For the past year or so, Sarah and I have ended each day by telling each other two good things. For the bulk of the year, our format was for the two things to be things that happened during the day that had made us happy such as closing a deal, getting a compliment, or hearing a great joke. We started the practice at a time when we were both at the beginning of major projects that were the essence of delayed gratification. Personally, I felt crushed by the amount of work ahead and the distance to the goal.

What two-good-things taught us was how to appreciate the good things that were happening to us every day. Most days we had a bundle of good things to report (reporting more than two was allowed). I can only remember a few days, less than five, where I had to manufacture a second good thing (”my burrito at lunch was great!”).

Sarah likes credit so I’ll say that the idea was hers, but the reason it clicked with me was that I had been reading a lot of Scott Adams’ blog and was struck by the way he’d used positive thinking while building his career. Here’s his essay on affirmations, and how fifteen times a day he wrote down his affirmation that he would become a syndicated cartoonist. After that, and ten years without taking a day off, he found himself a syndicated cartoonist.

Recently we decided to switch our two-good-things format. We’d gotten even busier and things we wanted the other person to do weren’t getting done. It was easy to look at the situation as one of us was slipping, but it’s hard to take criticism when you’re working harder than you’ve ever worked. So we changed the two-good-things format to acknowledge two things that the other person had done.

Of course we still don’t limit ourselves to just two things and we even let the other person give reminders about things they deserve points for. The result is that we each feel better about the other person’s contributions, about our own contributions, and strangely we’re both getting more things done that we think we can get points for. I feel like an addict but I’m not actually spending more time–I’m just more efficient. I used to spend hours avoiding the dishes but now when I walk by the sink I feel a happy calling and then suddenly the dishes are done.

There are a lot of parallels in business.

I’ve always liked Marc Hedlund’s application of lessons from the cat circus to engineering management, essentially “pick a cat that does something useful and then encourage the hell out of it.”

One of the speakers at MX 2008 talked about how at every executive meeting they end with the executives nominating people they’d like to thank in a different department. Then the executive goes and thanks that person face-to-face. Pretty good for encouraging cross-department team work.

There’s also an idea, Appreciative Inquiry, to build organizations around what works, rather than trying to fix what doesn’t.

One of the biggest hurdles to being positive at work is that a lot of times it doesn’t feel fair. You end up finding some trivial thing to attach some positive feedback to when the ‘fair’ thing to do is punish the massive screw up that got your attention in the first place. Scott Adams makes a big deal about how mystical his affirmation practice seemed, but his key point, and the key point with all these practices, is that they’re effective. I like to think of them as brain hacking–and I wish I could manufacture positive reinforcement hacks for everything I try.

For example, what would happen if instead of your team starting the day with a meeting talking about what they were going to do, you ended the day with everyone giving kudos for tasks they saw other people do? Would you create a culture of people addicted to accomplishment?

Sarah and I just got back from a talk at Haas about “deliberate practice” as it relates to excellence. The idea is that how good (or expert) you become at a skill has a lot more to do with how you go about doing your work than it has to do with merely performing the skill a large number of times or over a long length of time. An expert will break down the skills that are required to be expert and focus on improving those skills either during practice (sports) or during the course of day-to-day activities (business).

Most people who perform a job over a number of years will become experienced non-experts, not experts.

It’s easy to look at this in terms of sports. During practice, Tiger Woods doesn’t merely spend time hitting balls on the range. He practices specific shots and fine tunes his mechanics with each swing. One of my running teammates used to spend most of her easy runs thinking about her running form. I spent my easy runs day dreaming. She won more medals (and ended up running for Cal).

This all reminds me of an old study of what differentiated classes of swimmers, The Mundanity of Excellence (it seems to be readable through Google book search). The researchers found that swimmers who moved up in class did it almost entirely by how they went about performing their practice. It was the quality of their work, not the quantity of their work that mattered. Moving up in class could be as simple as changing the way you cupped your hand during your swim stroke, as long as you were willing to practice that improved stroke during every lap of every practice.

This was a business school talk though, and we ended up wanting more examples of how you would apply the concepts of deliberate practice in a business setting. So I started thinking about ways that I would or should focus on the quality of my work rather than the quantity of my work. It’s hard.

Public speaking is an easy one. People are so afraid of it that there’s an entire community to help people practice (Toastmasters). But where do you go to practice email? You have to do it on the fly.

When I write an email I consciously try to apply the rule that the action item for the receiving party should appear in the first two sentences. My emails are more effective as a result. They didn’t get more effective merely because I’ve spent years writing them or because I’ve experienced the receipt of well written emails. They got better because I made a conscious decision to apply a better practice with each email.

Every time I write code I start a mini-todo list where I can shelve ideas or concerns that popup. The list also means that if I get interrupted I have context that helps me get back into the flow faster. This is the major practice that let me be a productive developer while dealing with the interruptions that come with being a manager or running a business.

Sales is a huge one. Let’s just say that if I promise you a response and you get it, that’s because I started using Highrise to manage all my contacts. I’m not working harder to keep up with my email, I’m just working smarter.

The nice thing about having better practices for the mundanity of work is that it frees me from a lot of mental baggage so I can actually reflect a bit about what’s going on in life/business. There’s no sense making the engine more efficient if I’m using it to drive off a cliff (or some such crazy metaphor).

I liked this article on Tiger Woods’ work ethic and dedication to improvement.

“I view my life in a way … I’ll explain it to you, OK?” he told his small audience in Florida. “The greatest thing about tomorrow is, I will be better than I am today. And that’s how I look at my life. I will be better as a golfer, I will be better as a person, I will be better as a father, I will be a better husband, I will be better as a friend. That’s the beauty of tomorrow. There is no such thing as a setback. The lessons I learn today I will apply tomorrow, and I will be better.”

There’s something very fulfilling about dedicating yourself to incremental improvement. I still have my training log from the first summer I decided to take running seriously. On my team, running over the summer was rare, and the people who did kept it to themselves, as if they were embarrassed to be spending so much time chasing such small improvements. I caught on though, and over time it added up to huge personal best times and a trip to the State championship.

I think a lot of that experience translates into my approach to running CrowdVine. It’s certainly a lot more complicated now. Instead of focusing on improving one thing, I’m trying to improve a hundred things. And there’s a much bigger element of luck (I never believed in luck as a runner). But everyday I’m looking for and celebrating the incremental improvements. As Tiger points out, it’s actually a pretty optimistic way to live.

Interesting posts from Paul Graham and Fred Wilson about the trend of decreasing software development costs leading to lots of people starting companies. They tend to focus on the impact on the VC world (because they’re VCs). I’m interested in the impact on founders.

From what I can tell by living and working in the bay area, the assumed life cycle of a startup goes like this:

You have an idea, you turn that idea into a compelling elevator pitch, then use the pitch to raise a seed round of investment so that you can build a prototype. Then you raise another round so you can build it to a point where it might actually attract and support customers. Then you raise another round to build up your infrastructure because you’re about to get heavy traction. Hopefully you’ve sold by this point. If not, you raise another round of funding so that you can build the company into a real business with actual revenue. Hopefully someone buys you soon because there’s no way your new revenue is going to cover your expenses. If you somehow ended up with a profitable business and no one has bought you, then you IPO.

My experience building CrowdVine is that the drop in software development costs and the increased availability of low-cost
infrastructure turn the above idea on its ear. Here’s how I’ve experienced it.

Seed Stage

When I started CrowdVine I avoided investment for three reasons. I felt that venture capitalists weren’t aligned with my goals as a programmer. I didn’t need money because I thought I could build everything without help and because I had a few small contract gigs that paid the rent without sucking up all my time. Also, nobody was offering me money.

Plenty of people have noted that the goals of VCs and entrepreneurs don’t always line up, but at least they draw from the same motivational well: financial gain. As startup costs drop you’re going to get more founders who aren’t primarily entrepreneurs, they’re primarily do-ers (programmers, designers, etc.) A lot of them are going to have different motivations. Mine are, in order, pay the rent, build something, make that something wonderful, and get positive feedback. My motivations never line up with investors in the seed stage. They only line up later if I build something wonderful that lots of people want and delivering it to lots of people requires upfront money.

If you’re founding a company but you’re not capable of building the product yourself, then you’re not taking advantage of the trend. Software development got cheaper but communication didn’t. Pure idea/sales/marketing founders are losing value against founders who can build their own product. The wave of new founders will have only one early expense: cost-of-living. If they’re not capable of supporting themselves with contract work then they’re either too young to have the right contacts or they’re not going to do very well building a company that can support themselves (so they may as well get Venture Capital involved right away). Paul Graham’s Y-Combinator program seems smart to be targeting young entrepreneurs who aren’t necessarily ruled out for having founder-type qualities but also don’t have other good options.

The reason nobody offered me money is because I didn’t go around asking for it. All the VCs expect you to put together a power point deck, drive to their office, and make a pitch. But none of that plays to my strengths. The problem is that I didn’t know very much about what the company was going to do and I’m not good at hyping something that doesn’t exist. I think a lot of programmers are essentially realists and don’t like making promises about vaporware. The Y-Combinator program has started to emphasize the qualities of the founders over the quality of the idea. That seems appropriate. At the seed stage, engineer founders need VCs to remove a lot of the funding friction in order to even get to the point where venture funding is a choice. The only way I would have had the option to take seed funding is if CRV (the Odeo backers) approached me and said, “Heard good things about you from the other Odeo folks. Looks like you’re going out on your own. I can give you $250k if you promise to come back and demo a product for us in six months.” If they needed me to be convincing about the idea then there would never be a deal.

Early Stage

CrowdVine now has enough revenue to pay the salaries for two people (plus some). We’ve identified a market that looks promising (conference social networks) and we’re making headway in that market. Also, Jay and I are happier than we’ve been at any other job because there are no barriers to building software for people that are going to give us positive feedback.

Now we’ve got to polish the product, create a repeatable business process, and get a consistent revenue stream that extends past the end of the year. We’re lucky that revenue is already well above costs, so we have spare cycles to build the business. If we had gone with an ad or subscription supported model we might have a ways to go until revenue caught up with costs. In that case I’d be hesitant to continue to support the business with unrelated consulting. It’s unfair to your customers who are expecting your full attention.

We had a brief period of this which we solved with CrowdVine related consulting. We built two customized social networks based on the CrowdVine platform. Jay seems to like this work, so we’ll probably continue to do more.

We could also ditch the consulting and look for a seed round, although I still don’t think my interests are aligned with
the interests of venture investors.

Growth Stage

Hopefully we manage to get our product out of beta, build a repeatable business process, and attract a steady stream of customers. Our margins are good so it’s easy to grow slowly. However, we have a pretty big gap between contacting a customer and receiving revenue (let’s say six months). So if we wanted to grow quickly we’d have to find a chunk of money in order to hire a bunch of staff. The company would start to need skills that I don’t possess (like managing a sales force) and would need those skills quicker than I could learn on the fly.

In the current venture capital structure, this is the first time where taking investment starts to make sense to me. Our interests are roughly aligned (we both want to grow) and they have things I want (money and advice). However, there’s two other good options.

One option is to leverage the money from our conference business to build fully automated subscription or ad supported businesses. 37 Signals has several profitable subscription sites that don’t seem to take a lot of their time. They get growth because each site continues to grow and because they have enough spare cycles to roll out new products without hiring a bunch of people. They also started out doing enough consulting to pay the rent.

The other option would be to reject massive growth in favor of running a small company that’s great to work at. I wouldn’t call this settling. Maybe this is the Adaptive Path model. Despite selling every single product they ever built (one, to Google), they seem to have refocused on building a highly respected design and usability firm. I’d be pretty lucky (and thankful) to have what they have.

Exit Strategy

There’s a common perception in the startup world that all great visionaries and developers have short attention spans. This is bullshit. Linus Torvalds doesn’t have a short attention span, or at least not one that makes him switch projects every two years. Venture capitalists do have short attention spans, maybe for personality reasons, but definitely for institutional reasons. My attention span is at least ten years (proven three times now) so I’m pretty sure that any venture backed competitors aren’t playing the same game I am.

If we take any investment we’re going to have to commit to an exit strategy that is either to be acquired or to go public. If we don’t take investment money then we don’t have to consider either option. In fact, sale changes from an exit strategy to a sustaining strategy. If we end up with something that’s valuable but we’re tired of running, then it can be sold. The Ebay market for startups seems to price these sales in the hundreds of thousands of dollars, not the hundreds of millions.

In the 37 Signals model, it looks hard to sell any one product because there doesn’t seem to be any person who owns any one of the products. However, if you setup the products so that each one has a clear GM/CEO-type then you can sell that product without giving away the entire company. Obvious seems to have gone down this road with Twitter. Ev is the CEO of Obvious and he spun Twitter out as it’s own company with Jack as the head. Jack is the man that makes Twitter run and if
they ever sell that company then he’s the one who’s going to join the acquiring company. I’m sure he also has ownership incentives that would make him agreeable to sale. I think of this as the Buffet model for structuring a company: find managers you trust and then give them incentives and authority to run.

I don’t have any exit strategy. I like working and having my own company has been an excellent excuse to work more. I think the most valuable thing I could build is a company that I’d want to work at for the next fifty years. I recognize though that not everyone is going to want to spend fifty years working for me, so I’m looking for people who I trust and who have the initiative to some day run their own businesses. My hope is that this company can give people room to grow so that they can eventually run businesses within it. Cheaper software development means that a lot of “businesses” could be run by a single person. Maybe Jay will be running our consulting division next year.

Going out of business

There’s a pretty big risk that the company doesn’t grow at all. If we were venture backed we’d have to start flailing until we ran out of money. If I was purely a businessman, I’d have to walk away or start over. However, I’m an engineer and running a two (or even one) person company still fulfills many of my motivations.

Since I built the company without debt, I consider the risk of going out of business to be roughly equivalent to the risk of having an extended streak of unemployment. I don’t have a fortune 5000 company that’s committed to pay my salary, but I do have a much better skill set than I did a year ago (I did a lot of programming) and I have a product that I can leverage for consulting work. I predict a lot more of these startups turn into small businesses that stick around.

I posted some tips for conference social networking to the Future of Web Apps network. I think they’re applicable to anyone using CrowdVine for Conferences.

A great conference happens when everyone is having fantastic hallway conversations. We setup CrowdVine networks to make it easier for you to find people in the hallway. If you’ve never used a social network at a conference (or even if you have) here are four tips for making the most of it.

1. Find people you want to meet

You can search, you can browse by tag, or you can browse other people’s contacts. For example, if you need help at work implementing OpenID, you should search the network for OpenID and introduce yourself to the OpenID experts. If you have a new Rails plugin that you want to publicize, then you should make a point of meeting all the other people who tagged themselves “ruby on rails”. If you want to do business deals, then you might want to browse the “CEO” tag.

2. Make yourself visible

Use a recognizable profile photo. You’ll be surprised how many people recognize you and introduce themselves.

Then take a few minutes to fill out your profile and answer the profile questions. You just need to give enough information for other people to understand your expertise and interests.

3. Contact people

If you mark someone as a fan, they’ll show up in your network. It’s the digital equivalent of waving hello. You can also track the their blog posts and popular sessions from your My Network tab.

If you mark someone as want-to-meet, you’re expressing some interest in actually talking face-to-face. They’ll receive an email and at least know that you’d like to introduce yourself. That’s miles better than interrupting someone’s conversation and then explaining who you are.

For anybody that you want to connect with, try leaving a comment. That can be a great endorsement for the person. It’s also a terrific way to ask a question or explain why you want to meet.

4. Recognize that there are no obligations

People come to conferences for different reasons. Not everyone you contact is going to contact you back. Likewise, you shouldn’t feel obligated to connect with everyone who contacts you.

Bonus tip #5. Enjoy yourself! This is social software.

When I started working for myself I made a conscious decision to trust my gut. If it was the opposite of what other people were doing but my gut gave approval, then I’d do it.

For the most part that’s worked out great. I love owning a profitable business. All my options are open and that’s because I built it without investors or debt. Around here everyone is taking investment, going into debt, or building products with no revenue. Not all of those people end up happy.

One gut decision that didn’t turn out well was choosing a hosting company for CrowdVine. Everyone told me to go with ServerBeach but I chased some minor cost savings at CalPop and ServerAxis.

CalPop was awful the first month with lots of downtime. Lately they’ve just been a little disorganized but basically functional. I still host RateMyDanceMoves there but couldn’t trust them for professional work. Then I tried ServerAxis because they had a cheap VPS with 4GB of RAM and the underlying server was on RAID giving my data an extra dose of protection. A month later their hard drives crashed and they lost everything (I only lost a little bit of work). It took me five emails to get the complete story. Thankfully I never had a chance to host CrowdVine there.

Now CrowdVine is hosted with ServerBeach. I love them. I wish I’d made this decision a year ago. (BTW, you save $100 and I get $250 if you sign up with this code: U7S59BJ6R3)

Here’s the difference between the two decisions. A lot of people complain about taking investment or about dealing with debt. I haven’t heard anyone complain about ServerBeach. From now on I resolve to take glowing recommendations more seriously, even if my gut says otherwise.

Fred Wilson’s Time Is On Your Side, Yes It Is is a nice take on how many successful startups ran like a marathon and not a sprint. Starts with this quote from Marc Andreessen:

“Time is (in my opinion) the hugely unappreciated and unanalyzed part of the whole startup experience.”

A big part of why I built CrowdVine to have revenue from the start (rather than look for investors) was because I wanted to surround myself with people who took the long view.

This was also a big part of the No Investors Ever! Own Your Biz. talk at Foo.