Startup School 2005 lived up to the hype.  The day was dreary, but the discussions were not.  The auditorium at the Harvard Science Center was close to full capacity.  The crowd consisted of primarily young males (I'd say under 25).  There were some "older" people like myself and a few females sprinkled throughout.  The talks started and ended without the usual pretense of a conference.  I don't recall anyone even kicking the event off officially, Langley Steinert just started talking.  Paul Graham ended the day by saying something like "that's it."  Efficient for sure and refreshing.  The talks ranged from specific experiences with startups to more textbook information on the mechanics of running startups.  Some of the presentations are available for download.  Audio and video to be made available soon.

Since I've had plenty of the textbook stuff at MIT, the experiential information was the most valuable to me.  My favorite talks were by Langley, Marc, Woz, Paul, Chris, and Olin.  Woz had a rock star aura.  After I returned from lunch, there was a big crowd at the entrance of the auditorium.  It was a group of people huddled around Woz.  It looked like he was wearing the new Oakley Razrwires so he looked the part too.  Seeing him in person was one of the highlights of the day for me.  In fact, he was the only speaker to receive a standing ovation after his talk.

By the end of the day, I learned a lot and it got me excited about potentially starting a company.  This is the opposite effect of my New Enterprises class last year.  I think the big difference is that Startup School was inspirational whereas the class was not.  There was plenty of talk about the risk/reward tradeoff, but as one of the "older" people said, do you really want to tell your kids when they get older that you didn't follow your passion and worked at some mind-numbing job just because you had a family?  Here here.

As you might expect, there is quite a bit of blog coverage for the event in case my notes don't do it for you.  I didn't take notes on stuff I've already learned including issues around obtaining financing and securing intellectual property.

Here is the list of speakers:

1. Langley Steinert, Co-Founder, TripAdvisor
2. Marc Hedlund, Entrepreneur in Residence, O'Reilly Media
3. Qi Lu, VP of Engineering, Yahoo!
4. Hutch Fishman, CFO, cMarket; CFO, Veveo
5. Paul Graham, Partner, Y Combinator
6. David Cavanaugh, Partner, Wilmer Cutler Pickering Hale and Dorr
7. Michael Mandel, Chief Economist, BusinessWeek
8. Steve Wozniak, Co-Founder, Apple Computer
9. Stephen Wolfram, Founder, Wolfram Research
10. Stan Reiss, General Partner, Matrix
11. Mark Macenka, Partner, Goodwin Procter
12. Chris Sacca, Principal, New Business Development, Google
13. Olin Shivers, Associate Professor, Georgia Tech; Co-Founder, Smartleaf
14. 2005 Summer Founders; Sam Altman, Steve Huffman, Justin Kan, Mikhail Ledvich, Alexis Ohanian, Emmett Shear, Zak Stone, Aaron Swartz

• Langley's Bio
• Been involved with 3 successful startups
• Involved with Paul Graham's company ViaWeb
• Started TripAdvisor
• Quarter of the room had heard of TripAdvisor
• Was a VC for 3 years in between ViaWeb and TripAdvisor

Lessons learned:

• Follow your passion:
  • They had an idea to create a vertical search.
  • TripAdvisor is now the 7th most trafficked travel site.
• Do it for the right reason
  Don't do it for money.
  • Do it because you have passion for the idea.
  • Do you wake up in the night with new ideas?
  • Are you going to stick with it when it gets ugly? (It will get ugly. TripAdvisor came within 3 months of running out of money.)
• Choose your Founders very carefully
  • How well do you know your partner(s)?
  • Are they going to stick around?
  • Do reference checks.
• Be very picky about your first 10 hires
  • First 10 hires can make or break your company
  • Only takes one bad apple to ruin a small company
  • Candidates have to go through 10-11 interviews at TripAdvisor
• Less is more – Raise as little money as possible
  • Don't get big fast – that's why most bubble companies crashed
  • Big checking accounts breed bad habits
  • The more you raise, the less you keep. The more you raise, the higher the price at which you need to sell.
  • Chuckles when he sees press releases stating "I raised $20 million". It should have a subtitle: "I just gave up half my company."
• Explore Angle investors
  • Willing to invest in smaller increments Viaweb and TripAdvisor both raised less than $5 million each.
  • In this case, even $20 million buyouts can do really well for the founding team
  • Big VCs typically have to put at least $4-5 million to make it worth their while
• Don't be afraid of change
  • In the course of 3-5 years you will trip up
  • Embrace change in the face of problems: redefine the product; redefine the business model
  • TripAdvisor's first business model was a bust (ASP model)
• Keep an eye on the exit signs
  • Actively think about who could/would buy your company
  • Most big companies are horrible innovators
  • Build a map of the partners that could use your service
  • Touch base with them twice a year
  • Force your board to make introductions
  • Don't pass up a "reasonable" acquisition offer, might be your last
  • Looking Glass had an offer for like $40 mil and turned it down – they were sold in a fire sale two years later
  • TripAdvisor had dialogue with 2 different companies for 2 years before the acquisition occurred

Q/A:

• Search has only be tapped: vertical search and the intersection of search and shopping have potential
• Generally tries to stay away from Enterprise Software – has a lot of scars from former life at Lotus
• At the point you become profitable, a lot of new options become available
• Heavy skew toward developers when hiring
• Likes to have 12 months of run rate in the bank. As soon as you fall below that he starts looking to raise more money.
• Cost $10-15 thousand on legal fees to raise money so you probably want at least half to 1 million
• Outsourced nothing. Not a big fan of outsourcing
• Raised a million on just an idea – they didn't do any development, but they had a successful startup background
• How did you get people to go to your site initially?
  • PR (you can't spend enough on public relations). You need a good story, but they will publish it.
  • Aggressive in search engine marketing (spent a fair amount of money on it)

top

Marc Hedlund, Entrepreneur in Residence, O'Reilly Media

• Marc reviewed several startups that he (and O'Reilly) is currently involved with.  
• Marc's Bio

Adaptive Path:

• Coined the term Ajax
• Moved from consultancy to a products company
• This is common with software companies
• It is very easy to be a consultant and get clients if you have a specialty
• One piece of advice if you are going to start up a consultancy and turn it into a products business: don't let them pirate each other; keep them separate

Bloglines:

• Web-based RSS aggregator
• Acquired after 2 years by Ask Jeeves for $27 million
• The company was 1 guy – he did all the sys admin, web design, marketing, etc.
• The same guy started another company
• He suggests that you don't take any money from anyone until you have something running
• This guy wrote something he needed
• Bloglines had no revenue and no chance of revenue. It was all about users.  Yet it was still acquired.

del.icio.us:

• Took VC funding, so will have to get acquired for much higher sum
• Worth a read: Tim Oren – When Venture Capital isn't right

Feedburner:

• 3 or 4 guys started it and have started 3 before together
• Great control point, great time – likely they will do well

flickr:

• Great example of being adaptable
• Started with an online game for girls – it didn't work
• Then they did a flash-based chat – it didn't work
• Moved to a photo site
• Went through 3 business models and 3 product ideas in a couple of years
• You have to be adaptable
   

indico:

• You have to be extremely persistent
• Ask everyone you know for advice/connetions/etc.
• And when you find one, they'll put you in contact with other people

Jotspot:

• Founders started at Excite
• Companies love to acquire startups with experienced founders
• Starting out as a platform probably doesn't work. You need people to be interested in your app first, then support developers.

koders:

• Their product searches for open source code on the web and searches enterprise companies code base
• Investors don't like two different business models

Odeo:

• podcasting company, started by founder of Blogger
• Some people ask why they don't get money when some related company (or bad company) is getting money left and right.  Don't compare yourself to company that has an experienced entrepreneur.

Project PlaceSite:

• Full of engineers. Not clear they thought of sales and the business model

SpikeSource:

• Kleiner Perkins invested.
• Ray Lane on the board.
• Don't compete with companies with big names that are going after the high-end of the market.
• Get out of their way and go after the low-end.

splunk:

• Don't chase the hot term.
• The hot terms when you start are cold by the time you have a product.
• Don't start an Ajax Web 2.0 company.

Squid labs:

• Smart group
• Working on a variety of different things, but can get away with it since they are so smart

37signals:

• Has no debt, no investment, 5 employees, and are hugely profitable
• Started as web site design consultants then created products to help web site design
• Very simple idea and focus on making it as simple as possible

upcoming.org:

• Three guys that had full time jobs
• Recently acquired by Google
• Did upcoming.org just for fun

Zimbra:

• Got the best reaction at Web 2.0
• Trying to replace enterprise mail servers
• A demo gets you a long way
• CTO is former CTO of Bea.  VCs like that.

Marc's advice:

• Don't start a company because you want to flip it
• VCs can see right through it
• Try to change the world - he's not talking bookmark management
• Make people substantially happier in their lives

top

Qi Lu, VP of Engineering, Yahoo!

Qi's bio

Qi mainly went over some of Yahoo's new apps.  He said search and communication are big pillars of Yahoo and that they buy companies to innovate.  Nothing else terribly noteworthy.

top

Hutch Fishman, CFO, cMarket; CFO, Veveo

Hutch's bio

• He likes working with young startups and wouldn't want to be an officer of a large company due to all the lawsuits and regulatory issues.
• 40% of employees at ViaWeb were millionaires after the acquisition by Yahoo
• Financing stages
  - Seed: strategy and market research; develop business plan
  - First Round: complete initial product; build initial team
  - Second Round: bring product to market; initial customer deployment; complete team
  - Third Round: expand sales and marketing; significant risk taken out of the business
  - Fourth Round/Mezzanine: working capitol needed for liquidity event
• You need enough financing for 12-18 months
• You need a really good lawyer. Need corporate lawyer, IP lawyer, employment and licensing/customer lawyer. Generally try to go with larger firms or smaller firms that focus on technology.
• Recommends using a large accounting firm over smaller ones. It made a difference when Yahoo wanted to acquire Viaweb that they used one of the big accounting firms.
• After Series A, founders generally have around 20%
• Goal for founder/CEO is to own between 5-10% at time of liquidity
• Frequently strategic partnership in place with Acquirer prior to event
• Acquisition is current preferred option for liquidity events
• Should create a budget in advance of fiscal year. Good exercise to understand how much is needed and future requirements.

top

Paul Graham, Partner, Y Combinator

Paul read one of his new essays entitled Ideas for Startups.  Very entertaining.

Paul's bio

• People think coming up with ideas for startups is hard because it can can be a "million dollar idea". But there are no markets for ideas so he thinks there is no demand for "ideas" and subsequently they are worth nothing.
• Startup ideas are just a blueprint
• Should treat a startup idea as a question
• A blueprint has to be right, but a question can be wrong but lead to good ideas
• New technologies are the stuff new companies are made of
• Conversations with friends are the kitchen startups are made in
• Big companies are strongly biased against new technologies
• Ideas get developed in the process of explaining them to others
• Einstein needed someone to bounce ideas
• Most successful startups have at least 2 founders
• YCombinator won't invest in startups with 1 founder
• Start by finding a problem that is intolerable and believing there must be a way to solve it
• Look at stuff people use but are broken. e.g., Dating sites
• Take a luxury and make it into a commodity
• Windows won't be beat by a frontal attack
• 50% chance that the Windows killer won't come from Google but a small startup

top

David Cavanaugh, Partner, Wilmer Cutler Pickering Hale and Dorr

David's bio

David talked about intellectual property issues I'm pretty familiar with already:
- patents
- trade secrets
- copyright
- trademark
- NDA

top

Michael Mandel, Chief Economist, BusinessWeek

• Can sum up what he's learned over the last 15 years:
  • Boom
  • Bust
  • Boom
  • Bust
• No matter which stage you're in, people think it will never end
• Rate of investment in 90s wasn't any higher than 80s or 70s. The biggest difference was the pace of technology advancement.
• Corporations crave innovation and hate it at the same time.
• He thinks we are at the beginning of another boom phase. Just keep in mind that the bust can happen at any time.
• China is in a boom and a bust will happen in the next few years.
• Two months before Cisco's IPO, none of the major publications had stories on Cisco.
• We are entering a similar period.

top

Steve Wozniak, Co-Founder, Apple Computer

It was great to see Steve in person for the first time.  His talk was similar to others I've heard from him over at IT Conversations and MIT World so I didn't take many notes.  He talked about growing up and how he became fascinated with computers and technology.  It is a great story from one of the true pioneers of our field.

The Woz's website

• Need to be motivated
• Need humor because if you are not having fun what's the point?
• When you start your company, make sure you have thought about your values. Write them down. Refer to them later.

top

Stephen Wolfram, Founder, Wolfram Research

Stephen's bio

• Discussed his background
• If you delegate things you don't understand, it will get messed up
• Nobody with an MBA has succeeded in his company
• Has always thought running a company is common sense
• For some reason many people can't imagine working on something related to their hobby
• He's not sure business plans really help anything at all since there are so many variables that can turn numbers upside down

top

Stan Reiss, General Partner, Matrix

Stan's bio

• Stan acknowledged Paul's essay: A Unified Theory of VC Suckage
• VC or not?
  - Not right in all cases
  - You can give up over half your company
  - Changes the game: on the clock, spending other people's money
  - Biggest outcomes tend to be VC-backed
• Went from $4-5 billion a year in VC in the 1980s to over 100 billion in late 90s
• Small number of VCs are making money
• Which VC?
  • A very small number of VCs (like 30) are associated with the overwhelming bulk of the successful companies
  • Make the decision with a lot of care – can't study forever, but think hard

top

Mark Macenka, Partner, Goodwin Procter

Mark's bio

• He said most of the mistakes he's seen entrepreneurs make are business-related (not technology)
  • The importance of study and analysis of the market opportunity.
  • Don't underestimate the competition
  • The incredible continuing requirement to remain focused
  • Halitosis is better than no breath at all / cash vs dilution
  • Don't put friends and relatives on your board
  • The requirement (or failure) to solicit strategic and tactical advice on business/legal issues
• Most important thing: KISS principle

top

Chris Sacca, Principal, New Business Development, Google

Chris' blog

Sergi and Larry didn't write up a business plan, they just started hacking. They didn't think about making money for a long time.

1. Start!
2. Solve user problems
- Think about solving a user's problem and you'll make money later on
- Start with user experience and move backwards. Don't start with the technology
- There is 570 million terabytes of information in the world
- Google indexes about 170 terabytes

3. Go Big!
- Sergei's and Larry's first datacenter used borrowed machines

4. Cheap to demo
- If google buys your company they will have to redo it anyway
- They do acquisitions for talent

5. Geeks still rule
- They make lawyers sit across the street
- Give Founders' Awards as payment for developing a cool product
- Colin Powell thought the Google Laundry room was the coolest
- Serve bfast, lunch and dinner free to all employees and guest
- That may sound like a bubble thing to do, but the first chef was employee #40. Larry and Sergei thought that people bond over food and create ideas
- Every Friday, Larry and Sergei review the week's accomplishment and answer any question

6. Food

7. Be Open
- Much easier to use open source and standards
- Much harder for them to integrate .NET

top

Olin Shivers, Associate Professor, Georgia Tech; Co-Founder, Smartleaf

Olin's bio

• When it's not working out, don't hope for the best
• If you aren't one of the first 10 people, you probably won't make a lot.  Not a bad option if you don't have an idea currently
• There is no shame in talking about money and options. Distrust management that isn't open about allocations
• You're not doing this for fun. You're doing it for money (unless you are a revolutionary).
• VCs: soulless agents of Satan or just clumsy rapists?
• Failure is part of the process
  • There will be pain
  • "Thank you for what you have taught me"
  • Easy to say, hard to do
• Have a high tolerance for feeling like a moron
• Can you handle permanently residing outside your comfort zone. If it was easy, everyone would do it.
• You will spend much of your professional career a huge loser.
• Example: Steve Jobs; Newton, Lisa, Next, etc. Learned from those lessons with future products; iPod, Mac, OS X
• He does an awesome job extracting value from failure
• Most of his failures with research and startups have been failures of courage
• Scientific progress advances in units of courage, not intelligence –PAM Dirac
• Recommends: Sutherland's "Technology and Courage"
• Weird combination with startups: You have to be stubborn and flexible
• Something being hard means there is a huge barrier to entry
• A year in at Smartleaf he completely changed their business model
• No battle plan survives contact with the enemy
• That doesn't mean you should haven't one
• Business plans just gets you started
• People that hit big in technology were masters in technology first (Gates, Jobs, etc.) not MBAs
• It helps to start young
• You may need a few tries
• Be aware of falling into a groove
• Learn to write

top

Sam Altman, Steve Huffman, Justin Kan, Mikhail Ledvich, Alexis Ohanian, Emmett Shear, Zak Stone, Aaron Swartz; 2005 Summer Founders

2005 Summer Founders

These guys talked a bit about the Summer Founders program and lessons learned from starting companies.  If I was in my early 20s again, I know what I'd do.