got that may be of use to other entrepreneurs
- The Inventor’s Alliance has meetings in Menlo Park and Sacramento, you can also attend over the Internet. They invite speakers that focus on various aspects of the invention process, including protecting your invention and getting it manufactured. The typical speakers at their events are successful inventors, prototype experts, manufacturing experts, and patent attorneys. You can get an idea from the the website of past meeting topics and speakers, as well as a list of local inventor groups. I personally attended an event in February 2006 where Doug Hall spoke and it was outstanding and very well attended.
- TechShop in Menlo Park: “TechShop is a 15,000 square-foot membership-based workshop that provides members with access to tools and equipment, instruction, and a creative and supportive community of like-minded people so you can build the things you have always wanted to make.” Memberships are $125/month or $1200 a year. In addition to their Menlo Park location they have facilities in Durham, North Carolina) and Beaverton, Oregon
- Considering finding a mechanical engineer or product design engineer as a partner as hiring a consultant to do this will be a significant part of your prototype development expense.
- A good group to network with electrical engineers in Silicon Valley is the IEEE Consulting Network of Silicon Valley.
January 8th, 2010
We had a visitor from out of state drop in to today’s breakfast in Milipitas who had “ten ideas for my next startup” and asked for advice on how to sort the list or pick the best one. Here are some of the criteria that were suggested for someone to evaluate how likely they would be able to bootstrap a new business:
- Understand who the customer will be for the product, the customer is the one who will pay you. If you can’t define a customer, or the person/firm paying is different from who benefits, look at the problem from different angles to try and align who is paying and who benefits.
- Look for customers who are in a lot of pain. Preferably who face a deadline or an impending event. It’s dangerous to develop a “nice to have” product that doesn’t need to be used by a customer.
- Don’t judge a product by the size of the market, consider the size of the niche market that you can access directly to get started. If you are selling a product to an airplane manufacturer you should know someone at Boeing or Airbus (to cite an extreme example).
- Pick a business model where your skills and background are intrinsic to managing or differentiating the product. If you have an idea for solving a problem in an industry that you have never worked in, you should look for a co-founder who has some good knowledge (and connections) with folks in that industry.
- Be careful of businesses that require a lot of customers to be viable. If your business needs a million unique visitors to your website before advertisers will be interested, consider targeting a smaller population that advertisers will pay more for (e.g. “everybody” vs. “college students” or “network engineers” or “technical writers”). Consider a subscription model where you create enough value to charge $10-100 per year per customer. This should lower break even operation to hundreds to a few thousand customers (admittedly this may make it harder to get a customer, but it’s also very hard to get 100K unique visitors a month, much less a million).
- Pick a business that’s an Act 2 or a Phase 2 for you: if you can build on your existing skills or know how it’s less likely you will fail. Also, if it’s phase 2 you can still define a phase 5 that is hugely successful if somewhat distant in time, but if it’s “act 1″ or a new beginning it may be difficult to convince co-founders to join you or customers to pay you.
January 6th, 2010
Come join San Diego entrepreneurs who eat problems for breakfast. We collaborate and discuss innovative ways to operate more efficiently, gain revenue and reach company goals.
The facilitators of San Diego’s Bootstrappers Breakfast are Steven Moody and Francis Adanza.
- Steven has a background including being a successful entrepreneur, a manager and a senior consultant to companies with an innovative focus.
- Francis is VP of Marketing at a software enabled services firm focus on cellular spend management and an active entrepreneur since college.
They have a unique ability to understand the business issues and translate them into actionable cost savings and profit generating programs.
January 4th, 2010
Ogden Lily and Kevin Epes from Boitano, Sargent, and Lily will be joining us January 19th in Sunnyvale to answer questions on accounting and tax issues for startups. BSL has been serving Silicon Valley businesses for six decades: Ogden and Kevin are CPA’s with the firm. Some of the issues that they are prepared to address:
- Moving your accounting into the cloud with Quickbooks on-line
- Understanding the accounting implications of different corporate forms: LLC vs. C vs. Sub-S; CA vs. DE
- Deductibility of business expenses
- 401K options for bootstrappers
- When to incorporate
Bring your questions and remember if this if your first year to file business taxes the deadline is March 15 not April 15. Please note that Bootstrapper Breakfasts in Silicon Valley have a $5 membership charge per meeting in addition to the price of your meal, tax and tip.
January 3rd, 2010
One of the neat things about attending Bootstrapper Breakfasts is that you get to watch companies go from concept to launch to growth. Assistyx is one of our successes for 2009, what follows is a brief write-up by Dan Smucker, another regular Breakfast attendee who has been helping the Assistyx team with their marketing.
A brief history of Assistyx LLC and
TapToTalkIn the late summer of 2008, Phil Bookman came upon an interesting product while serving on the board of a special needs school. It was software designed for non-verbal children with autism or other delays. The software ran on a hobbyist handheld game system and had the capabilities of products that cost thousands of dollars. This product cost around $250. However, the “owner” had moved on to another project and no longer had interest. Phil saw the potential of this product and tried to get the owner to get back in the business to help the special needs school and other children. Having no desire to stay in the business, the owner agreed to sell the IP to Phil.
Phil was no novice at this having founded successful software start-ups in new markets in the past. He immediately called Lenny Greenberg, a fellow experienced entrepreneur and co-founder of Phil’s last successful venture. The two experienced and like-minded software entrepreneurs quickly decided to bootstrap another company, Assistyx LLC. Assistyx’s mission would be to develop affordable assistive technology products to a market dominated by very expensive custom hardware. Phil and Lenny both thought that this product could be sold directly to parents and professionals through the Internet as a subscription service. Parents and schools would no longer need to wait months (and sometimes years) for insurance companies or state agencies to approve the purchase. A child could be served immediately.
In his role as CTO, Lenny led the effort to convert the original software to the Nintendo DS, the most popular game platform in the world. The Windows app used to individualize the Nintendo software was substantially enhanced and converted to the Web. As CEO and CMO, Phil developed the Web site and ecommerce strategy for selling direct to consumers, speech professionals and schools. Phil and Lenny worked toward their vision with focus on the first product, TapToTalk, and their target market, non-verbal special needs kids. Within 5 months after launching, they had a prototype. After 7 months, they had a special education school as a initial beta site actively using the product. In 12 months they launched the product to the world.
In its first 3 months since launch, TapToTalk has customers in 28 states of the US and has opened its virtual doors to Canada, the UK, Australia and Ireland. Phil and Lenny are working on moving beyond the Nintendo in 2010. TapToTalk is truly a viral marketing success in its niche.
Lenny frequently attends Bootstrappers Breakfast and has spoken there on the importance of focus and having a long term product vision. He enjoys the back and forth with fellow bootstrappers who have provided good ideas and lessons learned. He spoke in October 2009 on strategic planning, for the slides see “Great Talk on Strategic Planning by Lenny Greenberg.“
December 31st, 2009
The following is a press release going out tomorrow to announce our expansion to San Diego and Minneapolis in 2010. I have added links to help provide background.
Bootstrappers Breakfast (www.bootstrappersbreakfast.com) fosters early morning discussions among entrepreneurs at local restaurants. The focus is on technology businesses whose next stage of growth is based on internal cash flow and organic profits. Entrepreneurs who like to “eat problems for breakfast” bring business issues and challenges to discuss with peers.
Bootstrappers Breakfast was started informally in 2003 by Sean Murphy, CEO of SKMurphy, Inc., and formally met at Coco’s in the heart of Silicon Valley in 2005. Since that time, they have grown to multiple locations in Silicon Valley and San Francisco.
The year 2010 brings additional Bootstrapper Breakfasts in San Diego, CA and Minneapolis, MN.
After attending Silicon Valley networking meetings for more than a decade, Murphy became disenchanted with the extreme emphasis on venture capital and fund raising. He wanted to create a place for entrepreneurs to discuss their real challenges like time management, finding partners, attracting customers, payroll issues, human resources–issues that entrepreneurs may not normally talk about in other networking meetings.
The meeting format is based on Lee Felsenstein’s moderation techniques for the Home Brew Computer Club and Doug Engelbart’s model for a bootstrapping a network improvement community.
Why the name Bootstrapper?
Bootstrapping is a technique for starting a computer system from scratch in a self-sustaining process. When applied to startups it indicates a business that relies on customer revenue to fuel growth without relying on a large amount of initial investment to get started. Doug Engelbart applied the term to methodologies for improving the improvement process in a firm or system.
The key objective for the group is to enable entrepreneurs to help each other improve their own businesses. Murphy explained some of the ways that attendees have benefited from the breakfast meetings: “you can get feedback on your startup or your idea for your startup from other entrepreneurs, meet potential co-founders or partners, or have a serious conversation about other aspects of bootstrapping a technology startup.”
About Bootstrappers Breakfasts®
Bootstrappers Breakfasts are meetings for founders of early stage startups. It is a chance to compare notes on operational, development, and business issues with peers. These breakfasts were designed for entrepreneurs to share ideas and leverage thoughts with other professionals who are serious about growing their business. Information about dates, times, and locations of the Bootstrappers Breakfast may be found at http://www.bootstrappersbreakfast.com/.
About SKMurphy
SKMurphy, Inc. (www.skmurphy.com) offers workshops and consulting services that focus on early customers and early revenue for high-tech startups. The firm’s clients have offerings in electronic design automation, artificial intelligence, web-enabled collaboration, proteomics, text analytics, legal services automation, and medical services workflow.
December 15th, 2009
Craig Newmark was interviewed on “How Craigslist Spread” on October 30 by Dan Zarella and he had some observations that we have incorporated into our planning for 2010.
Craig: Anyone should seriously engage with their community about what they’re doing, including serious customer service. That means using email, Facebook, Twitter, any place where people in your community might hang out. Get feedback, and then, do something about it.
Dan: Do you remember any “tipping point” in the site’s history when the amount of people talking about it or using it seemed to take off?
Craig: Never anything that I’d consider a tipping point. Our history is slow, continuous growth. In the race between tortoise and hare, well, we’re the slow guy.
We welcome any feedback or suggestions.
December 8th, 2009
After you have hit a project milestone or added a new customer it can be useful to do a “after action” (also called post mortem or post project assessment). Here are a couple of quick formats for a short meeting with the team, some are more appropriate for larger group settings.
Start / Stop / Continue also known as “Good, Bad, Ugly”
- Good/Continue: What went well, what was successful that we should build on.
- Bad/Stop: What do we need to phase out, what is no longer useful as a practice or an approach.
- Start/Ugly: what do we need to fix or change.
Military “After Action” Model
- What was the plan? What was supposed to happen?
- What actually happened?
- Why were there differences? What was the root cause?
- What positive differences can we exploit.
- What shortcomings do we need to address. What is the corrective action that will be put in place.
Singapore Military 2-5-1 model (hat tip to Robert Swanwick for “2-5-1 Storytelling” who credits Lt Col Karuna Ramanathan)
- Introduction: 2 items
- Who you are
- Summary of your experience
- 5 fingers
- Little finger – what parts of the effort did not get enough attention
- Ring finger – What relationships were formed, what you learned about relationship building
- Middle finger – what you disliked, what/who made you frustrated
- Pointer finger – what you would do better next time around, what you want to tell those who were “in charge” about what they could do better
- Thumb (up) – what went well. What was good.
- 1 – the most important takeaway from the effort
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