A dual post today on two great programs that all early-stage web start-up teams should know about: TechStars and LaunchBox. 

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We work with start-ups that are in various stages of fundraising.  I often talk with entrepreneurs about raising money and do what I can to make introductions.  In some cases, we’ll convert a small percentage of our services fees into an investment, so we know what it’s like to have some skin in the game.  We work with clients we believe in, regardless of our “participation,” and love the excitement of early-stage companies.

Having started Viget in 1999, we went through a bit of the tech bubble and all of the bust, and we learned a lot of lessons.  One was: no matter how good it gets, don’t bet the farm on start-ups.  So, we continue to balance our client list with traditional offline companies as well as start-ups, and that balance benefits both kinds of clients in addition our staff and our company.

There continues to be mainstream talk of a recession, and some VC’s are talking about what a downturn could mean to the investment community and start-ups seeking funding.  Even as we grow and expand, we talk about it internally — should we be concerned?

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Will lists Martin Plaehn’s Quick Hits: Do’s and Don’ts of Entrepreneurship.  There are eight of each, all good, but the top three don’ts are worth repeating:

1. Don’t hire of goodness of heart or friendship
2. Don’t hire anyone who you and your team are not genuinely excited about
3. Don’t tolerated mediocre engineers; for that matter, mediocre anyone. An early sign of mediocrity is when you downgrade tasks and expectations to align with an employee

Good advice.  Thanks to Brad for the link.

Guy has a guest post from Professor Scott Shane covering the Top Ten Myths of Entrepreneurship.  It’s worth a look, though I have to disagree with #10:

10. Starting a business is easy.

That’s not a myth — that’s as true as can be.  What’s hard is sustaining and growing a business, of course.  Then again, if you’re going into a start-up and you didn’t know that already, all the advice in the world — even from Guy Kawasaki — won’t help you.

I attended the Mindshare 2007 class graduation in Tysons tonight.  Phil Merrick, who graduated in the first class way back in 1997 when his company webMethods was just getting started, spoke to the group.  He ended his talk with one of my favorite quotes — one that every entrepreneur should know.

“It is not the critic that counts not the man who points out how the strong man stumbles or the doer of deeds could have them better. The credit belongs to the man who is actually in the Arena, whose face is marred by dust and sweat and blood who strives valiantly who errs and comes short again and again, because there is no effort without error and shortcoming but he who does actually strive to do the deed who knows the great devotion who spends himself in a worthy cause, who at the best, knows in the end the triumph of high achievement, and who at the worst, if he fails while daring greatly, knows that his place shall never be with those cold and timid souls, who know neither victory nor defeat.”

Theodore Roosevelt (1858-1919)

 There’s another, more succinct version as well:

“Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat.”

A central theme to Phil’s talk was advising the room of entrepreneurs to make decisions.  He pointed out that most decisions are binary (yes/no) giving you 50/50 odds of making the right one, and even beyond that many decisions don’t matter either way, giving you even better odds.  Ultimately, though, it’s the ability to make decisions at all that’s important.  Perhaps he should have referenced another Teddy Roosevelt quote:

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”

Derek Scruggs, founder and CEO of The Enthusiast Group, gives a candid interview to David at Colorado Startups.  His company just decided to shut down after working for a couple of years to create a series of niche social networks targeting outdoor enthusiasts with sites like Your Cycling and Your Running. 

With web businesses hot again and huge acquisitions grabbing headlines, it’s good to get a dose of reality.  Most startups (web or otherwise) fail.  Not surprisingly, when they do, most of the founders don’t feel like talking about it publicly.  Derek’s willingness to share his experience is valuable for any would-be entrepreneur, but it’s particularly relevant for anyone considering launching a web-based business.

I’m wrapping up a long weekend here at Viget, but before I sign-off for my pre-real-work-day nap, I wanted to get some more thoughts down on how it all went.  Hosting Startup Weekend was exhausting, in a good way.  As hyped, we started the weekend with 70+ people picking a business idea, and finished tonight last night by launching a site at midnight.  I can honestly say that it went better than I’d expected in almost every aspect.  Some examples:

• It launched.  I have to admit, I thought all along that we’d end up not launching, but to the credit of the dev team, at midnight tonight there was a somewhat functioning site live at holaneighbor.com.  It didn’t work well exactly, and it’s not really a compelling feature set yet, and the nicely designed screens aren’t in there yet, but technically we launched, and that alone is impressive.
• People stuck.  There were times Friday night, before there was any clarity in the concept, that I was sure we’d have no one back on Saturday.  The night ended on an upswing, though, and the vast majority of people decided to give it a shot on Saturday morning, which fed into the evening and beyond.
• I met a lot of good people.  I made new friends.  I got to know some folks I’d met before.  There’s nothing like collaborating in person with people on a project for stuff like that.
• Viget HQ held up.  Having recently moved in, I wasn’t sure how the space would hold up to all the people.  There are a few bumps here and there, but the space plan (big conference rooms, various huddle / collaboration spaces, the lounge, etc.) worked great for the distinct teams and break-out sessions. 
• It wasn’t about the company.  People were passionate and excited and wanted to get it done, but my perception was that it was more about having a chance to work with good people.
• Negative conflict was rare.  With so many talented, opinionated people crammed together forced to make group decisions quickly, I was prepared for some major blowups.  There were heated debates here and there, but things seemed to work themselves out with generally positive outcomes.
• The group had manners.  Pretty much everyone pitched in to help with the grunt work of keeping the office in shape (thanks, guys!). They appreciated Viget putting up the space, and they helped get it back to working order before leaving.  Even Andrew Hyde, founder of Startup Weekend, was here cleaning white boards at 1 am (4 hours before his departing flight).

Not surprisingly, just like with the first weekend in Boulder, it all came down to the dev team.  There’s lots of valid hype about how you can quickly build web apps these days, but the fact remains that it just takes time to build a really good product, and a lot of that time goes to writing good code.  Having launched anything at all is an accomplishment, especially given the potential complexity for the concept we chose.

What now?  Good question.  The group decided to decompress for a few days before figuring out a core team to take HolaNeighbor on to the next level.  There’s still a lot to do to make it a viable business, and I hope it has a life beyond today.  Can the passion for the concept that was alive this weekend carry on?  Only time will tell, but regardless, the experience of the weekend was certainly positive for me.

Update: checkout the article about Startup Weekend in the Washington Post.

Mike Chasen was the speaker at the Potomac Officers Club event last week.  He talked about his experiences as the founding CEO of Blackboard, which he’s built from a 2 person partnership crammed into a tiny office in DC in 1997 to an 850 person publicly traded company with offices around the world.  Blackboard provides software that helps universities put their courses online.  Some points he stressed that stuck out at me in terms of lessons for growing start-ups:

• Focus.  He recognizes that a lot of entrepreneurs try to get started part-time, but he believes in 100% focus for start-ups.  Their original idea was to put college applications online (not courses), but he and his partner tried to do it while keeping their day jobs at KPMG, and it never got over the hump of initial resistance.  They faced the same resistance with putting courses online, but, because they were focused, they pushed through and made it work.
• Charge.  They’ve always stuck with a model of charging for software rather than giving it away for free in the hopes that their audience would grow and ad revenue would follow.  They faced pressure to “go free” in the dot com bubble, and while their decision not to makes them look smart now, he notes that the only reason they didn’t consider it was that they didn’t understand the model.
• Know your model.  One early day of fundraising involved two VC meetings.  In the first, after Mike explained that their model of long-term software licenses would create predictable revenue, the VC told him he was nuts — that everyone in DC makes money on consulting, and that they should give away the software but charge big for integration services.  A quick study, on his 2nd VC meeting that afternoon, Mike explained their model would be to give away software and charge for services, to which the VC countered that the margins on software sales were way more attractive and that services would be a bust. 
• Embrace turnover. He’s been through six heads of sales, and clarified that doing so was a natural reflection of their evolution as a company.  At each stage of their growth, Blackboard needed a different skill set to handle the specific challenges of that stage.  He also noted that they’re “right” about a hire about 50% of the time.
• Network. He credits local networking events for leading him to their first angel investor, who put up $200,000 as part of a $500k round.  They went on to raise more than $100 million. 
• Take it. He recommends raising as much money as you can in each round, even though he admits that their final round of funding (~$50 M) was hampered by their excess in the previous round.
• Pie. His ownership stake in Blackboard is down to 4%, but he points out that if he’d tried to hold on to more equity he wouldn’t have been able to grow Blackboard the way he did.  He’d rather have 4% of a big pie than 50% of nothing.

I was impressed by the story of Blackboard.  Mike started the company with only a couple of years of professional experience and grew it through some turbulent times.  For him to remain at the helm through all that change and maintain his passion and effectiveness is remarkable.

Paul put up a talk he gave at the final Y Combinator dinner of the summer called How Not to Die.  The message is not only to never give up, but to be as public as you can about your work to add extra motivation — since such publicity will make it “unthinkably humiliating to fail.”

There’s no doubt that without extremely dedicated founders, any start-up is doomed from the beginning.  Working hard and staying motivated through the miserable times (because there will be some) is essential to success.

Quitting makes sense sometimes, though, and the idea that quitting = failure = humiliating is dangerous.  Working extremely hard on a start-up for years only to eventually realise that it never had a chance to be successful no matter how hard and long you worked — that’s humiliating.  Not because hard work is bad, but because all that time could have been spent working hard on a different (and hopefully better) idea.

Good entrepreneurs have great vision and a unique perspective — on the market, their business, and the future of both.  Seeing ahead of time when hard work will get you through and when quitting is the best path to big picture success is what great entrepreneurs do well.

I like Paul’s essay.  His emphasis on focus is spot on.  His statement that “if you can just avoid dying, you get rich” is a bit much, but his analysis is interesting.  There’s a big difference between survival and success.

In this country, I maintain that it is relatively straightforward (but not necessarily easy) for a hard working person to build a sustainable business that supports a full life.  Hard work and decent decision making can pretty much get you through. 

Building an exceptionally successful business is complex (and hard) and often includes at least a few things going your way that are largely outside of your control, but within your ability to identify, understand, and react to — as long as you’re looking for them. 

So work hard, but not with blinders on.  Always balance intense effort with a quest for clarity and perspective.

Thanks to Peter for the link and Seth for inspiration.

Last month I had a chance to talk with the TechStars group in Colorado, and I was impressed with the teams. TechStars in an incubator that selected 10 teams to spend the summer in Boulder building their businesses in a big shared office space with occasional interruptions from mentors who dropped in and shared their [hopefully] sage advice. 

The central theme of my talk was that building a product in 3 months really comes down to focus.  Yesterday they accomplished what they’d set out to do, and all ten teams demo’d their products to a group of about 50 potential investors.

See coverage from Mike Arrington, Brad Feld, Don Dodge, and Anne Zelenka.  Anne’s summer-end wrap-up …

Most impressive presentation of the day goes to the Flatirons, which made an awesome backdrop to the CU Boulder campus where the conference was held. Not surprisingly, some of the TechStars are relocating to Boulder to enjoy more of Colorado’s natural beauty and business opportunities.

… confirms my initial thoughts about TechStars — the most enjoyable part for those guys had to be just spending the summer in Boulder.

Congrats to all the teams for making it to demo day.

There’s a blogonerd fight going on between Nick, Jason, and Mike that Andy ranted about today. Smart, arrogant, opinionated guys with a pulpit, a point, and a cult following tend to be pretty entertaining.

If you can sift through the endless comments (please install Intense Debate already!) there’s actually an interesting discussion going on there about the state of the software industry and what revenue models are most viable (subscriptions vs. ad-supported). 

It’s all changing because ad models are working more and more as web usage soars and the ad industry is waking up to (1) where their customers are, (2) how they can connect with them, and (3) how they can measure (and quickly tune) that connection.  So ad dollars are available that weren’t there even a year ago are shifting online, and it will keep going in that direction.

What’s also changing is that web apps are getting better and more useful.  Underlying technologies and the products being built on them are maturing.  Expectations (from consumers) are increasing, creating a positive pressure.  Product developers are responding by creating better products.

What isn’t stressed enough in the debate is this: people will will pay for good software that fills a need.  People will pay more for great software.  Most of the web apps out there are crap and their failure has little to do with their pricing model.  Yes, you should think about how you’ll make money when you start any business, but that should be a distant second to figuring out how you’ll make a remarkable product.

Think about your users, create a great product for them, and then obsess about how to generate revenue.

I blogged on Viget’s Four Labs tonight about old friends / colleagues / clients John and Leo, co-founders of Incando / Pickle.com.  Their company was just acquired by Scripps Networks, so they’re marching into a new phase of their careers — transitioning from shot-calling entrepreneurs to VPs within an established organization.  There’s a lot of potential for greatness at Scripps, and I think they’re excited about the challenge.

Over dinner and drinks, we talked a lot about the Pickle saga.  We also talked about Viget and our future, and got some candid, insightful advice from guys with an interesting perspective.  John and Leo ran a web consulting firm in the 90’s, where I worked out of school before starting Viget.  They know the consulting side.  Launching Pickle and working with us, they also know the client side.  Having evaluated a number of funding and exit options, they know the market well, and where the needs for services are.  They had suggestions for types of clients to target, deals to go after, and how to best focus our energies in the short- and long-term.

I came away as excited as ever about where Viget is headed over the next several years.  We have an incredibly talented staff, great client experience, and a unique service offering.  We’re growing, and we could go in a number of attractive directions.  As they say, the sky is the limit.

If I had to summarize John’s advice in a word: focus.  Funny, that’s what I always say.

You generally hear stories of start-ups from exceedingly confident entrepreneurs who have forgotten (or chose to ignore) the day-to-day grind of how they became successful.  Glenn Kelman, CEO of Redfin, writes a great post on The Flip Side of Entrepreneurship on Guy Kawasaki’s blog where he offers “the top-ten list of the ways a startup can feel deeply screwed up without really being that screwed up at all.”

Marc Andreessen liked the “grass is always greener” point and so do I:

Start-ups are like medieval monasteries: always convinced that paradise is just ahead or that things only recently got worse. If you can begin to enjoy the process of building a start-up rather than the outcome, you’ll be a better leader.

Other bits that jumped out at me:

 #1. True believers go nuts at the slightest provocation. The best people at a start-up care too much.

Passion is the fuel of a start-up.  As soon as people stop caring intensely, the effort is doomed.

#2. Big projects attract good people. If you aren’t doing something worthwhile, you can’t get anyone worthwhile to work on it. … You need a big mission to recruit people who care about what you’re doing.

I would argue that “big” isn’t necessary, but worthwhile certainly is.  Great work attracts great people.  You need a clear mission to recruit great people and get them to care.  Great people want to do great work and, while it doesn’t always have to be “big”, they recognize the role that focus and direction play in achieving results.

#5. Everybody has to re-build. The short-cuts you have to take and the problems you couldn’t anticipate when building version 1.0 of your product always mean you’ll have to rebuild some of it in version 2.0 or 3.0. Don’t get discouraged or short-sighted. Just rebuild it. This is just how things work.

Amen, brother.

#6. Fearless leaders are often terrified.  Just because you’re worried doesn’t mean you have a bad idea; the best ideas are often the ones that scare you the most. And for sure don’t believe the after-the-fact statements from entrepreneurs about how they “knew” what to do.

As they build a team, I believe that the leadership in a start-up needs to balance calm confidence in the direction of the company with an appropriate level of transparency to the reality: start-ups are inherently unpredictable and plans change. 

At Viget, we’ve had an open policy from the start with the whole staff and routinely discuss everything from changes in service offerings to detailed financials to failed sales opportunities.  We’ve tried to build a culture where everyone can engage in the realities of growing a business.  It requires a degree of trust in the team for being able to “handle” both good news as well as bad, and it presents challenges in terms of leadership because day-to-day decisions are out there for criticism and debate.  I believe that you can be forthright about your doubts and concerns and still a strong leader.  Transparency goes a long way these days.

#7. It’ll always be hard work.

As Glenn points out earlier in the post, stories of sites like Plenty of Fish, which generates millions while the founder works 2 hours per day, show that “hard has gone out of fashion.”  There’s often debate, especially when times are good, about how much time a person should focus on work.  For Glenn, “working two hours a day on my own wasn’t my goal when I came to Silicon Valley.”  When it comes to start-ups, 99% of the time success (beyond just financial — actually building something great)  and really hard work go hand-in-hand.

#8. It isn’t going to get better — it already is.  If you can begin to enjoy the process of building a start-up rather than the outcome, you’ll be a better leader.

I’d take this a step further and say that if you can’t enjoy the ride regardless of how it ends, you shouldn’t bother.  Work on something you love to work on.

#9. Truth is our only currency. At lunch last week, an engineer said the only thing he remembered from his interview was our saying the most likely outcome for Redfin–or any startup–was bankruptcy, but that he should join us anyway.

Great story.  Truth and transparency really matter.  I think people who still try to run a business without being open and honest are going to have a hard time attracting great people and achieving great results.

Self-effacing posts like Glenn’s aren’t common enough, probably because both blogging and entrepreneurship tend to attract the over-confident.  While great success stories can be inspiring, a dose of reality can sometimes be more significant to helping a start-up get started.