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Guide to Evaluating Startup Ideas

Tony Wright — Thu, 27 May 2010 18:44:47 +0000

A great developer I once worked with was kvetching at lunch one day. He’d been working at a well-funded startup for about a year and had come to terms with the fact that the startup was really a pretty dumb idea. He’d wasted a year of his life and had a pile of stock options that weren’t very interesting. His last two jobs had been similar. He asked me a question that, at the time, I didn’t have a good answer for. “How can you possibly know when joining a startup if it’s going to be successful?” In other words, how can you spot a good startup idea?

Since I’ve announced that I’m moving on in the coming weeks/months, I’ve been bombarded with cool offers at existing startups, larger companies, and, of course, I’ve been pondering some of my own startup ideas. So his question which I didn’t really consider very carefully at the time is now one that I’m thinking a LOT about.

So without further ado, here is my “checklist for good startup ideas”. No startup will do great on every aspect of the checklist, but this allows me to put startups/products to a sniff test that I think is pretty darn useful. Note, this list is in rough order of importance.

How deeply do you think the startup will effect people’s lives? Can you imagine them using it every day? Can you imagine them being royally pissed if they couldn’t use it? This can range from utility (gmail) to emotion (twitter), but if a product isn’t in the “I’d rather chew off my own arm than lose it” category for a meaningful percentage of it’s users, it should be a non-starter.
Are the hypotheses that form the basis of the startup tractable? In other words, can test the idea(s) in a short period of time? I’ve talked about the importance of tractability before (hat tip, Ev Williams). Bottom line is that most initial hypotheses are wrong to varying degrees. Twitter was very tractable. Tesla is not. I’ll re-use the money quote from Fred Wilson: “…Of the 26 companies that I consider realized or effectively realized in my personal track record, 17 of them made complete transformations or partial transformations of their businesses between the time we invested and the time we sold. That means there a 2/3 chance you’ll have to significantly reinvent your business between the time you take a venture capital investment and when you exit your business.”
How does the cost-of-acquisition, cost-of-goods-sold (COGS) and revenue-per-customer stack up? Most software startup have a pretty low COGS, so this question generally comes down to, “How much does it cost to buy a customer and how much revenue does that customer represent over their life?” This obviously requires a lot of guesswork early on, but experience is a helluva teacher here. If you haven’t been on the wrong side of this ratio a few times, find a mentor who has. Any way you slice it, you need to fine a “scalable, cost-effective way to get your customer’s attention”. I can’t count the number of startups that aimed squarely at small businesses or “prosumers” with sub-$100 price point and have no idea on how they’re going to buy a customer (other than word of mouth, SEM/SEO, and PR).

I love extremes here. Zynga, Twitter, and Facebook has nailed one extreme– their cost of acquisition is free and nearly infinitely scalable. If you can build a service that grows virally (free and growing customer acquisition), you can focus most of your attention on value creation and revenue-per-user. With a little success there and a little time to let the virus spread, and you can almost not help but succeed. I think it’s hard to overestimate the power of free marketing/customer acquisition.

There are certainly extremes on the other side. What do you think Oracle’s revenue per customer is? How much can they afford to “buy” a customer for? What about Groupon?

Pro Tip: If you’re raising angel or Series-A money and you say you’ll be using the proceeds for things like magazine ads and wrappers on busses, you’ve probably already lost.
How MANY lives could you imagine touching in 5 years? This is different than asking about total addressable market (TAM). Craigslist started as a classified ads mailing list for San Francisco. Amazon started selling books. Have some imagination and consider what your company could morph into. Is it interesting enough to justify the opportunity cost and the fact that you’re looking at a drastically reduced salary for 2-5 years?
Is it an invention or re-invention? Hats off to you inventors out there, but I strongly prefer an existing market to creating one from scratch. The companies whose equity I covet didn’t build anything NEW, they just built something BETTER (Google, Facebook, Apple, Amazon, Craigslist, eBay, Zynga etc). In short, the first mover advantage is a crock of shit (most of the time).
Is it worth talking about? Can you tell a story about the product that would make a blogger say, “Holy crap– I could write a story around that that would get tons of links, tweets, and comments?” One of my favorite products is Visual Website Optimizer (it’s a brilliant A/B testing tool). The founder (a great product designer who I’ve had a few conversations with) sent out a barrage of emails to major tech bloggers and heard nothing but crickets (he appealed to Hacker News readers for advice– I think the discussion is interesting). His fundamental problem is that he doesn’t have a story that will drive links/tweets/comments/pageviews– all of the metrics that pro-bloggers care about. Oftentimes, clever PR people can create a story out of something that has nothing to do with the product (see: 37Signals & Zappos), but it certainly helps a lot if your product is funny, controversial, unusually useful, or inherently exhibitionist.

Are you passionate about the end-game? This one is hard to rank. All of the points above assume you are a “mercenary” founder (maximizing for opportunity) rather than a “missionary” founder (passionate about a vision that keeps you awake at night). Great video on that point here. Regardless of whether your end game is a vision realized or a big pile of cash (or some combination thereof), you need to be passionate about it… You need to have something that powers you through the bumps in the road where a rational person would cut and run. Both motivations are dangerous, by the way. If you’re motivated by cash, you might have a hard time sticking through tough times when you realize what you’ve built might only be a single or a double. If you’re motivated by vision, you might not like the pivots your startup needs to take to survive/succeed.
Is the market moving in the right direction? Can you imagine there being a LOT of growth and consolidation in the next 5-10 years? I just saw my first RedBox the other day (it’s a cool box outside of supermarkets that allow you to rent DVDs). They are currently on the wrong side of a market shift away from physical media– can you imagine people renting DVDs in 10 years? I think this one is particularly hard to get right (which is why it’s low on the list).

That’s my list. Am I missing something that’s on yours?

Stepping down as CEO of RescueTime

Tony Wright — Sat, 22 May 2010 18:47:25 +0000

Wow, I’ve felt bad about neglecting my blog. Not guilty-bad (though there’s a bit of that too), but bad because I feel like I have a LOT of stuff I want to write about. I literally have 15 or so blog posts that are pretty much just titles and topic sentences that I’m eager to write.

This isn’t one of ‘em.

John Cook just wrote that I was leaving RescueTime, and I feel like it makes sense that I should talk about this a bit to clarify what’s going through my head. Though I have to admit that it’s tempting as hell to do what Alex Payne did– which is pretty much leave it at “I just quit Twitter and I’m doing something new“.

Leaving any job is a personal choice with a lot of factors. Leaving a company that you’ve founded and nurtured from idea to prototype to product to business can be downright agonizing. The product is your baby and the team and investors you built it with are your brothers-in-arms. You think about it so long and so constantly that it gets to be an addiction. Not in a BAD way, mind you. The years I’ve spent on RescueTime have been some of the best of my life.

So Why Leave a Good Thing?

This is the most common question I’m getting right now– “If things are going so well at RescueTime, why leave?”. I’ve asked myself that question a TON over the last few months as I’ve been considering this move. RescueTime is enjoying some pretty awesome growth (51% quarterly revenue growth on average over the last 4 quarters– solid!). Not to say that there aren’t daunting challenges ahead for RescueTime, but all of the graphs are moving up and to the right. So, why the heck would I leave on the cusp of profitability? My reasons are largely internal… I know, I know. “Seriously, Tony? The ‘it’s not you, it’s me’ breakup line?’”. Seriously. Leaving RescueTime is like breaking up with an awesome women who you know you could be happy with, but no longer believe is the right woman for you. I have a mess of specific thoughts, but they all boil down to the fact that I’m more excited about what could be next– and I’ve always been driven by the “Regret Minimization Framework”. Watch this short video below:

Jeff’s boss’s response? “This sounds like a good idea. But it sounds like a BETTER idea for someone who already doesn’t have a good job!” I clearly have a great job at a great/growing company. But there are new things that are happening in technology/business that I find too darn exciting to not dive in. I want to get uncomfortable again, and trade reliable growth for blue sky. Given the stage that RescueTime is in, I think this is a reasonable time to make that leap. We’ve got a growing company that’s providing a livelihood for a great team and that (eventually, I hope) will provide a great return for the investors who made their bet on RescueTime (including myself!).

What’s next for RescueTime?

RescueTime’s focus right now is to scale, get new customers, and grow. We’re pretty convinced the entire team could answer support requests and play checkers and we’d grow every month (a testement to the fact that we focused on scalable marketing). But the team is going to continue to rock on A/B testing, outreach to our growing collection of Fortune 500 customers, back-end scaling so the servers don’t melt (processing hundreds of thousands of man hours of attention data per day isn’t easy, folks!), and (of course) making the product a little bit better every day.

I’m going to keep working with RescueTime on a few initiatives, and I’ll always be a founder (and advisor for as long as the team thinks I’m useful). Don’t be surprised if I answer a support request from time to time or do some writing on the RescueTime blog.

What’s next for Me?

(second most popular question, behind the “Why?”) Short answer, I don’t know– and that’s exciting. Longer answer, I’m looking for early stage opportunities in a few markets that I find particularly interesting. I want an opportunity where I can be strategically involved (hacking on business models) and tactically involved (managing UX, doing PR/outreach, A/B testing, writing copy, slinging pixels and CSS). Upside is a must for me– I’m eager to have skin in the game as opposed to a steady paycheck (though some combination of both could be interesting). I’ve written a bit about how I think stock options for most employees are a bit of a sucker’s bet unless you’re getting in VERY early (it turns out the only way to get meaningful reward is to buy it with risk). But at the end of the day, I’m only partially motivated by upside. I’m more motivated by the opportunity to make a BIG impact, the autonomy to do stuff that I think is important, being in a “fast” environment, and being surrounded by people I respect and like. This seems theoretically possible at a larger company, but seems likelier the earlier stage you go on the spectrum. It might ultimately mean that I have to start something new.

High Five, RescueTeam

The team of hackers that work at RescueTime are breathtakingly good. With a small team, we’ve built and maintained a windows app, a mac app, a web app, and a monster data warehouse that processes hundreds of thousands of man hours of attention data per day, all with a hosting bill that any startup would envy. We’re adding 600-1000 new users and 15-30 new paying customers per day without a single marketing dollar and without any marketing effort. We’ve built a machine that we’re really damn proud of.

I read the other day that 85% of venture-backed companies are dead inside 3 years– I’m damn proud of the fact that our business and team are going to be in the 15% minority. High-five guys, and godspeed!

Considering Y Combinator (or any seed funding)?

Tony Wright — Mon, 22 Feb 2010 20:20:49 +0000

[Timely note! We're hosting a Y Combinator Meetup in Seattle on Thursday Feb 25... details here!]

March 3 is the deadline for YC’s Summer 2010 session. I figured that I ought to throw my thoughts out there on the decisions that lead up to the application, the app itself, and the interview process that follows (if your app makes the cut!).

Making the Decision to Apply

First off, I think the most important thing to emphasize as an entrepreneur is that you should optimize for your chance of ~~success~~ a meaningful exit, NOT the magnitude of it, should it happen. It may seem like selling for millions to Google is a foregone conclusion given how brilliant you are, but it’s not. Startup success is a tough slog with lots of randomness outside of your control. If you can trade a little bit of equity to nudge up your shot at success by a few percentage points, you should do so. Thankfully, YC from this perspective is a no-brainer. No one can argue that it doesn’t improve your shot (with the amazing mentoring they provide, the investor introductions/credibility, and PR bump), and if you calculate YC’s take is if you sell for $100m (divided by the number of founders), it isn’t too painful.
Think about what you’re building, what market you’re playing in, and whether it’s appropriate for venture financing. I think I recall reading about someone applying who was proposing to build an app to manage Dungeons and Dragons campaigns. While there’s probably a business there, it’s pretty unlikely that the pen-and-paper RPG market is going to be the next big thing to change the world. Pick a big market– or better yet, pick a small market that can eventually morph into a huge market (like classifieds for San Francisco, selling books online, or an online garage sale).
Read everything here and make sure you agree with some of it, but don’t be afraid to disagree with some of it either!
Do something bold. You aren’t going to be thinking to yourself on your deathbed that you really should’ve taken less risks. YC is a blast. You get to meet amazing mentors, other great startup founders, and a few fairly impressive robots.
Consider how committed you are to your idea/market, your company, and your co-founders. YC has plenty of flips, but the majority of ‘em seem to be going concerns for years. Can you get excited about what you’re doing (and who you’re doing it with) for 7 years?
Do a gut-check on your team. Do they have the rough ingredients necessary to kick ass? If the better mousetrap you propose to build is going to be better because of an amazing UI, make sure you have a great UI guy. If you’re doing a vertical search/UGC play, make sure someone is at least a little interested in SEO. If you’re going to sell software to businesses, make sure someone is willing to sell stuff. And, of course, if you’re tackling something with big technical challenges (like most of us are) make sure you have some great hackers.

The Application Process

Read Paul’s essays. It provides good insight into what’s important to him (and YC). Reading Founders at Work is a good idea, too. It’s a great book and shows you some patterns for startup success.
Remember that the app is a sales pitch and focus your answers on the things that are important to YC. The biggest risks to YC are:
- That you don’t have the chops to build something good. The best way to deal with this concern is to show them something good that you’ve built. Preferably several things, and preferably things that you’ve built with your co-founders.
- That you’ll get bored/discouraged and quit. So try to work in examples of times when you’ve persevered despite significant obstacles.
- That you’ll fail to make something that people want. So do what you can to show that you’re in tune with the market you’re proposing to serve. You can be a badass hacker with unflagging dedication, but if you don’t/can’t understand your users, you’re probably not going to be a big win for YC.
Don’t be too shy or too arrogant to sell. I remember reading a comment on Hacker News that said, “My code speaks for itself.” No, it doesn’t. At least, not to investors, customers, employees, reporters, and the zillions of other people out there you’re going to have to sell to.
Get working on your software ASAP. If you apply with a functional product (or even a launched product that people love), you remove a lot of the risks listed above.
Get working on the YC app ASAP. If you’re unsure, apply! The app takes a few hours and it’ll help focus your thinking if nothing else.
If possible, make sure that your whole team is ready to dive in whole hog. Starting something up is a commitment to your founders and to your new investors. Having a team member who has other commitments can be a source of contention.
Hack the system! Every session I get emails from people asking me to review their apps. I usually do. I can’t imagine why you wouldn’t do this… YC founders are people who wrote successful applications and spent at least 3 months getting repeatedly kicked in the junk by Paul Graham and friends. I’m sure we must know something about how YC thinks that might not be obvious. If you can’t bring yourself to ask a stranger for some time, how are you going to raise money after YC? How are you going to hire your first employee?

The Interview

I don’t recall the stats on how many applications make the cut, but if you get asked in for an interview, congratulations! Now get to work building something (hopefully you already have).

Get started on a demo. If you walk in and start monologuing, you’ll fairly quickly get interrupted and asked to start showing stuff.
The “demo” will be less like Steve Jobs and more like Guantanamo Bay. You’ll be derailed almost instantly and peppered with questions and objections.
Have a backup idea that you’re comfortable talking about. I know several founders who were essentially told, “we don’t like that idea. Do you have any others?” This may be a test of how much you love your idea as much as anything else. Founders who refuse to pivot often die from it. It also might be a test of your ability to have good ideas. If they don’t like your idea OR your backup, they might los faith in your ability to grok what people want.
Practice. Ask 10 smart people to name 10 things that will make your idea fail. Have good responses for those objections. Don’t practice a speech. Don’t practice a 10 minute demo, practice little 1-2 minute chunks of a demo that you can string together if they leave you alone. Practice individual talking points and responses.
Be willing to be wrong but also be willing to disagree. YC doesn’t want lapdog PG fanboys(and girls!), but they also want people who are coachable and willing to learn. Don’t be afraid to say, “That’s one of the things we’re going to have to figure out, but we have a few ideas.”
Be dynamic and energetic. You’re a storyteller here. Your job is to get YC excited about your business. Make them believe that it (and YOU) are an investment opportunity. Work on eye contact, not talking to too fast, and thinking on your feet. Have someone role-play an aggressive interviewer.

That’s about all the advice I have. I’d close with this point– very very very few YC founders wouldn’t do it again in a heartbeat. It’s a killer experience and it’s certainly a needle-mover during the most fragile part of your new company’s life. Applying is cheap in terms of time and rewarding even if you don’t get asked in for an interview. Do it!

Followup Answers re: Lifestyle vs. Investment and Angel vs. VC

Tony Wright — Thu, 10 Jul 2008 21:12:08 +0000

Last night I spoke at Seattle Tech Startups. Given that lots of people who go to these meetings tend to be wantrepreneurs (aspiring startup folks), I focused on early decisions that need to be be made. Do you shoot for a great lifestyle business or do you aim for a grandslam? Services biz or product biz? Bootstrap it, find angels, or court VCs? And when you answer all that, how do you settle on an idea when you have lots of them bounding around in your head (for this part, I liberally borrowed from Ev Williams’ great post on evaluating startup ideas, which I posted a riff on a while back).

After my short presentation, there were some really fabulous questions. Two of ‘em kept me thinking and I wanted to expand on the answers a bit. Here they are.

Question (paraphrased): “Given that takinghuge piles of VC money both has the dangers you describe and and firmly closes the door on most early acquisition opportunities, why are people still going after big VC?”

My response was two-fold at the time. First, there are some ideas that require a lot of money– as an example, I mentioned a local northwest guy who is working on a really cool electric motorcycle… It’d be hard to imagine getting that business off the ground with $500k of angel money. I also mentioned that some entrepreneurs look at their valuation as a score. Taking $4m on $12m post-money is essentially saying that, on paper, your company is worth $12m. Feels pretty cool, I suppose.

Two more things to add here.

First, I think people chase VC because it’s available. Angels are purposefully elusive– they don’t exactly hang out a shingle saying, “I’ve got $50k burning a hole in my pocket”. VCs, on the other hand, have a web site, and processes to handle/process deal flow. They almost always want to lead the investment by negotiating terms and putting in a big chunk of the money, while angels sometimes shy away from leading/negotiating, but are happy to pile on with other investors.

I think there is a big hole to be filled here by institutional investors who aim at a larger number of smaller deals (something that most VCs can’t handle because they have too much money under management, take too long to do the deals, and have too few people to sit on boards). There are smaller funds out there that are starting to fill the “early/small” niche (with $250k-$1m investments) but they are rare and (from an outsider’s point of view) are buried in interesting startups to invest in. The good news is that they’re seeing great success, so more are popping up every day. If you want to see a good list of folks who are really looking at early-stage/lower-dollar deals, here’s a great article profiling a few. You’ll notice a decided lack of ‘em in the Northwest. Madrona is mentioned but I think they very rarely do a deal less than $1m.

Second, B2B. Despite Web 2.0 hype, there is tremendous money to be made with B2B software. Going the B2B route requires a sales engine or some clever distribution innovation. If you’re spinning up a sales team, that requires LOTS of money flowing out of your business (salary, commissions) before you recognize revenue for their efforts.

Question #2: “Can you talk about how to decide whether a business/idea should fall into the “lifestyle” category or the “get funding a go big” category?

My answer last night centered around overall magnitude of the idea. Could you imagine it being the next Google/Facebook/Salesforce.com? Is it that ambitious? Can you set out milestones where you end up selling for $100 million? I also mentioned that how much you NEED is important. If you can “run the experiment” for $500k to see if your market/team/idea are as good as you think, raising $10m is silly. If you can roll those same dice taking no funding and working on weekends, raising ANY money might be silly.

What I want to add: Think about how you fit into recent investment trends. Investors closely follow trends. Most seem to focus on trends and recent acquisitions that you’re already reading about– the top tier ones often try to anticipate what’s going to be the next trend. Imagine yourself pitching your idea to someone who religiously follows and tries to anticipate trends. Will their eyes light up? To my amateur eye trends that are important out there right now are: Ad networks, widgets, casual gaming, video advertising, iPhone/mobile apps, Facebook/MySpace apps, social aggregation, and (of course) anything that could credibly take a shot at killing Google. Am I missing any? There are a few tired trends that probably still have legs with some investors like niche social networks, social news sites, photosharing, etc.

If you’re outside these trends, that’s okay (we certainly are, though we think that productivity/information overload is a meme that is growing like gangbusters). It just means that you’re going to have a harder time raising money and you’ll need a bit more traction to pique VC interest. We’re just about ready to close our angel round with a fairly platinum-plated group of investors, so it’s certainly do-able. I’m just glad our founders all had hefty personal bank accounts to allow us to grow the business over the 3 months of fundraising. I know plenty of people who’ve needed 6-10 months to raise a round, so be prepared for that if you’re bucking trends.

Remember, Google came to a market that had well-funded mature players at a time when a lot of really smart people were saying that search was a dead business where you couldn’t make any money.

Another thing to consider on this front is this: Do you have some unique aspect of your business that allows you to acquire new users/customers for zero or near-zero cost? SEO, viral marketing, user-generated content are all fabulous ways to get an organic flow of visitors to your product. VCs love clever distribution wrinkles, and most successful startups have a fabulous (if sometimes accidental) story to tell here.

And finally– the best way to decide whether it’s a small biz opportunity or a huge business opportunity is to launch. If you’ve got something big, the market will start dragging you down the growth path. If it’s a big opportunity and you’re growing like gangbusters out in the wild, funding isn’t hard.

Anyhoo– hope folks enjoyed the talk– I’ll post the video if STS puts it up.

The Information Overload Conference in NYC, July 15!

Tony Wright — Fri, 27 Jun 2008 19:44:04 +0000

I just got word that I’ll be speaking at the Information Overload Research Group 2008 Conference in New York City on July 15th (though I’m not on the page yet… ).

This is the grassroots organization mentioned with RescueTime in the New York Times article “Lost in Email, Tech Firms Face Self-Made Monster” (well, it’s probably fairer to say that this is the article where RescueTime was mentioned with them!).

The conference looks like it’s going to be real interesting (and not just because I’ll be speaking there– I’m positively riveting!). If you’re in the neighborhood (or if you need an excuse to visit NYC), you should sign up (the conference only costs $150 and includes lunch– it’s a helluva deal). Brian Fioca, one of my co-founders will also be in attendance.

If you don’t want to go to the conference but want to grab a beer on the 14th, drop me a line!

Bootstrappers Beware

Tony Wright — Fri, 20 Jun 2008 03:22:16 +0000

A lot of people are damn religious about bootrapping businesses. Especially nowadays when it’s so easy to start a software business– you just need a few hackers, Ruby on Rails, a cheap virtual server and you’re ready to roll, right?

Sure.

But just because it’s cheaper to start a software company, doesn’t mean that it’s that much cheaper to make it from when you launch a product to the point where you’re sitting back, drinking a margarita, and marveling at the recurring revenue machine you’ve created.

The way I look at it, there are three bars that matter to me.

1) Making enough money that the business brings in enough money to pay the overhead. Rent, servers, lawyers, whatever. Hopefully you keep this really lean.
2) Making enough money that the founders get an insultingly low (but still existent) salary.
3) Making enough money that the founders can take home roughly what they’d make if they went and got a real job.

Bootstrappers are woefully bad at guessing how long it’ll take to get over these bars.

Let’s look at everyone’s favorite example of bootstrapping: 37signals (whose products and philosophies I love, by the way). According to a recent post, it took them about 6 months to build Basecamp, with DHH spending 10 hours a week (they don’t mention how much time other folks invested, but let’s assume it’s 2 other people at 10 hours a week). It turns out that with a really popular blog, a very successful consulting firm, and all of the attention that they got with Ruby on Rails, it took them about a year to get to the point where they could give up consulting and work on it full-time. I assume that they were somewhere between the 2nd and 3rd bar (mentioned above) before they made the leap, though they might’ve taken a pay cut as a leap of faith in the growth that Basecamp was experiencing. DHH sez:

“It didn’t turn into a smash hit overnight either. We ran Basecamp for a year alongside our other obligations before it was doing well enough to pay all the bills and afford our full-time attention. Most good businesses didn’t become great ones within the 12-18 months that the poster boys of the startup lottery did.”

Amen!

I’ll give you an example closer to home. RescueTime (my baby) was on TechCrunch 3 times, LifeHacker twice, and add in a few thousand other blogs (of varying flavors and colors). We are a Y Combinator company, which gives us plenty of geek cred. We’ve been [edit for clarity] mentioned in an article on the cover of the New York Times, and have gotten mentions in PC World, US News and World Report, BusinessWeek, and more. More important than that, we’ve got happy users who seem to like telling their friends (the old fashioned kind of viral marketing!). I think most SaaS startups would feel very lucky to get this kind of attention– we certainly do. But for all of this attention, I really don’t expect to clear that second bar for many many months (we’re only a month or two into having an offering that people can pay money for, so give us time!).

Let me be clear about the type of startups I’m talking about– I’m talking about low-cost (or free) product companies with price points low enough that having a human being actually SELL the damn software would be inane. Whether it’s a payout of $.83 for an ad click or $24 bucks a month for BaseCamp– having a human being wandering around selling this stuff doesn’t scale, and chances are your founding team doesn’t consist of anyone who is a motivated (and skilled) software/ad salesperson anyways.

On the other hand, if your price point is high (generally requiring a more complex or premium offering) or if you have a services component (web development consulting, managed hosting, etc)– you’re golden… Or at least you have great potential to ramp up revenue fast (as you can justify a sales effort and fairly easily convert time into money). Of course, there are the obvious downsides– for enterprise software you have to build… enterprise software (capital intensive and damn ugly). And then you should expect to spend 60-70% of your cash on sales and marketing. If you go the services-heavy route, you’re simply selling time for money… You can make a nice business out of this (I ran a consultancy for 7 years which I eventually sold out of) but there’s virtually no equity to be built– no one wants to buy a consulting business.

In my opinion, if you aren’t prepared for 18-24 months before you actually get your first paycheck (either through savings, doing it part-time / half-assed, or seed funding) you’re setting yourself up for disappointment.

Speaking Tomorrow at the Six Hour Startup Conference

Tony Wright — Fri, 30 May 2008 16:32:02 +0000

Tomorrow I’m speaking on a panel at the 6 Hour Startup Conference. It should be good fun and (hopefully) informative, so if you’re spinning up a new company (or pondering it), you should come on by. Here are two things I won’t be doing at the conference:

Pitching my own company
Reading bullet items from a PowerPoint deck

Here’s a great quote from a great blog post about conferences and meetups:

“Here’s what a speaker owes an audience that travels to engage in person: more than they could get by just reading the transcript.”

I’m not a stellar public speaker (and it’s more challenging to reliably deliver value on an unstructured panel like this), so I hope we can deliver.

It’s not what you say… It’s what they hear

Tony Wright — Mon, 28 Apr 2008 05:13:41 +0000

Long ago, when I set up this blog I read a few primers on blogging. One of them suggested that you have a picture of yourself on your blog. There were lots of good arguments for doing it, so I dutifully hunted among my photos for a picture of myself. Turns out that I didn’t have too many (I tend to be behind the camera rather than in front of it).

I did find one that I liked. It was on a nasty old fishing boat on the Prince William Sound (in Alaska). A friend of mine had bought the boat and invited a few friends for an multi-day cruise. There was no running water. The bathroom was a 5 gallon green bucket (I’ll leave it to your imagination how we “flushed” it). At the end of the trip, I was scruffy as hell, but I’d had an absolute blast tromping around the rugged islands of Alaska. That’s where the pipe picture was taken.

As my blog actually accumulated readers, there came a trickle of negative feedback about the pipe, which has increased to a steady stream. Some people feel like I was trying to look serious. Or academic. Or rich. Or that I was just clowning around. To me, the photo had a ton of meaning. To anyone else, not so much.

For some reason, this made me think of one of my favorite posts on product/UX design. Here’s a quote:

“When I started working on Wufoo, I was definitely a bad designer. I thought I was hot shit and knew all the answers. I saw the user as a wild beast that needed to be tamed. He got in MY way. Use the tool the way I designed it, fool—not the way you think it should work [emphasis added]. Thinking back, I remember being angry all of the time.”

One of the big lessons (which I continue to learn a little bit more every single day) is that it doesn’t matter a damn bit what you’re saying (whether you’re “saying” it to a user with design or saying it with words or pictures on a blog), it matters what’s being heard.

So I’ve pulled the pipe picture in favor of a more recent one. Some people suggested that I keep it as a “schtick”, but I’d rather be known as “that guy who kicks ass with RescueTime” than “that guy with the pipe” (who actually never smokes a pipe).

Lessons of Y Combinator: Things I’d do differently after 2 startups

Tony Wright — Wed, 02 Apr 2008 16:54:25 +0000

I wrote a little guest post over at FoundRead (part of the GigaOm network). Give it a read!

http://gigaom.com/2008/04/02/ycombinator/

Come See me Speak at the Churchill Club

Tony Wright — Fri, 21 Mar 2008 22:01:33 +0000

This Wednesday, I’ll be participating in a really interesting panel discussion entitled “Silicon Valley Fights Back Against the (Information) Monster it Created”. The panel is moderated by Matt Richtel (New York Times Correspondent). Here’s the description:

Intel launched no email Fridays. So did US Cellular. Some managers at Genentech urge employees to check email only twice a day. The Valley and its denizens are trying to combat a problem of their own making: information overload. Everyone knows the issue. The very tools spurring your productivity are also undermining it. This is not merely a question of personal organization. Information overload is spawning industries. New businesses and new products are being created from the likes of Microsoft and Google, and numerous start-ups, too, to help people manage and mute the cacophony and onslaught of information. The question: what can you do to avoid becoming overwhelmed? Even further, can you capitalize or build or enhance your business around helping others to regain productivity? Or have we created a monster here destined to eat us alive (please forgive the hyperbole…we wrote the end quickly because we have incoming email and need to get to it right away).

- Registration: 06:00 PM
- Buffet: 06:00 PM
- Program: 07:00 PM

Location:
Crowne Plaza Cabana Hotel
4290 El Camino Real
Palo Alto, CA

You can register for the event here. I have two guest invites– so holler if you’d like to go.