My favorite book on training, The Cyclist’s Training Bible, starts with a self-evaluation that identifies your strengths and your limiters. That’s the first time I’d seen weaknesses rephrased in a pragmatic and actionable way.

Limiters

If you’re a scrawny cyclist who routinely leads up the mountains, you’re probably weak at sprinting. But that’s not worth worrying about because sprinting isn’t how you, the scrawny cyclist, win races.

However, if you find yourself breaking away on the uphill and then getting caught as you try to solo time trial to the finish–that’s a limiter. Even if you consider yourself a good time trialer, that’s still the skill that’s preventing you from winning races.

Entrepreneur Types

Starting a new company is a good time for self-reflection. Probably the most useful realization I had was that I was a specific type of entrepreneur and that type came with limiters that I could improve or work around.

I had the realization while advising at Kapor Capital. I got to meet a lot of entrepreneurs there and hit a point with one where I was totally flumoxed.

She had built an amazing technology but was somehow attracted to the tiniest potential application for it. I think at an emotional level, she just wanted people to use the technology and that was clouding her better business judgment.

Half-way through convincing her that there were several ways to create much more impact with her technology, I realized that I get trapped by small market ideas for the exact same reason. I get excited the second I find a few customers. Then my sense of duty kicks in and I get wrapped up in serving their needs and requests.

Ever since that realization, I’ve called myself a Utilitarian entrepreneur, meaning my inclination is to focus on the value I’m providing to the exclusion of almost anything else. I’ve been trying to figure out the strengths of that predilection and the limitations that I should be working on or around.

Partly as a way of comparison and partly as a way to be a better advisor to other entrepreneurs, I’ve noticed that there are two other common types, Technologists and Opportunists.

Technologists

Technologists are attracted to hard problems. Think of Google as a company founded by Technologists–the core idea was a breakthrough insight about search algorithms.

The best case scenario is that you find a clear and profitable application for your technology. Since you’re doing something hard, it’ll also be hard for people to copy you (make sure to tell your VCs about this built in defensibility).

One common pitfall is that you build something impressive that nobody wants. I don’t want to name names, but the examples that come to mind are in search and in databases. I just checked the TechCrunch deadpool and it seems much more common that people build something simple that either nobody wants or that has no way to make money. But there’s at least one example of technologists-gone-wild on the first page of deadpool companies.

The second common pitfall is that you miss obvious and more effective simple solutions because of your focus on over-engineering your dream technology.

A year ago, I heard from several computer-science-smart founders that filtering content was the next major internet challenge that needed to be solved and that advances in machine learning allowed this to be tackled algorithmically.

Fast forward one year. The best new application for filtering your overwhelming stream of information (at least in my opinion) is Stellar.io. Stellar has taken the non-technologist brain-dead solution–it shows you content that’s been liked or starred by people in your social graph. No math required.

Opportunists

Opportunists are like heat seeking missiles. This word has good and bad connotations–which seems right. Larry Ellison and Bill Gates are opportunists who were successful, but who don’t have great reputations.

However, I don’t think raw aggression is the defining characteristic. Rather it’s simply how quickly someone latches on to something that’s working and how quickly they drop something that’s failing. They’re attracted by the scale, magnitude, and potential impact of an idea.

I’ve worked with a very successful and very nice person in this category. It’s impressive to watch him move on to the next idea while I’m still wrapped up in trying to polish the existing idea for our five users.

The biggest gotcha is just to completely overlook the utility or feasibility of an idea because you’re so wrapped up in how awesome it’s going to be once it’s big.

The funny example I give, is a guy who called me up asking if CrowdVine could help him build a social network for everyone who owned a cell phone. That’s a lot of people! But why would the first ten users use it? He, a cell phone kiosk owner, had no answer for that.

The second biggest gotcha in this category is when the hype far outpaces the fundamentals. I have a couple of personal experiences here, but the most clear is Odeo.

In hindsight, the media hype for podcasting in 2005 was probably a reaction to how slow they’d been to recognize the value of blogging. It was easy to get swept up in the idea that we were riding the next big social media wave.

It took a lot of backtracking to realize that while podcasting was an occasionally useful form of social media, it wasn’t on par with blogging or social networking.

Utilitarians

Utilitarians are attracted by, you guessed it, utility–positive feedback from customers about how useful your application is.

From the outside, Joel Spolsky, looks like a Utilitarian. He’s got a nice, medium sized business, providing bug tracking software.

Size is one of the pitfalls (or not, depending on whether you think lifestyle-business is a perjorative). It’s definitely the pitfall I fell into with CrowdVine. I was plenty happy–happier than I’d ever been professionally–to be selling nice-to-have software to a small niche of cash-strapped businesses.

That business satisfied my short-term need to make users happy, but not my long term desire to have a large impact. Because happy users make me so happy, it was hard to realize that CrowdVine was our first product, not our last.

There’s another good product comparison here. Sharepoint, a social network (slash collaboration) product from Microsoft, has every feature that could possibly push someone to buy it. But generally, and I’m basing this on unrelated phone calls where someone spontaneously brought up how much they hate that app, those features are not optimized for usability.

A utilitarian would never do that. The app just won’t make sense to them unless they know that it’s being used and used well. Yammer is the utilitarian counter to Sharepoint. It’s a rapidly growing intranet social network that is useful enough that individual employees deploy it themselves and then spread it to the rest of their organization.

Countering Your Limitations

One Utilitarian entrepreneur that I was working with did back of the envelope business models (a 30 minute exercise in using Excel) and one of the models came out as two orders of magnitude bigger than the others. That’s what she’s working on now.

For me, I went to another successful entrepreneur with all of my side projects and asked for advice. He was completely right about what I should work on–but it was a decision that was hard for me to do because I was so enthralled by other side projects that I was convinced would be useful–but which were also obviously small potatoes.

The advice, “launch early and often,” seems perfect for Opportunists. It flushes out problems with feasibility. Technologists should get out of the building. If you build it, will they buy it? Utilitarians seem to do those two things naturally–what they need is a prioritization filter.

If you feel like you fit into those categories, you probably just need to do one or two similar things in order to counter your limiters. If you don’t fit these categories, I bet there’s still a class of mistakes that you make over and over. That’s your limiter.

* Photo by Leo Reynolds

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• Dear Successful People: Occupy Wall Street

A week ago, this guy, David Maris, went down to the Occupy Wall Street protests and surveyed folks about what they believed. You should read the article, but here’s a sample, “93% say that student loan debt should be forgiven.”

Say what? I don’t believe that at all. My first reaction was that that is a crazy idea, especially phrased as being about forgiving existing loans. You could maybe get me to go along with free public higher education as a way of strengthening our work force. But if you take a loan, you should pay that loan, right?

If you read the rest of the beliefs, you’ll start to get a clearer picture. There is some serious unhappiness brewing because of unemployment and underemployment.

If you have $100k in college debt and get a job as soon as you graduate–you’re not going to march on the financial system claiming you got a raw deal. But if you grew up with every authority figure in your life telling you that you that you needed to get a degree to get a job and then you can’t get even an entry level job–that is tough to swallow.

But I’m not in that situation. I have a job. I paid off my college debt years ago. I have health insurance. But 2008 scarred me–I’m pretty sure Wall Street is to blame, and also that not enough has been done about it.

In the summer of 2008, my company was cooking. We had four people and were looking to hire more. Then Lehman Brothers crashed and every one of our customers went silent.

We went months without booking any new revenue, but what was worse is that none of our customers were returning our calls and emails, probably because they didn’t know what was going on either. As a company, we were on the ropes and there was no way to know if we’d get off.

I thought the self-serving move would have been to shutter the company and pocket whatever we had in the bank account. But I couldn’t stomach that so we just put our heads down and hoped for something to hit before we ran out of money. It was extremely tight–but we came through the other side.

So, what could I have done to have avoided that situation? We didn’t have any direct ties to Wall Street. We had no investors or debt. We didn’t even have customers in finance. Personally, I had no mortgage, credit card debt, car or college loans.

And yet, somehow we were still hit hard. The mess that came ouf the Lehman collapse paralyzed all corporate spending decisions. There was no way to avoid the fallout.

If an investment bank goes out of business, a bunch of bankers get thrown onto the street, and they have to start selling off their art collections in order to make ends meet. Hey, man, that’s capitalism.

If that investment bank goes out of business and that puts me out of business. Yo, I can’t have that.

So this is just me, raising my hand, saying I support this movement.

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• Lessons Learned Doing Time Boxed Development

If you don’t have a lot of time, this is what I’m trying to say with this post: prove your product in the small, then prove your business model in the small, then aggressively rinse and repeat in the large. Think about Facebook starting at Harvard, then going after a few other colleges, then going large.

People, including me, often want to go product idea, press, product development. This is exactly what I did with CrowdVine, which first appeared on TechCrunch as a un-validated idea backed by a half-working product. I got exactly one positive out of the TechCrunch post: I felt validation that I was, in fact, running a startup.

Post coverage, we changed our logo, our design, and pivoted from social-networks-for-anything to social-networks-for-events. None of the users that TechCrunch sent us ever converted to users in the new product positioning. None of those users even contributed to the information we used to make the pivot. That first round of press was a complete distraction and still, four years later, I get calls from people who read the old positioning.

The Startup Pyramid Model
So what is the optimal go-to market approach? Sean Ellis, from the world of Lean Startups, gives his take with the Startup Pyramid model, described on his blog and pictured above.

The approach is to get product/market fit first, then figure out conversion, then pour money into scaling. It’s not hard to understand, just hard to have the patience to follow.

Sean is from the world of Lean (and this post is from that perspective as well), but this idea of focusing on product market fit isn’t Lean specific. I read it first on Marc Andreeesen’s old blog before I’d even heard of Lean Startups or Customer Development: The only thing that matters.

The benefit of this approach is potency. During product development you get to be completely focused on figuring out your product, without the distractions of interviews, inbound calls, or scaling. Your work on conversion will be targeting a (mostly) stable product. Your money spent on scaling will be supporting real users (rather than imaginary users) and your marketing will be spent on channels that have been verified to convert profitably.

The opposite of this approach is guessing and flailing, often referred to as “spray and pray.”

Product Market Fit
What it is product market fit? Paul Graham has the best definition, “make something people want.”

Just to double check that you’re not fooling yourself and that you’re capable of understanding such simple advice, Sean Ellis has a quantitative rule of thumb:

Survey your users and ask how disappointed they would be if your service went away (very, somewhat, not at all, already stopped using your service). If 40% of respondants say they would be very disappointed, then you’ve achieved product market fit. Remember, it’s a rule of thumb.

See survey.io for the gory details on how to do that sort of survey work.

Not everyone needs to be so formal. We could feel viscerally that Twitter was powerful when it had less than 100 users. The trick is just to know the difference between the feeling other people get when they use your product versus the feeling you get when you think about your product concept or when you give your product pitch.

Once you have this “fit” you can move on to figuring out how to get users.

Get Efficient Conversion
Getting efficient conversion isn’t about getting tons of users, it’s about figuring out how to get tons of users. That’s a key difference, which is confusing because this phase almost always involves getting at least some users.

If you are looking for paying customers then you need to stay here at least until $1 of spending converts into $1 of revenue. Even if you don’t know your business model, stay here for as long as you are finding easy boosts to your conversion numbers.

This is where you might break out Dave McClure’s AARRR model (Acquisition, Activation, Retention, Referral, Revenue).

At this point in your company you might be dying to have some sort of vanity metric to brag about, like users. But the volume required to tweak these numbers is not high, in the 100s or 1000s.

The idea during this time is to turn your company into something that can scale. How does $1M in spending translate into growth? When you know that, that means you have something that can scale.

Scale
Assuming you get here and you know how to spend money profitably, now would be a good time to raise $100M. Why raise so much money? Because you know how to turn each of those dollars into profit.

I don’t have any other specifics for this phase, and why would I? If you did the product/market fit and the efficient conversion phases then you’ll know everything there is to know about scaling your company.

Gotchas and Edge Cases

1. Stealth mode. There’s a difference between stealth mode and nobody-cares-about-you-yet mode. Usually you can operate in the latter. That way you can gather as much feedback as you want without worrying about the distractions that come when people start really caring about you. With Lift, I didn’t think we had the option of operating in nobody-cares mode, but I still didn’t want to be in stealth mode because it makes it so much harder to talk to people. Also, out of respect for CrowdVine, which is still an operating business, I wanted to make sure I could get a clear message out. If that’s the case, you may get early press (we got fifty articles based on two blogs posts saying essentially that we’d formed a company, chosen a market, and had a landing page), but you want to make sure you remember that your priority is earning product/market fit.

2. Network Effects. People sometimes say that this model doesn’t work for a network effects business since you can’t tell if you have product market fit until you have scale. Nonsense. You just have to do your product development with access to a single high-density niche market. This could be less than 100 people if they mostly know each other.

3. Business Plans. How do you know what you’re working on is worthwhile? It’s possible that you’ll get product market fit and then realize that you can’t make any money off of it. There is a step zero (repeated when evaluating pivots), which is to apply a filter on anything that doesn’t have any possibility of being profitable.

For example, I was working with a company recently that thought it would be valuable if their technology were offered as a for-pay widget to bloggers. But no amount of optimistic business modeling was able to come up with a version of that business that even made $100k per year. So we looked at other business models until we found one that looked like it could be very profitable. The company still needs to prove everything in the pyramid above, but at least we’ve pruned out some of the obviously wasteful ideas.

4. Checkpoints. Each phase of the pyramid is a checkpoint at which you might turn around or stop. You might find that people don’t like your product concepts or you might find that there isn’t a way to scale.

For example, CrowdVine’s usage grew 70% last year, almost entirely off of word of mouth. But I haven’t found any profitable ways to generate additional revenue through other marketing means. CrowdVine is a profitable, growing, healthy company that let me live bicoastally and travel all over the world. But CrowdVine can’t pass the checkpoint for entering the scaling phase. That’s all right–it can still have a long, productive life, but it isn’t a company that can accept an investor’s money.

5. Getting Test Users. I often hear people rationalize a PR push as the only way they can get enough users to test product market fit. I’m extremely suspicious of this. If you are passionate about your idea then you’re going to be telling nearly everyone you know about it and those people (your friends mostly) will be begging to get in. Usually people who feel like they need a PR push are people who don’t know anyone in their target market. That’s crazy! The solution isn’t PR, it’s go to some events and make some friends in that market.

6. No Business Model. The point of this post is not to start a war over whether it’s acceptable to start companies that don’t know how they’re going to make money. CrowdVine made money from day one and the startup pyramid is the model I would have used to understand what we were doing. My new company, Lift, doesn’t know how it’s going to make money and the startup pyramid is also the model we’re using, with two tweaks. One, we need to be very aware of our ability to raise investment and two, in the efficient conversion phase we’re mostly interested in conversion to usage, rather than conversion to revenue.

7. Press. Technically, you do want some idea of how press converts into usage, so you do want some press in your efficient conversion phase. But it’s still distracting and you’re still figuring out other parts of your positioning, so it should come as late as possible.

Feedback
Like all second-time founders, there’s a lot of things that I’m trying to do differently. Most of them come from the world of Lean Startups (see The Lean Startup, Startup Marketing Blog, Four Steps to the Epiphany, and Lean Startup Wiki). This Startup Pyramid model is one of the ideas that I reference most frequently and that I want to be able to articulate to people we work with. Let me know if it makes sense or if you’d do things differently.

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For me, it’s the building of the product and the feedback of how and why it’s useful that matters. So, it’s odd to me that so much of my company, CrowdVine, is based on providing services for setting up, configuring, and customizing our software. That’s a little far afield of how I initially imagined the company and I wanted to talk about the good and the bad of building a services company.

What are services?
I used to think software companies that sold solutions were crooked. It turns out there’s not really anything wrong with offering a solution. It just means that you’re selling your time and know-how along with the software. Your time and know how is the service part.

For example, we get asked all sorts of detailed questions and since we have a lot of experience, we can give pretty good answers. For example, a conference might ask when they should launch our software and we’ll walk them through a decision tree, when will they hit 100 registrants, are they hoping for a marketing boost, how engaged do their attendees tend to be and then we’ll just give them our expert advice. Without that advice the conference would call a staff meeting filled with people who have no experience at all and try to reason it out on their own.

Or more concretely, a lot of people want to customize the CrowdVine design to look like their existing website. Sometimes this is as simple as uploading a logo and anyone can do it. A lot of times this means customizing CSS and requires someone who’s good with HTML, CSS, and a debugging tool like Firebug. Some of our customers have such a person. But even if they do, we have someone on staff who’s the world expert on customizing CrowdVine designs. That’s all he does. He can spot gotchas before he starts. He has a quality checklist for when he’s done. And he’s 3x faster than someone who’s trying it for the first time.

Those are good examples of services.

Bad examples of services are when your service covers up flaws in your software. For example, we use a simple but important recipe for how our software is launched. We can make sure almost all of our customers follow this recipe because we’re already talking to them. But being able to rely on that holds us back from developing an even more intuitive launch system.

There are simpler examples too, like our CSV importer which choked if the last line of the CSV was blank. That bug lived a long life because the only person who ever used the CSV importer was our account manager and she knew how to work around it.

Services guarantee customer development
Providing services puts you in a situation where you almost can’t help but be engaging in customer development. You’re constantly talking to customers and they’re expecting that when they ask for something you do it. This gives you very deep feedback because you can get your customer on the phone to talk for an hour about why something is working or not. It also means you’re often co-developing a feature with someone who you know will use it.

There’s a downside too. You’ll probably be too busy to engage in any build-it-and-then-they’ll-come development. But it’s very easy to fall into a trap where you build something that only gets used once. I suppose that’s learning in a way. If the feature didn’t set the world on fire with the first customer and later customers didn’t demand it, then it’s not a feature that warrants extra development. But I look at CrowdVine and see a lot of hidden features that look more like they need to be iterated rather than abandoned.

Bootstrapping
While getting a company off the ground, you can either dip into your savings, work a side job, take somebody else’s money, or build a services business on top of your first prototype. We did the latter.

It worked. People work for me. I took vacation this year. I have clean socks. However, I don’t drive a Tesla (yet) and I feel like purchasing an SSD for my laptop would be too luxurious. That’s my way of telling you how well, in dollar terms, it worked.

The first few gigs were extreme early adopters and it really didn’t matter much that the software was in such bad shape. One early reviewer said it looked like it had been built by a 12-year-old with a learning rails book. That definitely meets the definition of releasing while you’re still embarrassed by the product.

The downside to bootstrapping by selling services is that it’s hard to look too far ahead. How do you order your product development queue? By whatever feature will close the next deal. There are plenty of features that got promised before they were built.

Running sales
I’m a terrible sales person. I’m not great at the ask. Putting together supporting material triggers severe procrastination. I’ve never written down and rehearsed my demo or pitch. And yet, I’m the absolute best sales person in the world for the niche of software that CrowdVine provides.

The lean startup theories say that the founder should always be the first sales person. That’s scary if you think being the first salesperson requires traditional sales skills. Thankfully, founders get to use what I call the founder sales process.

Unlike your average sales person, a founder gets a ton of credibility for free. You’re an authority and can give a deep explanation on whatever the potential customer needs. You’re also naturally curious about what’s working and why, and that curiosity seems to give even more credibility to the times that you’re speaking authoritatively or debunking some crazy concern of theirs. So when I need to do a sales call, I just get on the phone and focus on being thoughtful. I um, ah, stutter, make a buzzing noise when I can’t think of the next word, cut people off, and yet…

It works. There were only two places where lack of sales skill hurt, neither fatal. One, there were plenty of times where I left money on the table or didn’t pair a concession with an ask. For example, I gave big discounts to an early customer because I needed reference customers. But then they didn’t launch. The second thing that was hard to understand was the importance of maintaining relationships. I lost an early customer to a new competitor because they had feature X. We’d had feature X for six months, but I didn’t know that it was even important to this customer. The whole decision to switch was made without me in the discussion, because I’d been ignoring the customer.

Doing the work
We’ve done two types of services work.

One is where the customer provides the idea. For example, a customer might come to us and say they want to build a social network for everyone who owns a cell phone (we turned away this client). They’re talking to us because we have social network software, but the actual implementation would probably include all sorts of client-defined customizations.

The other type of services is where we’re telling the customer what we’re going to do. For example, we provide social networks for conferences. We’re constantly testing and refining our process for doing this. We’re happy to take suggestions from our customers, but for the most part the work we do for one customer is the same as what we do for the next customer.

I greatly prefer the second type of services work. It has a much higher success rate. Success means more work from the customer, more word of mouth, and more job satisfaction. You can tell your customer with certainty that they will get good value for their money.

The first type of services work has a lot of launch risk in it. That guy who wanted to build a social network for cell phone owners got his idea while working in a cell phone kiosk. To put it mildly, he was not savvy. But he was opinionated. So that job would have been either saying yes and billing for work that was never going to work, or constantly fighting, saying no, and pushing our own ideas for what might work. If he’s reading this he’s going to be pissed that he never got me to sign an NDA.

The other nice thing about having similar services that you do repeatedly is that you can standardize them and delegate them to someone you hire. That’s what we do. I do the sales call, but then other people do all of the actual work of delivering on my promises.

Growing Sales Team
The standard approach for a services business is to start piling on sales and account management employees while taking a few dollars per head for yourself. This is where it gets gross. If you’ve read this far, you’ve seen some positives to offering services. But this path puts you up against a decision: do you want to be a product company or a services company. I want to be a product company.

So, I’m running an experiment to see if I can offer services without a sales team.

There are a couple of pieces to this. One, we have a product that does generate word of mouth sales. Two, we have a self-service option. Three, we just started listing the prices of our most expensive packages ($3000-8000).

What we’re trying to do is maximize the number of people who will be happy in self-service while cutting down the sales process for people who are going to purchase our services. With word-of-mouth, people are coming to us already convinced and with transparent pricing I’ve removed most of the negotiation. So when we do get on the phone, we’re mostly talking logistics.

The transparent pricing part is the most new and I’m curious to see how it turns out.

We do have competitors, but they must already know what we charge because they charge the exact same thing. Maybe having our prices public will let them underbid us or contact all of our existing customers with lower bids. But they can already do that and don’t.

I’m a little bit worried about having a price war, although not for the reason you probably suspect. I’ve paired my prices with some consideration for margins and I’ve been trying to take as much cost out of the sales process as possible. If somebody merely drops prices without also keeping their costs in line, then they’re going to go out of business. I used to want (and briefly had) 100% of this niche market. But then I realized that nobody will take this niche seriously if there are no alternatives. It’s much better to be the best of four options than it is to be the only option. We already had one really visible implosion and the founders wrote a post-mortem giving a lot of the blame to the product category.

Another thing I’m wondering is if public prices are beneficial to marketing agencies who want to sell their own support services on top of our self-service software. We do talk to some people who seem incredibly suspicious when I tell them they could charge their client thousands of dollars. We also work with some agencies where our public prices may be exposing an outrageous amount of markup on their part.

When do you stop offering services?
The standard business advice is to try to run as focused of a company as possible. So if the self-service side is huge, then the services side has to go. Except, I don’t want to do that. I like having a few deeper relationships with customers. I like my services team. I like that if a customer gets in a bind, we can get them out. That makes us a lot smarter about our product. It also makes us a lot more valuable to customers–think about how scary it is when some key Google service dies on you and you realize you have absolutely nobody to turn to.

I feel like such a rube whenever I come up against this type of decision where it’s “standard practice for maximizing shareholder value” versus “feels like the right thing for my customers” and I choose “do the right thing.” But then I think of Matt Mullenweg and how he breaks all sorts of rules like having a company where most people work remotely or pairing support services with WordPress. They seem to be doing ok.

So that’s my answer. If you like providing services, then never shut it down. There always seems to be people who really want them. If you hate services and feel like they get in the way, then obviously, shut them down as soon as it’s financially feasible (or start raising rates as a way of gradually shutting them down).

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“Never mistake activity for achievement.” ~ John Wooden

The software project that haunts me the most was a single-sign on implementation that I did for O’Reilly. The project was handed to me, partially done, with the instructions, “These three things need to be finished, do you think you can do them so that we can launch in two weeks?”

The three things didn’t seem hard, so I said yes. I think it takes some experience to recognize that there’s a huge red flag in that question. I was answering, that, yes, I could complete those three things in short order. How would I know, having never looked at the project, whether those three things were sufficient for launch. In the course of the next two weeks, three more unfinished things popped up and the launch date was pushed back two more weeks. Then more missing features and bugs were found. And again. After three months of this I was racked with guilt over the missed launch dates.

I went home that weekend determined to figure out how to get the project on track. I was basically a junior programmer then and had no idea how to run a project. So I bought a book on project management, Rapid Development by Steve McConnell, and cracked it open. The book opens with 36 Classic Mistakes Enumerated. I checked off 17 mistakes for the project and was hooked on the book for the rest of the weekend. When I went to work on Monday, I hid out in an empty office on a different floor and spec’d the project for myself. According to my rough spec, the project had at least 180 function points and I had completed 90 over the last three months, leaving 90 more to do. Would we be launching in two weeks? Definitely not.

For a long time, this was the project I was most proud of. I used my spec to pull the project out of the weeds and onto a realistic schedule. A lot of good things came out of that weekend of reading. For one, the project got on track, a realistic launch date removed my late-project guilt, and the launch was a technical success. It also gave me a lot more work options: I got more respect at that job, I got opportunities to make bigger decisions, and that led to opportunities to work for some pretty cool startups. Then one day I asked myself: why were we building a single sign-on system?

Mixing some metaphors about nature and total ignorance, I had gotten out of the weeds only to see trees. Years later when I could see the forest, I realized that my proud moment hadn’t accomplished anything (minor convenience for a small population of users, inconvenience/confusion for a big population of users). The goal of the project was actually to allow for a second phase around business intelligence or some such thing. That never happened and I’m told now that the system is now being phased out.

“Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful, that’s what matters to me.” ~ Steve Jobs

Ever since that realization, I’ve been working to figure out for myself how to maximize the impact of the work I do.

There’s a good discussion of what constitutes startup success over on Gabriel Weinberg’s blog (and the discussion is basically what prompted me to write). It goes over various scenarios for startups and tries to judge if they would be considered successful. Obviously a long running company that made millions of dollars for the founders and investors is a success. What about one that made a lot of users happy but didn’t make the investors any money? What about one that made everyone money in an acquisition but then was immediately shut down?

I just don’t think I could ever call my work successful unless people used it. I don’t want to be merely well paid. I don’t want to write great code that doesn’t get used.

There’s a logical argument to be made that taking part in a system that produces one google and nine failures is a way to maximize your impact. But I couldn’t handle that unless I was working on Google. I don’t want to look back on 30 years of work and realize that only three of those years mattered. That means I care about consistency of impact as much as I do about the magnitude of impact.

I think there’s a lot of other personal preferences in working out a way to optimize your work. Here’s where my preferences led me:
1. It’s better to be in control, at least of your domain, but better the company. It’s rare that anyone else has tasked me with a project that mattered.
2. Sustainability matters. The main reason I stopped working for venture backed companies is because investors introduce so many more ways for your project to get die an early death (small/medium successes get dropped and small/medium acquisitions often get killed).
3. Compounding interest works. The first two years of CrowdVine were very limited. Now, with some revenue and a few more people, there’s a lot more that we can do.

That’s basically why I bootstrapped CrowdVine. Not all the trade offs are good, but it’s the first job I’ve had where every day of work mattered. And I think that’s pretty fun!

Related Posts:

• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.
• Experiments in Software Services
• Lessons Learned Doing Time Boxed Development

In engineering management terms, a project like this is called time boxed development. It comes up all the time, especially in Agile development methodologies. The idea is that you commit to a time period and production-ready code–but are allowed to adjust the scope of your work as you go. So for last week’s example, a successful result could have been as simple as a page describing the project and a contact-me-when-you-launch form. If, instead, I had built all of my dream features but a bug prevented me from launching–that would be failure.

Working in a time-boxed way is actually a skill and something I’ve practiced a bit. I like having the time box because it makes it much easier to make decisions. Those decisions almost always come down to: take the simpler option. You spend less time going down rabbit holes and more time reacting to actual feedback on live features.

The first time I heard about time boxed development was at a users conference for an XML database company. They used six month time boxes. We used Scrum at Odeo, which is an iterative approach where work is pulled from a feature backlog and then performed in “sprints” that are usually two or four weeks long. I did some agile project management training and got to see how this works in the corporate world (good for engineers, bad for antsy product managers). Then I tried two-day projects in order to refine my own development practices (IHeartQuotes was probably the most successful project to come out of that).

Along the way, I’ve learned a couple lessons.

Activity is not accomplishment
The hardest part of being a first time Scrum manager was not knowing how to help people adjust the scope of features they were working on. I spent a lot of time telling people that they’d bitten off more than they could chew, that they weren’t good enough to finish on time, that they might as well give up, etc. Nobody would ever listen to me. The engineers were cocky and ambitious and were shooting for the moon.

I think they also thought I was being a jerk by not believing in them. They wanted to be challenged and I was doing the opposite by trying to get them to scale back their ambitions.

I think this is a failure of Scrum. It was set up to live in a world where you have to commit to features. So it uses time boxing to help give some visibility to the development process, but at the end of the day everyone knows they’re judged on how many features they check off. So that’s what ambitious programmers shoot for–do as much as possible, even at the risk of not having releasable code at the end of an iteration.

But that activity, checking features off or having code in a half-working state, doesn’t have any inherent value. Luckily, there’s been a huge move toward metrics driven development. That gives a better way to challenge yourself–instead of how many features you can build, you can judge yourself on how much value you’ve created. Did your change effect the conversion rate? Did it change results from customer surveys? Did it increase retention?

If I was judging my CMS project by features, I’d be ticked by some of the things I didn’t finish (no contact forms and subscriptions aren’t properly wired to a merchant account). I might even have risked the entire iteration by chasing for those missing features. Instead, I worked through a series of accomplishments. The first was being able to move tonystubblebine.com over. Check. The second was to have something that I could pass to the rest of the CrowdVine team to move our marketing pages over. Check. The third was having something I could send to a few people for feedback. Check. Those are all accomplishments, and more valuable than having reams of code that nobody uses.

Release half-way through your iteration (or earlier!)
There’s a classic pattern where you bite off more than you can chew and leave yourself a ton of work at the end. The problem isn’t just having an unrealistic amount of work on the final day, it’s that running into a single problem on the last day will sabotage the entire iteration.

Instead of doing this, you need to scope a version of the work that is releasable as early as possible in the iteration. That way you have plenty of time for gold plating.

Even better, releasing early leaves you time for A/B testing.

Every time I’ve been involved in somebody else’s time boxed development there’s been this huge rush to finish as many features as possible at the end. Scrum calls its iterations sprints, and that’s exactly what it feels like. Beside feeling bad (suck it up, pansy), this doesn’t leave any time for people to catch their breath and actually check if any of the features were creating any value.

Releasing late in the time box almost always means you’re stuck in a pattern of release and abandon. My favorite personal example is the first version of CrowdVine’s private messaging feature. It’s now basically one of the most popular features on the site and gets used a couple of times by every member. However, the first version of the feature was live for six months and was only used three times total. It was in an awkward place and was trying to do too much. I built it, released it, and moved on to other features. I’d mistaken activity for accomplishment.

Minimum Viable Product vs. Half-a-product
Even though this post is sparked by this product I built last week, I’m not really talking about the product much. That’s because what that product needs right now is not a ton of users–it needs a little bit of feedback. And I got that by just sending it off to a few people. By all means, try it if you want, but it’s what I would call a minimum viable product. It’s a product that’s good enough to get useful feedback on but not so polished that it’s worth building a marketing campaign around.

In comparison, 37signals promotes the idea of building half a product that kicks ass, rather than a half assed product. However, like writing a short essay, a great half-product takes a lot of work.

Time boxing can get you there, but usually not in one go round. When you scope the product down and get it in front of users early you find out what features were necessary and which weren’t. You also find out which features need to be improved and which are already working well.

If you are trying to build a high quality product inside of a single time box, then you need to be very careful to polish one piece before moving on to the next. My friend Luke gave me a phrase for naming your definition of polished called, “Done, done.” That way when someone tells you they’re done, you can respond by asking “Are you done, done?”

Two weeks is good
I’ve done development iterations of two days, one week, two weeks, three weeks, and four weeks.

Four weeks is too long. You end up working on a bunch of unrelated things. Two days is too short and I’ve never felt like I could really do anything of significance in that time. I just use two day projects if I’m having trouble carving out time.

Three weeks weirds everyone out because it doesn’t line up to anything regular on the calendar.

Last week was the first time I’ve done a one week project. I thought the project was a perfect size, but I also found it almost impossible to balance it with other work responsibilities. I had phone calls. I spent a day at the Game Developers Conference. I organized a big party for the weekend.

My ideal would be to pick a project that looked like it had about 40 hours of work and that had a legitimate accomplishment that could be completed in the first 8-10 hours. I’d take that project and give it two weeks of calendar time. There’s not a lot of harm in finishing early because it’s not like there’s ever a shortage of programming work. If the project finishes early then make tweaks based on usage measurements, do some A/B testing, move on to code cleanup and test coverage, etc.

Changes for next time
I really liked making the time for this and I’m definitely going to do it again. The next product I have lined up is an extension to CrowdVine. Here are some of the things I’m going to change.

I’m going to move to a two week time box but keep the new feature work to the first week. That way I can still call it product-in-a-week, but I have some flexibility to keep the rest of my business running.

I’m also going to spend more time up front defining what accomplishments we’re shooting for. I think I didn’t do a good enough job of that when I designed my simple CMS service. I was definitely at risk of falling into the feature trap because I really wanted a product the whole world could use (built in just a week!), but I’d be better served if I had more of my sites already ported over.

For example, instead of porting over the CrowdVine pages, I spent time on a subscription billing system. Unfortunately, since I didn’t finish the subscriptions by wiring them to a payment system, that was work without value.

Probably the biggest change is that I’m going to involve more of the CrowdVine crew. I did most of this work solo, but the next project more naturally fits a bigger team.

I think that’s it for changes. Does anyone else have strong feeling about time boxing?

Related Posts:

• Designing a simple CMS Service
• Done, Done and Ready, Ready
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.

Recruiters call but we’re not looking to work with a recruiter. Business partners call about partnerships that we’d never do. Venture capitalist interns call in order to build a relationship and don’t seem to acknowledge that the only relationships that lead to funding start with a recommendation from a founder that has already been successful. Plus we’re not looking for funding.

I’ve tried a bunch of ways to get out of these calls. Three of the ways cut the call short but leave me angry and take me out of the zone of whatever I was doing. I don’t like hanging up because it feels rude. I don’t like yelling at the person — that definitely puts me into a bad mood. And I really don’t like arguing with the person and then losing the argument. That’s the worst.

The system I eventually hit on was to put together a polite script that led to me hanging up.

First I made clear policies for myself so that I knew which conversations I wanted to have and which I wanted to get out of. We’re not looking for funding and if we do, we will mine our own network for introductions to VC. We don’t do partnerships unless the partner already has a customer who is asking specifically for us and who is willing to pay for any integration work. We never work with recruiters and haven’t had any problems finding the people we need.

Second, I put together actual scripts that I practice and refine with each call.

Sales people
The sales calls we get range from ridiculous (vinyl siding) to somebody didn’t do their homework (managed DNS). I use the following script:

“Thank you for the call. This isn’t something we’re looking for right now. If you’d email me some information, I’ll keep it on file and get back to you . My email address is tony at crowdvine dot com. Thank you. [pause] Have a nice day. [pause] Goodbye. [pause] [click].”

Here are the key parts. Everything I said was polite. A lot of times your actions effect your mood, so it’s really important (to me) that I act in a way that maintains my positive mood. I was also direct. I gave a real reason and a real email address. I avoid triggering the moral response I get when I lie. Last, I got off the phone within 15 seconds. Those pauses are there to give the person a chance to also have a polite conversation. But the truth is that I’m not listening. They can say whatever they want and I’m hanging up at the end of my script.

I used to also say, “You don’t need to contact me again,” but that’s arguing and sales people take that as an opening for a conversation. The script above sends a stronger message, “It’s easy for me to ignore you.”

Venture Captialist Interns
Venture capital firms have interns (“associates”) who cold call companies claiming that they want to start building a relationship in case you ever need funding. What they’re really doing is market research. There’s a great discussion of this on Hacker News.

Since most founders are at least a little bit afraid of venture capitalists, they’re really hesitant to be rude, even though these calls are a total waste of time (there is zero chance that it will lead to funding) and the intern is lying to your face. I’ve never had to answer this one on the phone, but I did use the script below in an email to good effect.

“Thank you for contacting us. Unfortunately, as a matter of policy, we don’t take meetings regarding speculative partnerships. If we decide to look for funding we will be back in touch.”

This is the George Costanza strategy. It’s not them, it’s us. The conversation is over. The intern that I sent this to did send me a email back, but he couldn’t muster anything strong enough that I had to stay in the thread.

If you get caught on the phone by one of these guys you could probably throw in a “That’s our policy, why don’t you send any information to my email address? Thank you. Have a nice day.” At that point, if you still aren’t off the phone you can just keep repeating “Thank you. Have a nice day” until you’ve worn them down.

Partners

We’re open to the possibility of partnerships. In fact our software was built with the idea that we’d do one thing well and then integrate with other people who did something else well. But calls about partnerships have always been a time waster for us just because of priorities.

The time we spend on customer service and product development has both a bigger and more immediate effect on the business. So it really doesn’t matter if a partnership would have positive effects, because the things we’re already doing have a bigger effect.

I use a modification of the line I use with VC interns, that we have a policy of not meeting about speculative partnerships.

“Thank you for your interest. As a matter of policy we’re only interested in partnerships that fill a request from one of our customers or where the partner is bringing a customer that will pay for CrowdVine’s services. Do you have a customer that is asking for CrowdVine?”

The answer is almost always no. So that’s when I move into my wrap up script, “Why don’t you send me your product information. My email is tony at crowdvine dot com. I’ll keep it on file and if one of my customers asks for something like this then we’ll get back on the phone. [pause] Thank you [pause] Good bye [pause] Have a nice day [pause] [click]”

A potential partner is much more likely than a salesperson to respond positively to the script above and actually say good bye when you do. If they don’t, then it’s ok to hangup because they’re secretly a salesperson.

Recruiters

The second the economy went south we started getting calls from recruiters trying to place candidates. Recruiters are the worst. I think the ones who call us are people who found car sales too physically demanding (because you’re always having to walk to the manager’s office). It’s extremely important not to listen to anything they say.

I’m still looking for the perfect script, the one that leaves them feeling dehumanized and makes clear that there is no reason for them to ever call us back. Here’s my current version:

“Thank you for thinking of our company. Unfortunately, as a matter of policy we pick our firms based on references from our advisors. Best of luck placing your candidate. Have a nice day. [pause] Good bye [click]”

Notice how I’ve removed the [pause] before hanging up on them? That’s because a recruiter will argue anything. Hanging up immediately means the last thing I hear is myself being polite.

The reason I give them, about references, is a bit of a white lie. It’s technically true, but is much less important than the real reason I’m hanging up–we’re a networking company with our phone number plastered on our website. Any candidate who could possibly fit here would just call us directly.

If the recruiter does call back, I use the same script but say the “pause” out loud in order to make clear that they’re getting a scripted response.

I never would have guessed that figuring out the above tips would be so important. In general, being accessible to our customers has had a lot of benefits. I have my direct phone number on the website and that leads to a lot of great conversations with customers. I’d recommend the same thing if you can find a way to deal the solicitations.

Related Posts:

• Two Good Things
• Deliberate Practice
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.

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?

Related Posts:

• Productivity Hack: Hangup politely
• Deliberate Practice
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.

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).

Related Posts:

• Three Types of Entrepreneurs
• Two Tips for Deliberate Practice
• Productivity Hack: Hangup politely
• Two Good Things
• My 2012 Resolution: Awesome Mornings

Don’t discount until completion.
Bryan says that when they do pro-bono or non-profit work they don’t discount their work until the client has implemented their advice. I can relate to that. CrowdVine’s second customer got a nice discount because we were looking for reference clients and then the customer changed direction mid-project, leaving us without a public reference implementation.

Don’t ever discount.
Jen’s advice is to offer something that’s got a lot of value and don’t ever deviate from your message about how valuable it is. There’s a low priced option for her art, but there’s never going to be a discount on that option. It’s too valuable to discount.

Don’t do direct sales or marketing.
All three were relying on word of mouth and felt that gave them focus: have an amazing product. Brian said that the only cold call sale they ever made was cornering someone from Flickr at a party and begging them to let Adaptive Path do a rev on the product.

Give each employee two 30″ monitors.
Nothing says you’ll have the tools to do your job than showing up on day one and finding two 30″ monitors. That’s one of many tricks responsible for a 100% retention rate at SmugMug. Way to go Don!

Hire Customers.
Don’s other trick for retention (and also for finding kickass employees) is to hire customers. They take less training, have higher loyalty, and you can observe them before you talk to them.

There’s so much good advice that’s hard to get online but easy to get through word of mouth. It’d be nice to do a monthly small business dinner or something where we could get at these tricks.

Related Posts:

• Take the Next Step, Paul
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.
• Experiments in Software Services

I was never able to take the next step, even when pressured. And she never took it for me. It would be fair to say that I hated her during these meetings.

Today I ended up quoting her while reading Paul Graham’s “You Weren’t Meant to Have a Boss.”

Paul’s thesis is that typical big business drains the life out of its employees because we weren’t meant to work in such large groups. It’s unnatural. To truly live, we need to be in groups small enough that we have room for creativity and freedom of action. That’s the way nature intended.

I agree. Jay and I talk all the time about how much more fun we’re having at CrowdVine than any of our other programming jobs. We’re free to build product. Programming isn’t just a job for us, it’s our hobby and passion. Being in a small group for the first time really is bliss. We’re not the only ones saying that either. Talk to people who’ve been much more successful than us like 37Signals or SmugMug. They’re not just successful, they’re happy.

So while I agree with everything Paul wrote, I found myself screaming, “take the next step, Paul!”

He’s a venture capitalist. He’s promoting programmers joining startups. Venture backed startups start as everything he describes–small companies that are great places to work and learn. But they only stay that way for a few years.

By definition the startups are either going to grow into an awful company with bosses or be acquired by an awful company with bosses (or fail). The startup founders are either going to turn into bosses (which Paul correctly points out isn’t very rewarding either) or they’re going to turn into employees with bosses.

The logical step that Paul couldn’t take is that he’s wrong for being in the venture business. The venture business depends on an ecosystem of bosses. Even if his founders feel like they’re getting a fair trade for a few unhappy years at a big company, they wouldn’t have the option of either growth or acquisition if other programmers couldn’t be pursuaded to work “unnaturally.”

The difference with companies like 37Signals and SmugMug (and CrowdVine) is that while they have the same natural working conditions, they’re structured so that those conditions don’t have to end. If Paul really wants to create good jobs he should turn YCombinator into a small business incubator.

Great discussion of this on Hacker News including responses from Paul. One commenter there made a big fuss that I was technically incorrect to call Paul a venture capitalist. True he’s a new un-labeled form of investor who’s using his own money and experience, and not using money from a venture fund. However I stand by my argument, which is based on the exit pressures which are very VC.

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• Small Business Hacks
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• Three Types of Entrepreneurs
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• Product. Conversion. Scale.

“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.

Related Posts:

• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street
• Product. Conversion. Scale.
• Experiments in Software Services
• What is success? Impact.

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.

Related Posts:

• Experiments in Software Services
• Take the Next Step, Paul
• Against the Grain
• Time Enough For CrowdVine
• Three Types of Entrepreneurs

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.

Related Posts:

• Launched: CrowdVine for Conferences
• More From Pathable
• Social Conference Software at Foo Camp
• Pathable In-Person Social Matching
• Three Types of Entrepreneurs

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.

Related Posts:

• Experiments in Software Services
• Commodity Web Startups
• Time Enough For CrowdVine
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street

“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.

Related Posts:

• Experiments in Software Services
• Commodity Web Startups
• Against the Grain
• Three Types of Entrepreneurs
• Dear Successful People: Occupy Wall Street