Month: September 2006

I encourage you to read what Evan Williams has to say (courtesy of Gigaom) about some of the mistakes he made at Odeo.  Evan is one of the founders of Blogger which he sold to Google and is also founder and CEO of Odeo, a podcasting company.  He goes on to outline a number of mistakes that he has made as an entrepreneur such as not understanding who his customer was and wanted, starting off with too broad a market focus, and raising too much money too fast.  It takes alot of guts to publicly tell the world that you screwed up and how you screwed up.  More importantly, it seems that Evan has narrowed the company’s focus and cut down some excess management to rightsize his business.  As I have mentioned in a previous post, having too much money can be a curse and not a blessing.  If you don’t know who your customer is and what your customer wants and how you uniquely deliver that, no amount of money will help you answer those questions.  As you know, the more money you raise, the bigger the expectations are for your business.  If you raise too much too soon, you may feel extremely pressured to go big and broad too fast without really getting the basics down first.  I am sure Evan is not the only CEO to have felt this pressure to run fast, even if he didn’t ultimately know in which direction he was going.  My only advice is that in the early days as your are experimenting and understanding your market and customer base, a smaller first round of capital may be a better bet for you as it forces you and your team to be resourceful and focused while better aligning investor expectations.

As an entrepreneur, you are most likely spending most of your time building your product and getting it to market.  in other words, you are focusing on the big picture which is what you should be doing.  I do want to share with you a couple of anecdotes about not forgetting to take care of the little things – little things like keeping proper files and records.  It is quite simple to overlook this aspect of your business but taking care of your company and keeping your house in order is easy to do, especially if you start from Day 1.  Make sure your basic finances are in order and that all customer contracts, employment-related documents, financing paperwork, etc. is all stored properly and securely.  Sure we have electronic copies of many of these items but real signatures are quite important. 

1. Example #1: Your company is about to be sold and as the acquirer is doing due diligence it wants to make sure that there are no outstanding claims to the intellectual property of your company.  In other words, the acquirer does not want to have an ex-employee or founder come after them once the transaction is completed.  Well, this is easy to take care of, right?  Typically most companies have their employees and particularly technical personnel sign an assignment of inventions and confidentiality contract where any product or patent developed while working for your company is owned by the company.  So in order to satisfy the acquirer’s needs, all your company has to do is find the signed documents for the key technical founders.  Well, guess what – if you didn’t keep proper records and don’t have the signature, there are two options – the acquirer may walk or you have to go back and get another signature from an ex-employee.  Good luck with that.
2. You are about to sell your company.  5 years ago, you and a technical co-founder conceived of the idea and launched the service.  However, your technical co-founder decided to work full-time at another company and ended up just consulting with your startup post-funding.  While this person may have signed an assignment of inventions agreement with you, he also signed one with his current employer.  When you closed your first round of funding years ago, the lead investor did his diligence and found out that the technical co-founder’s existing employer may have a right or may even own the startup’s technology.  After much debate, you secure a release from the technical co-founder’s company stating that they have no claims to the technology.  Fast forward 5 years – you are about to sell your company, you have switched lawyers twice, and the acquirer needs this release.  You can’t find the signature page.  Guess what, you are going to have to go back to the technical co-founder’s employer and get another release.  I can pretty much guarantee you that it will cost you to make this happen.

The net net is to not forget about the little boring things like record keeping when you start your business because it may come back to bite you in the ass and cost you real dollars when you need a document or signature most.

As you know, talent is the lifeblood of any company.  Given that, I have written a number of posts on hiring (see here and here).  I recently saw Joel Sposky’s (Joel on Software) post on hiring great developers and thought that I would share it with you.  He makes a number of great points and I have extracted a few pearls of wisdom for you:

1. "The great software developers, indeed, the best people in every field, are quite simply never on the market."
2. "Numerically, great people are pretty rare, and they’re never on the job market, while incompetent people, even though they are just as rare, apply to thousands of jobs throughout their career."

Like any important process, hiring great people means that you and your company need to make it a priority and stay incredibly focused.  In fact, hiring great people reminds me alot of finding great deals as a VC.  At the end of the day, being proactive is key and leveraging your network to generate targeted and filtered deals or resumes will always create a higher yield than sitting back and waiting for the masses to come to you.