Party Foul

This past weekend I was in San Diego for a friend's bachelor party. It is the last of my single college friends to get married. One of the nights, a group of 10 guys went to a nice restaurant in downtown San Diego. We had reserved a private room at Osetra. The food was good and the conversation engaging. There were no naked women or excessive shots of Tequila. Bachelor parties have apparently tamed with age. Unbeknownst to me, one of the guys ordered a few $500+ dollar bottle of wine. A few of the people did not have any of the wine. When the bill for the evening came it was over about $3,000.  The bill was paid for by one guy and we all planned to pay our share later.  As one of my friends at the dinner pointed out to me-- this guy committed a party foul -- if you're going to order a $500 bottle of wine, you should pay for it rather than have it go into the shared bill.

Founder's Co-op likes 2 (and 3) person teams

We have 2 portfolio companies at this time and we've seen success with 2 person founding teams. I've also had a lot of personal success with 3 person founding teams. I recall there was a study done at MIT years ago that looked at the number of founders and success of startups as measured by revenue 1 and 2 years after founding. It turns out that the success of your start up is directly correlated to the number of founders up to 4 and then it starts to decrease. The theory behind the article makes intuitive sense -- up to 4 people working together can make more traction than just 1 sole entrepreneur.
In addition to the research above, at Founder's Co-op we're seeing these 2 person teams work very efficiently and effectively. The teams both have 1 business and 1 technical founder.  The companies are able to make substantial progress on both product and business each day because of the diversity of skill.
They're both ramping revenues in the first 6 months of operations and I'm super bullish about both companies. If you're applying to Founder's Co-op, you should know that our default preference in terms of number of founders is as follows:

  1. 2 founders: 1 technical and 1 business
  2. 3 founders: 2 technical and 1 business
  3. 4 founders: 2 technical and 2 business
  4. 1 founder: 1 technical

I tell you this because this is our preference -- this is not a rule. I'm sure we'll fund the single business guy too one day. That said, I highly doubt we'll fund a founding team of 5 or more -- just too many founders and too much founder conflict. By the way, my first company, Firefly, had 7 founders.

Too much focus on customer acquisition in my blog?

Someone recently gave me the feedback about my blog that I've been writing too much about customer acquisition. As I've gone back and looked at my blog, I'm not entirely sure Marcello is right, but his feedback got me thinking - Why am I so focussed on customer acquisition?

  • In a nutshell, I don't think this aspect (i.e. customer acquisition) of building a business is emphasized enough to entrepreneurs.  In all the advice out there, customer acquisition sometimes feels like a dirty word or a trivial concept and for that reason, I want to shine a light on the topic.  That said, I'm fully aware that customer acquisition does not a business make!  Once you've spent all that money acquiring a customer, you've got to monetize and retain that customer.

Competition makes us stronger

In the internet age, every business person wants an edge and they want that edge to last. Just today, I had coffee with someone starting an online media company. He asked me -- what should I do about the 3 other competitors in the same space. The answer is pretty simple:

  1. Deal with it
  2. Have a better SEO strategy
  3. Out-execute them

Executing on the answer is much harder than saying it.

Entrepreneurial advice of the day

I met with a former management consultant turned entrepreneur today. He has an interesting new business in the online word of mouth marketing space (which I can't talk about yet because he's in stealth mode).  My advice to him -- which seemed to resonate with him-- was fairly simple:

  1. Start selling now -- don't wait for the website.
  2. Get fucking aggressive on customer acquisition

He really liked that I told him to get fucking aggressive. He said that no one else had told him that and he appreciated the spirit with which I conjured the expletive.  I told him it comes from me having made the mistake of sitting back and thinking business is going to come to me. I told him to call me when he makes his first sale....I hope he does.   

The benefits of Founder's Co-op

I met with an entrepreneur who asked me to spell out the benefits of Founder's Co-op and I told him that the fact he had to ask the question meant that our initial web site was lacking.  In a nutshell, the benefits to entrepreneurs in Founder's Co-op are as follows:

  1. Community: When I asked the founders of the two companies (Cooler Planet and Orange Line Media) that we've already invested in what makes Founder's Co-op great (yes it was a leading question) their answer was the community. Now, I know this sounds like a sappy touchy feely answer -- but I think it actually may be true. There's a lot of emotional and business benefit that comes from being associated with and in the same space with others attempting to accomplish the same thing as you.  It's why people trying to lose weight do better as a community and why those trying to run a marathon train together (who else would tell you to cover your nipples with Vaseline and band-aids).
    The companies we work with currently choose to work in our offices (not a requirement) and also participate in the Founder's Co-op equity pool (a requirement). At Founder's Co-op, we believe the sum of the parts is greater than each of the individual parts. We also believe that Seattle lacks a center of technology start up culture and we want to work to foster that culture. Moreover, often advice and mentorship from people who have done it before (i.e. Chris and I and the other Founders Co-op mentors) is great but advice and shared experiences from other entrepreneurs in the process of trying to grow a company can really help tactically and emotionally.  I'll tell you that I've heard my share of SEO, SEM, and .net secrets being shared over lunch more here than anywhere else! Lastly, and perhaps most importantly, the community component of Founder's Co-op makes it a lot more fun for everyone involved.
  2. Advice and mentorship: Given that Founder's Co-op serves first time entrepreneurs, surrounding those entrepreneurs with other successful technology entrepreneurs is enormously valuable. As partners, Chris and I meet with each company each week. In addition, we assign at least one mentor besides us to each company as an advisor. This is the starting point of mentorship and counsel. These regular meetings and relationships form the backbone of advice that fundamentally serves to guide and support the young first time entrepreneur.  The discussions range from high level strategy to the tactical. and include all areas of technology, technology platform, business model, recruiting, business development, marketing, customer acquisition, from entrepreneurs who have been there done and done that.
  3. Network: Our entrepreneurs get the benefit of the social networks of Chris and I, of our mentors, and of our investors. This is an easy sentence to write but the power of the extended network in Seattle, San Francisco can make raising capital, getting a business development deal or getting an answer to a market question much easier. 
  4. Capital: Oh, yea, we also invest in our companies and try to support them as they outgrow the initial seed and early funding rounds.

That's all I'm going to say about the benefits of Founder's Co-op for now. I think the best way to understand the benefits is to talk to the enterpreneurs in the co-op. I need to figure out a way to get their voices heard because they'll be much better able to tell you about what's good and bad about Founder's Co-op. Stay tuned for that. Have a good weekend.

Economic outlook

Mark Pincus has a great blog entry on the US economy here.  A portion of his post is posted below:

"I can't see how the dollar can't decline given that the fed is dropping rates to save the economy and counter tightening credit markets; meaning rates paid on dollar fixed income deposits will go down relative to other worldwide oppts. It seems that at some point the federal govt will have to start offering higher rates on t-bills as noone will be willing to buy its paper at low these rates.

So what happens when the fed is lending cheap and borrowing high? Seems like that spirals deficits even faster which btw contribute to obama's calls to raise taxes and 'pay our fair share'.

Where does this all go? Seems only outcome is higher taxes and interest rates along with record inflation as the dollar dives and real assets esp commodities skyrocket. Assuming that the rich give their money to hedge fund managers who are smart enough to bet on these trends, we end up with even greater concentration of wealth as a very small few avoid the economic landslide and increase wealth while the majority share a fairly equal misery."

The things I'm doing besides Founder's Co-op which I admit is not totally in synch with this economic outlook are:

  1. International Real Estate
  2. Google stock (yes, I bought a bunch at $415 -- feeling happy about that today
  3. And I just bought SKF -- shorting the financial sector again. With all the people thinking we're out of the woods on the economy, I still don't think so. I bought it at a price of $99.

Jewish Divorce

This was too funny to "passover".

An elderly man in Miami       calls his son in New York       and says, 'I hate to ruin       your day, but I have to tell you that your mother and I are divorcing.       'Pop, what are you talking about?' the son screams.       'We can't stand the sight of each other any longer,' the old man says.       'We're sick of each other, and I'm sick of talking about this, so you       call your sister in Chicago       and tell her,' and he hangs up.       
      
Frantic, the son calls his sister, who explodes on the phone, 'Like heck       they're getting divorced,' she shouts, 'I'll take care of this.'       She calls her father immediately and       screams at the old man, 'You are NOT getting       divorced! Don't do a single thing until I get there. I'm calling my       brother back, and we' ll both be there tomorrow. Until then, don't do a       thing,  DO  YOU HEAR ME?' and hangs up.       
      
The old man hangs up his phone and turns to his wife. 'Okay,' he says,       'They're coming for Passover and paying their own airfares.'

US News and world report: Study of Chemical in Plastic Bottles Raises Alarm

Posted April 16, 2008

Bisphenol A (BPA), a compound in hard, clear polycarbonate plastics, is getting official scrutiny—and things are looking less than rosy for the controversial chemical. The U.S. government's National Toxicology Program yesterday agreed with a scientific panel that recently expressed concern about physiological changes that occur in people when they ingest BPA that has leached from plastics into their food. The Canadian government is even considering declaring the chemical toxic, reports today's New York Times. This could set the stage for banning it from plastic baby bottles, water bottles, and food containers. At the very least, some people will be even more eager to buy foods and beverages in BPA-free containers.

Founder's Co-op early missteps

I think we've gotten a number of things directionally right with Founder's Co-op. And we've also made a number of mistakes. My partner, Chris Devore, outlines more eloquently than I the issue that arose between us and Y-combinator surrounding our applications tab at Founder's Co-op.  You can read his post here.  This is just one of our early missteps.  There have been many -- and I have to say -- while some of these missteps sting (like this one) -- Overall, I'm celebrating these mistakes. It's only when you take risk and put yourself out there as an entrepreneur and as a new start up that you start to make mistakes and to define yourself.   Founder's Co-op is a start up like the companies that we fund. We are making it up as we go and having fun. I also apologize to the folks at y-combinator -- we love what you're doing, how you're thinking about the world, and see ourselves as complimentary and not competitive. We look forward to having coffee with you when you come to Seattle.

Return from Disney World

I'm back. I actually arrived home in Seattle this weekend. It took me a couple days to decompress from what turned out to be a great, albeit tiring week. Disney World is a weirdly special place on a lot of different levels.

  1. First, as a family vacation for my dad's 70th -- I think the trip exceeded his expectations and mine. There were no major family fights. The hotel was nice -- and the grandkids ages 1 to 8 loved the parks.
  2. Second, as an incarnation of an entrepreneurs vision -- it's amazing. In my mind, it's as impressive as cirque du soleil.  The breadth, scope, and execution are truly impressive.
  3. Third, as a business operation the place is amazing. Everything from the transportation, the trash receptacles, the technology, the marketing, to the customer service. The business lessons abound.

The funding climate for early stage companies in April 2008

I just had another meeting with an early stage entrepreneur who was commenting that raising capital seems to have gotten harder. I think that's true -- the bar has been raised.  The current economic outlook, the mortgage and financial crisis, the crashing of consumer confidence all have an affect on investors willingness to do a deal for an early stage company.  So my advice to the entrepreneur -- who is a solid guy and has a good business was to focus on getting money from customers rather than investors.  My belief is that the companies that are built during this period of time are going to be stronger and better than the companies that are built during the next growth spurt (whenever that is!).

Feedback on Founders Co-op

I'm on the plane heading back from San Francisco. I had a number of good meetings with bay area venture capitalists. The two meetings that stood out were with David Sze of Greylock capital and with Stuart Davidson of Labrador Ventures.
Some feedback that has me thinking is to beware of funding just small ideas that only need small amounts of capital. While I know we don't have this problem with our current portfolio (both Cooler Planet and Orange Line Media are going to be very successful companies in my opinion), it's good advice. So, if you're an entrepreneur and applying to Founders Co-op be sure to tell us both how you're going to get your first 10 thousand in revenue as well as your first 10 million in profit. Well, hop[efully, you know what I mean.

By the way, sorry if this post is short or hard to understand. Writing posts on the plane on a blackberry is a little tricky.

golds gym customer service continues to suck

For those of you that remember my gold's gym customer service fiasco from a few years ago-- here's an update. I received a blog comment today with the advice "read the contract". It was a atandard cut and paste comment aime I assume at attempting to address the negative word of mouth that golds gym gets online. The email never said -- I'm sorrt you had a lousy experience-- we've changed and hope you'll try us again. That's all they need to say to get a second chance with me.
I wrote back to the email address on the log comment:
Reading the contract is good advice.

My advice to you is to do the same and take accountability for shitty customer service.

I'm not an ignorant or dumb customer. I have a graduate degree. I understand your desire to influence customer perception on blogs....but the best thing I can tell uyou is that in your processes of acquisition and employee trainoing you fail miserably.

Your email only serves to remind me of a horrendous customer service experience. One of the worst Ive ever had with a company (including the airline industry).

Customervice service rule.number 1 - the customer is right. Try saying sorry next time!
Andy

Why Founders Co-op sucks less than venture capitalists?

Disclaimer: I've personally been part of founding teams that have raised over $40,000,000 in venture capital. I've made a lot of money personally working with venture capitalists and plan to continue to do so.   For some ideas and some ventures, venture capital makes a ton of sense. That said, I co-founded Founders Co-op because I thought that the venture capitalist market has holes in it and I'd like to fill those holes.

So does founders co-op suck less (and yes -- as investors we still suck -- i.e. if you can bootstrap your company with no investors you should do so!!!)?

  1. We're entrepreneurs and founders too. We know what it takes to build companies and we know what it takes to raise capital.
  2. We strive to be responsive to entrepreneurs with quick decisions
  3. We're investing our own money
  4. We're willing to invest small amounts of money -- anywhere between 10,000 and 250,000. We don't need to invest at least $2,000,000 or own at least 20% of a company. You'll hear this from vcs.
  5. We're comfortable taking risk and even supporting the occasional flier. We don't have to justify our thinking to LPs.