ITWorld: How to raise a tech entrepreneur

Imagine you are the father and major breadwinner of a family of eight children, half of whom are teenagers. Your startup is about to go into the weeds and you aren’t sure if you are going to be able to pay your staff of several dozen people, let alone figure out how to feed and clothe your family.

boblThat is the situation faced by Bob Lozano (at left) 17 years ago during one of the most stressful periods of his life. I interviewed Bob and several others  who are part of multi-generational startup families and what their experiences were raising their kids who are starting their own companies. You can read the rest of my story in ITWorld here.

Dealing with hypergrowth

Many people will think that handling hyperfast growth is a nice problem to have in their business. Yes and no. While it is great to have a business that is growing in revenue and customers, in these days of Software as a Service and virtualized servers keeping up can be a challenge. [tweetherder]It isn’t always obvious how to build an infrastructure that can scale up quickly.[/tweetherder] A recent article about the career of Aditya Agarwal in First Round is worth taking a closer look. Agarwal went to Oracle right out of college, and has been with Facebook when it had just a few employees, and has worked at Dropbox and other Internet companies.

If you are trying to build an engineering team that can handle growth, here are some of the highlights from the article that resonated with me.

1. Be flexible. You might have to move to a different team, or take a different approach, because of the increased scale. Or realize that your code was built for a smaller customer base. Don’t dwell on it.
2. See the bigger picture. They wanted people “who can think about the product all the way down to the infrastructure.” That means understanding how your code fits in to the overall project and how what you work on can influence someone else’s code too.
3. Be a polyglot programmer. Don’t use a hammer for every job, and learn new programming languages when it is appropriate for a particular project. Spend some time to develop your skills so you can work on multiple platforms, OSs etc.
4. Fight complacency or depression. Try to work each day on a more even keel. This is going to be hard work, and don’t get discouraged. Accept failure as part of the learning process. Be on the outlook for what needs to be done and set your sights accordingly.
5. Develop your leadership skills. Know when you can’t fix something by yourself and how to find someone who can help you. Leading a team isn’t just about telling someone to do something, but also about understanding what your team’s strengths and weaknesses are and how to code around these problems. It is also about providing the right motivation, resolving conflicts quickly, and making sure communication and collaboration is flowing in a positive direction. Be transparent about your decision process and communicate often and clearly about what you are doing and why.
6. Know the trade offs between producing quality or quantity. There are times to focus on one or the other, and just be able to deal with that. There is no right or wrong or absolute way. Agrawal mentioned that when he went to Oracle for his first job, he wasn’t expected to deliver any code for the first month. Facebook was another story: there he was expected to contribute code on his first day.
7. How much chaos can you tolerate? How much can your customers tolerate? These are important questions to ask and get answers to that define your daily work habits.
8. Know the corporate values and cherish them. Learn from your new hires that have worked at established software companies and how they have built their cultures over the years.

The next supercomputer may be your cellphone

What if you could have access to a cheap supercomputer in the cloud, and one that automatically upgrades itself every couple of years? One that taps into existing unused processing power that doesn’t require a new ginormous datacenter to be constructed? This is the idea behind Devin Elliot’s startup called Unoceros.com.

I was skeptical when I first heard him talking about it. This is because he borrows processing time on millions of cellphones at night. Think this through for a moment: these phones are charging, often connected to your home Wifi network, and they are sitting completely idle next to your bed. Why not put them to a good purpose? Think of SETI@Home only instead of searching for intelligent life in space, it is being used for running intelligent apps here on planet Earth.

I mean, the puny cellphone? Can’t we find a better collection of processors? Turns out that while we were sleeping, all that CPU power can add up to quite a few petaflops of processing. If you have a couple million cellphones, you can construct a distributed supercomputer that can rival some of those that are on the top500.org list. Today’s modern phone has the processing equivalent of a medium Amazon Web Services instance. That is far from puny.

I have been fascinated with this topic for some time ever since I participated in a rather unique “flash mob” computing experiment about ten years ago in San Francisco. This was the idea behind a course offered at University of San Francisco and taught by scientist Pat Miller, who works full-time at the Lawrence Livermore Labs. Call it Bring Your Own Laptop. One of the participants was Gordon Bell, who was the father of the VAX while he worked at DEC and now at Microsoft. I was one of hundreds of volunteers and left two laptops of my own for the weekend while the class tried to knit them all together to run the usual benchmarks to prove we had created a supercomputer.

While this flash mob failed at assembling a top supercomputer, they were able to get several hundred machines to work together. But that was ten years ago. Now we have the cloud and efforts like CycleComputing,com to build more powerful distributed processors.

Anyway, back to Unoceros. They have developed some software that can be included inside a regular cellphone app that, with your permission, makes use of your idle time to become a distributed compute engine for those developers that are looking for spare cycles. They are working out the kinks now, figuring out how to distribute the load and make sure that bad actors don’t harness their network for evil purposes.There is also the not-so-small issue about who pays whom and how that aren’t trivial either.

Could it work? Perhaps. It isn’t as crazy as having hundreds of people carrying their gear into a university gym one weekend.

Time to create a minimally awesome product

If you hang around entrepreneurs long enough, you’ll hear them start talking about MVPs. The first time I heard the acronym, I was thinking baseball: most valuable player, thinking here we go again with the sports metaphors. (Put the wood behind one arrow, have our product hit a home run, etc.) But it turns out that the term means minimally viable product, or for a new company to create something that is just good enough to gain traction and customers.

It has become an abused term however. I came across a post from a VC friend of mine from Pittsburgh, Sean Ammirati. Sean and I worked together at the misbegotten ReadWriteWeb a few years ago and he ran their business operations. Now he works with a lot of startups and you can tell from his post where he explores five myths about MVPs.

His first suggestion is that minimal doesn’t mean that it is crappy. A lot of startups interpret viable to mean that you slap something together quickly. But your interface matters. “I’ve met with too many entrepreneurs over the years who mistakenly interpreted a lack of demand around a concept when it really was at least partially due to an ugly or unnecessarily complicated interface,“ Ammirati says. The cruder the product, the harder it will be to understand how people will react to it, and an entrepreneur could be getting lots of wrong information because users are responding to the crude pieces, rather than the overall vision and what the product will ultimately supposed to be doing.

Next, the MVP is not a destination, and entrepreneurs have to remember that any product or service is more about the process of refinement. What is viable today may be obsolete tomorrow. Ideally, he says, “you end up having multiple iterations that test different core assumptions about your business based on different customer interactions” and refine and adjust dynamically to this feedback.

Don’t be afraid to take the actual “product” out of the equation, and look more closely at an actual idea. Ammirati suggests a simple sketch can do wonders here – remember the famous Compaq napkin idea for a luggable PC?

Don’t always swing for the fences (sorry) and try to come up with an idea that will appeal to millions of users. Far better is to examine the overall user experience, responsiveness and what you can learn and how you can validate your initial hypotheses.

Finally, built lots of landing pages to test various hypotheses and see what is gaining traction. “ If you aren’t a designer and don’t have a designer on your team, you are crazy not to spend the $300 with DesignPax or a similar service to ensure the landing page isn’t so ugly that it affects the conversion rate,” he says. Startup guru Eric Ries calls this the “Adwords Smoke Test” and it is a good concept.

Ammirati has come up with “minimally awesome product” as a replacement for the MVP acronym, and I think it is a dandy term.

Are you paying yourself too much?

As we get into the holidays, I want to ask all of your startup CEOs this question. Could you be paying yourself too much, and risk losing your business eventually? No, this isn’t coming from my Scrooge side, but some practical thinking.

Last week, a Sili Valley startup (Yet Another Social Media Posting Tool) posted, in the name of complete transparency, their entire staff salary schedule, from the lowliest workers on up to the CEO, who is getting nearly $160k. While people weighed in on whether or not this is Yet Another GenY Oversharing, what got me going on this particular screed was what the CEO was paying himself. It should be about a third of his current draw.

CEOs should be working for peanuts. Yes, they have bills to pay, but if they are in the startup scene to make money, they should stick with a salaried position at a more established company. When you go into startup mode, you want to be building a company, and you do that with offering equity and a longer-term payouts. Offer more money, and chances are good that your venture will fail because you will be burning through your cash pile. I asked a friend of mine, a tech startup CEO, for his opinion, and he told me: “I personally don’t believe in the CEO of a startup having the highest cash salary. If CEOs believe the story that they are telling investors then should be taking as much as they can in stock. If they are concerned about the cash portion of their paycheck they should be seeking employment elsewhere.” Take a look a this poll taken last year of startup CEO salaries.

And lest you think this is just for startups, the CEOs of Facebook, Oracle, Google, Yelp and HP all had $1 salaries in the past year — granted, they all made megamillions on bonuses and other incentives, but still something to think about.

And while it is admirable that this one startup wants to be so transparent, they could be hurting themselves in the long run. Again from my friend the tech startup CEO: “I would never publicly disclose my company’s compensation model. Doing so provides your competition better insight into how you think and how to compete against you. It also gives potential employees a baseline by which to start negotiations” when they start thinking about going elsewhere.” He and I both think that experience is a poor metric to be used in setting higher salaries. What should matter is results, and what each staffer produces, or how the market will respond to having a rockstar on your team.

Happy holidays and hope you all have a great break and a wonderful new year’s.

Every entrepreneur should see this movie

In my work with startups and young entrepreneurs, one thing that I have noticed is tenacity is not always a valued skill or even well understood. I got to see a screening of a new movie produced by Penn and Teller (yes, those guys again) a few weeks ago and it got me thinking about this.

300px-Jan_Vermeer_van_Delft_014The movie is “Tim’s Vermeer” and documents the many years that Tim Jenison spent trying to learn to paint Vermeer’s The Music Lesson, an oil painting that sits in Buckingham Palace. Tim is an interesting guy: he has made tons of money in the tech biz, so he can afford to take these excursions into odd places and learn new skills.

Now, why would anyone want to spend years of his life to do this? We see Tim learn how to do basic oil painting c. 2010, then learn how Vermeer mixed his pigments using materials from the 1660’s when it was painted. But wait, there is more: Tim also constructs an optical device that he uses to reproduce the painting, and by constructs I mean he also learns how to grind and polish his own glass lenses using materials available from that era. He then puts together a replica of Vermeer’s studio, getting objects that appear in the painting, including wallpaper and floor tiles, as precisely as possible.

Along the way, he teaches himself Dutch, visits Delft where Vermeer worked, and gets an audience with the actual painting itself after convincing the British monarchy. Clearly, this is a guy who is driven.

You would think that watching someone go through all this is as exciting as, well, watching paint dry, but you would be wrong. Tim is tenacious beyond belief. It takes him years to complete his version of The Music Lesson, but when he does you can see that he has done a credible job. He takes the painting to David Hockney for vetting, who gives his approval.

Apart from being a very entertaining movie, why should entrepreneurs see it? Mainly because it shows what lengths Tim goes through to get to his ultimate goal, and how he is just a dog with a bone about it. I don’t think many people would have stuck with the project as long as he did. The movie offers a message of hope here, although highlighting how insanely difficult the challenge is. Startups need to hear this message often.

Second, because it shows, probably to a fault, how entrepreneurs have to create their infrastructure from scratch sometimes because they are breaking ground so new. Many of the firms that I mentor find this out the hard way, and get into a detour (as Tim did with his pigments, mirrors, and so forth) that consumes valuable time. Tim didn’t actually start the actual painting part of his project for many years, while he worked out the other details. Many startups have trouble with putting together their servers, or setting up the right cloud configurations, or understanding their data security models, or knowing how to setup payment processing. These details aren’t things that you necessarily know going into a project until you get into the weeds and see them first-hand.

Finally, it gives another lesson to startups: how to disassemble a project into more bite-sized chunks and tackle them one at a time until you can make some small victories with each task. Sometimes a startup can try to move on several fronts all at once, rather than managing a more sequential workflow.

Go see the movie if you can.

ITworld: How post-industrial St. Louis made itself into a startup hotbed

St. Louis has become a startup mecca, and a good place for recent college graduates to find work, or even follow their dream and create their own venture. There are tons of support resources, a favorable business climate, lots of shared spaces to choose from, and a positive vibe from many quarters. Having been a resident of the city for the last seven years, I have personally seen this evolution and am indeed part of the action myself.

So why St. Louis and why now? You can read the full story in ITWorld this week here.

A Letter from Budapest

IMG_0963I spent this last week in Budapest, thanks to Balabit, a Hungarian security software company, and fell in love with the city and its people. (Here are more of the photos that I took of the town.)

Budapest has an interesting mix of old world charm and new age coding: a vibrant startup scene that is just taking hold. While I estimate that it is four years or so behind where I see things in St. Louis. That isn’t a knock on their innovation or spirit, just more a comment on their available support infrastructure. Hungary isn’t completely in tune with the notion of startups as economic development: there are crazy laws on the books that don’t encourage new businesses and seem to date back to the Soviet era when full lifetime employment was the goal. But that just means their startups are more determined to succeed. Call it Silicon Goulash, perhaps?

Hungary has a fascinating and long history of innovation. Many of its citizens were prominent mathematicians and physicists, including the Intel founder Andy Grove and the grandfather of computing himself John Von Neumann. The carburetor, the transformer, parts of the first telephone exchange, the first synthetic vitamin, the modern CRT, Rubik’s cube and the ballpoint pen all came from the minds of Hungarians.

IMG_1018Speaking of the Soviet era, Hungary was also ahead of its time in offering long-term asylum to political refugees. Cardinal József Mindszenty was the leader of the Catholic Church who was imprisioned and then lived in the US Embassy in Hungary for 15 years before being allowed to flee in 1971. Does this sound familiar?

I found Budapest a very walkable and livable city. It has hundreds of outdoor cafes packing dozens of pedestrian streets; something that we so desperately lack in the States. It has a terrific riverfront on the Danube with bikeways galore and an island park in the middle of the river that has my favorite water park ever. And speaking of water, there are dozens if not hundreds of thermal baths that span centuries. You can see why I enjoyed my time there so much.

Ostensibly, I was there on behalf of Balabit to meet with their executives and see their products and story. The company is behind the open source log aggregator syslog-NG and other security products, and has been in business for more than a decade. But while I was there I also met with other IT firms, including Electool.com, Graphisoft and Metta.io, and also visited with Prezi.com.

Prezi, the alternative SaaS-based presentation delivery tool is one of three software companies to have become an international success, along with LogMeIn and UStream. The three of them originated in Budapest and still have decent-sized development offices there.

Of the three, LogMeIn is a public company, while Prezi and UStream are private. All three have attracted tens of millions of dollars in A-list Silicon Valley venture funding. UStream and LogMeIn both have several offices around the globe in addition to the ones in Budapest and America.

The three firms got together to recently produce the well-attended RAMP conference about how to scale up your software architecture, bringing in experts from around the globe to Budapest.

And founders of the three firms have also put together their own nonprofit called Bridge Budapest to offer fellowships and internships at major software companies to Hungarians, and for the rest of us to come to Budapest and intern at one of their companies.

IMG_1057While I have tried Prezi several times over the years it has been around I never have been able to gain much traction with the tool. Maybe it is just the way I work or my speaking style. But their offices are an interesting twist on the typical tech startup playground: they have recently moved into a Beaux-Arts building with the top floor a former telephone equipment room. It is a fitting place for a modern tech startup.

Tech isn’t the only thing happening in Budapest. I met an agribusiness manager one night. He just moved his family from the Midwest to Budapest. His company does a lot of business in Eastern Europe and Russia, and wanted a stable place to have an office. “To Western Europe, we don’t look all that stable a country,” said another entrepreneur to me. “But to the east, we look rock solid. It is a nice position to be in.” Hungary is in the EU but doesn’t use the Euro: its currency is the Forint which sounds very Princess Bride-like charming to me.

Budapest is also home to the Soros-backed Central European University. It was the first on the continent to offer an American-style MBA several years ago and now has a budding entrepreneurship program, a business incubator and courses that seem quite current with promoting startups and what one could find in the States.

Speaking of schools, if you know someone who is a CS/EE student and is looking to study abroad, take a gander at this program that is offered by the Aquincum Institute of Technology (and where Rubik himself teaches).

I asked several people about the tax situation in Hungary and got a range of responses. One source told me, “our tax and legal system is so wonky,” and complained that half of one’s salary is taken in taxes. Another source said while this is true, the tax rate is less than it has been in recent years, so things are improving.

If you have a chance to visit, I think you will be as excited as I was. And if you would like an introduction to the companies that I mentioned, let me know.

The 10 hour idea for your next startup

Most of the time, you hear founders of startups talking about their great idea that is sweeping in scale and scope. But last night I went to a meetup where the exact opposite was proposed: an idea that will take you exactly 10 hours to put together: or, as the presenter Dylan Hassinger tells it, “one long night of coding.”

It bears further thought. Because as you flesh out your idea, you find out that it is going to take you a lot longer to really pull everything together. As an example, consider last week’s subject, Juristat. It took them the better part of a weekend to formulate the kernel of the company, and now, many months’ later, they are just seeing an actual product.

But the 10 hour idea is a good goal to keep in mind. The current term is “minimum value proposition” but this really strips things to the barest, most essential part of your startup. What is it that you are trying to get across? If you can figure something out in 10 hours, you have your elevator pitch, your have the essence of what you are trying to do. You have your hook for hiring new help. It gives you a lot of leverage.

At last night’s meetup, Hassinger boiled his own presentation on the “bulletproof startup” into a sound bite: “”Use your skills to build a tiny product with real value for a growing market that excites you.” That I like. He told us that he originally started out by saying an idea should take three months, then one month, then a weekend. I like that he arrived at 10 hours. One all-nighter. That has some appeal (although lately I value my sleep higher and higher).

Too often I see startups that are all over the place. They are trying to do too much too soon. They have multiple great ideas, and flip from one to the next, trying to satisfy the whims of their last mentor or last customer or the defects that they uncovered at their last coding session. Sure, there are a lot of blind alleys that you have go down as part of the startup process: that is to be expected. But if you have this laser focus, you can strip away everything else that isn’t essential for your actual business.

Sometimes, the 10 hour idea also means that you drop features from your product, because they are taking you away from what is that essential essence. It is easy to get into the feature war: just one more feature, really, I promise. I see this all the time in the software products that I review for major publications. They add and add and add features until you can’t find your way out of a menu tree. In review sessions where I face down developers and marketing folks (often the first time that they are actually in the same room together, which is sad and should be the subject for another column), they see how complex they have made their product and where they went astray. “But our biggest customer asked for that feature!” Sure thing. Then you add another. Resist the temptation to add complexity.

Helping lawyers predict the future

juriA company started over the course of a weekend today is one of the winners of the St. Louis Arch Grants competition. Juristat, which applies big data analytics to legal caseloads, won a $50,000 grant as part of the competition. This comes on top of a $50,000 equity investment by Capital Innovators, a St. Louis-based venture capital firm. Juristat’s tagline is “helping lawyers predict the future.”

A little over a year ago, Drew Winship was one of the participants in the St. Louis Startup Weekend. The goal was to find others of like mind and form a company within 50 hours over a weekend. I watched as he brought his team together and began to formulate their plan, and it was fascinating. Winship’s idea was to download information from the state court websites to determine the best days and trial judges for lawyers to try their cases in front of. Because there are differences among them, and if you know going into a trial that you can get a better outcome some place else, why not use that to your advantage?

For example, why not figure out the probably of a judge granting a summary judgment (meaning a shortened trial)? Or which litigators at particular firms have better won/lost case stats? Or if your stats are better than competing law firms’? Or the composition of particular juries? If you get enough data, the analyses can be pretty compelling, particularly for large dollar law suits.

There was just one tiny problem: the Missouri state court website didn’t have any easy way for the general public to download its data. So Winship and his team put together a series of automated scraping techniques to gather the data over that first weekend. That created something of an issue, because this automated scraping effort looked to the court website as a denial of service attack in progress.

So began Juristat. You could see how lawyers and their regulatory bodies might not have much of a sense of humor, especially when it comes to having their data taken without their permission. Indeed, if you examine the sad tale of Aaron Swartz and his suicide earlier this year, he was essentially doing something similar with downloading batches of academic journal articles.

Winship is a member of the Missouri bar and somewhat reluctant to become a cowboy data wrangler: mainly because he could be put in jail for these activities. The courts decide what is and isn’t appropriate fair use of their data, even though it should be available to the public. This reminds me of the early days of the Internet when folks like Carl Malamud fought with the US Patent Office and the Securities and Exchange Commission to to free their data archives. Now we don’t think much of having this kind of access: indeed, you would be hard pressed to find folks that prefer the paper documents to what you can find online.

I spent some time with Winship last week and he brought me up to date on his fledgling company. While Missouri’s courts have since balked about giving him any data, he has been able to legally access the entire New York state court system and process it in his system. He is expecting contracts from a couple of major Manhattan law firms “any day now” and has continued to develop and refine his algorithms to make them unique and useful to his legal clients. Part of their challenge was to develop application interfaces that would work and that others could use to build on top of Juristat’s efforts. And part was just manipulating the data in such a way that it would be useful for your average lawyer with no computer knowledge. (Insert your favorite lawyer joke here.)

Yes, there are some pretty big players in their space, including Lexis and Westlaw. They don’t have all the data that Juristat has, and they don’t have any accessible analytics either. That is the golden opportunity available, and why the company has won the attention of Arch Grants.

But what I like about Juristat’s story is that you don’t often find its founders that simulate a DDOS attack to start up their company. And certainly not by a bunch of lawyers! I wish them well.