From Geek to Entrepreneur

As a geek who has started three successful companies, I’ve had to move from “coder” to everything else — salesman, marketer, accountant, and changer of the pellets in the urinals. In the process, I’ve found that some widely accepted advice lead to failure while trusting my inexperienced gut lead to success. Through stories I’ll give you six ways to figure out whether specific advice is right for your situation, and then workshop those lessons against the 37signals philosophy.

Bio – Jason is the founder of Smart Bear Software and author of Best Kept Secrets of Peer Code Review. He blogs weekly on startups and marketing from a geek’s point of view at http://blog.asmartbear.com

Jason Cohen's Entrepreneurial Skill Set

Jason thinks of himself as a coder. The chart above shows, in green, his self defined key competencies in a start up. Of course, as a company founder, he needs the other ones too. How did he jump the coding shark?

Step One – Started blogging at ASmartBear.com Followed all the rules about little and often, bullets not semi-colons blah blah. Had about 400 RSS subscribers. Decided to do his own thing. Increased by 16,500 or so in less than a year.

The Rules of Blogging and the other Rules of Blogging

None of the rules that work for most bloggers were wrong. What was going on?

Lesson #1 Jason got to set his own rules. You don’t need to live in someone else’s box.

Lesson #2 Advice has context.

The rules from Problogger are about blogs with advertising etc. Jason wanted to blog to move his business forward – to attract top talent. What worked for him may not work for others.

Step Two – Enterprise sales.

Alert! Alert! We need a patent. Shit sales people says.

Jason almost took him on but was saved by an unexpected PO for $48,000 from Adobe. No-one told Jason he wasn’t a sales guy.

Lesson #3 The statement, “I am not a XXXX person”, is twaddle.

Lesson #4 Trust your gut, even when you are inexperienced.

You know whether someone is a good coder without quantitative information. The same principle applies to other functions.

Step Three – Sales again…

SmartBear was growing but needed to ramp up sales.

Sales 2.0 at A Smart Bear

Sales people only did inbound sales, no outbound sales were working, sales people couldn’t answer any technical questions. Unmitigated disaster. So why did he do it? Largely because everyone else said that that was the right thing to be doing.

Lesson #5 “That’s how it is done” is bullshit.

When SmartBear started, they could bootstrapped the company using Google Adwords – because no one else is doing it. They now cannot afford to use the same Adwords now as the world has changed.

By doing things differently, SmartBear  found their competitive advantage. By having the geek founder doing the technology demo’s perhaps their customers were given huge confidence in the ability of the company to deliver. Perhaps by anti-selling, they set themselves apart from the crowd. But the source of competitive advantages will change.

37 Signals have their own set of rules.

• Solve only simple problems
• Planning is silly
• Don’t work too hard

Their rules, my rules

Rules depend on where you are, what you want to be, and what point in time you are.

The relevance of advice from commentators is also very dependent on where they play in the Rich/King B2C/B2B matrix.

Common advice from bloggers in context

Jason lays his own prejudices laid bare.

The 6 Prejudices of Jason Cohen

Looks like it is beer O’clock. That room emptied fast!

From Bootstrap to $60m. What I’ve learnt

Atlassian has been a successful software bootstrap, right up until we took $60m funding from Accel Partners in July 2010. Scott packs some of what he’s learnt about running a software company into thirty minutes. You’ll hear about how to pick a business model, how to get free marketing, how we hired 32 people in 6 months, and how we built a workplace that has won numerous HR awards.

Bio – Scott Farquhar is the Co-Founder and CEO of Atlassian, an innovative, award-winning enterprise software company. Atlassian produces tools that help technical and business teams collaborate, plan projects and build software. Based in Australia, Atlassian currently has over 17,000 enterprise customers around the globe and has been named one of the “Fastest Growing Companies” by both Deloitte and BRW Magazine.

Scott was awarded the ‘Australian IT Professional of the Year’ in 2004. In 2006 Scott was the youngest person to ever be awarded ‘Australian Entrepreneur of the Year’ by Ernst & Young.

Scott Farquhar, Atlassian shares Ten Great Commandments of Startups

Lessons learned in taking a company from boot strapped startup to $60 million funding from Accel in 8 years.

Start with two founders. Startups are hard work and you need to share the lows – and the highs. For Scott, discovering the company had been hacked while he was on honeymoon in Africa was one of the lows. Three months later they raised $60 million from Accel.

Share the company 50:50 at the outset.

You need a business model. Duh! The Freemium model was a very novel concept for a business model in 2002 when they started. Note! SaaS is not a business model – it is a delivery model.

They evolved their model as they had no money for a sales team, needed to sell itself so had to be cheap,were based in Sydney so had to have web presence as Sydney is at the arse end of nowhere globally.

Enterprise Software vs Freemium Business Models

Use your own product. Atlassian uses its own system – bug tracking and all – publicly. One competitor actually took their top ten questions and used them in their own marketing – only downside.

Measure everything. Sales by country, profit, revenue, everything. Switch your data logs on even if you don’t have the analytical capabilities yet. The data will be useful when you do.

Test everything.

Always be Closing Marketing. Be loud and unique. Always sponsor the beer at conferences. Sponsoring the beer means other speakers talk about you. MUCH cheaper than taking a booth.

Atlassian Beer, the cheapest Guerrilla marketing at any trade show

Ship something tangible – Atlassian send custom T-shirts to their best customers. Some customers actually buy a better version of the software JUST to get a t-shirt.

Make everything into a campaign – hiring people is as much an opportunity to run a marketing campaign as a marketing campaign. Atlassian pays internal referrals a $ 10,000 bounty to recruit staff, external people get paid $ 2,000. Only let recruiters send them 4 candidates or they wouldn’t do any more business with them.

Market to your employees. relentlessly.

Your first idea will fail.

• Odeo -> Blogger.
• Genie -> Yammer.
• Traf-O-Data -> Microsoft.
• Orion Support -> Atlassian.

Think long term. We want to be around in 50 years time.

Have a non-bull shitty and understandable mission. Atlassian Misson:

“To create useful products people lust after.”

Know when to switch gears. Startups need to be really scrappy. At our first conference in San Fransisco we stayed in a $48 room and put three people in it. Scott found it really hard to upgrade to bigger spends – broadband, travel (there is cost to time) etc etc.

Generalists move to being specialists. Developers are not always the best managers. Technology people aren’t necessarily the best customer support people.

Know when to let people know. No university course teaches you. You have to trust your gut feeling. Often the rest of the team won’t back you up initially.

Build somewhere that you want to work. If you are creating something that you want to last for 50 years, you need to be in a place that you want to be. You have to invest in your culture.

Top Grading process lets you find out two things you need to know about people:

• Are they going to find their feet wherever you put them in the company?
• Are they passionate about your business.

Share your values and make them explicit. If people buy into your values, they are likely to be the right people for the business.

Atlassian Mission

Give Experiences. Never ever give money as rewards. Give experiences as people will remember them and they will build your team.

“The Lean Startup: A Scientific Approach to Innovation.”

Most software projects fail. Most startups fail. Most new products are never used. But it doesn’t have to be that way. The Lean Startup is a disciplined approach to imagining, designing, and building new products. By testing our assumptions earlier, faster, and with more rigor, we can stop wasting people’s time.

Bio – Eric Ries is an author, speaker and consultant at the Lean Startup. He blogs on StartupLessonsLearned.com on issues concerning startups and entrepreneurship. Previously, he served as Venture Advisor at Kleiner Perkins Caufield & Byers and co-founded IMVU. In 2007, BusinessWeek named Ries one of the Best Young Entrepreneurs of Tech.

Eric Ries

Eric Ries starts with the comment that receiving an invitation to speak at BOS from Joel Spolsky was a bit like most kids getting an invitation from Lady Ga Ga to perform on stage. Makes a plea to turn phones on, get online.

“If you are not online you are not alive.”

Most startups fail and most produce stuff that no one uses.

Most start ups fail. The evolution of Web 2.0 Startups in 2006 over three years.

Web 2.0 startups from 2006 failed within three years.

Green circles mean ‘sold’, pink crosses mean ‘dead’.

Who can we blame?

Eric Ries blames dead people

Just over 100 years ago, most work was done by skilled craftsmen. Frederick Winslow Taylor brought science to the workplace.

“In the past, the man was first. In the future, the system will be first.” FWT, 1911.

This paradigm shift in thinking led to the Traditional Waterfall Product Development where the unit of progress is to Advance to the next stage. This works well where the problem is known, and the solution is known. But it is not appropriate in today’s world.

Today, startups and entrepreneurs live in a different world. A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. Therefore, a startup is an experiment and entrepreneurship is management and you can apply scientific principles to create a new management paradigm tailored to conditions of extreme uncertainty.

The Pivot What do successful startups have in common? They proceed down a zig-zaggy path using what you have learnt on the way. You can increase the number of pivots you have by raising more money or by making stuff happen faster by being more agile.

Agile product development has a different unit of progress, a line of working code. This has been the case in most businesses since WWII.

In lean startups, the rules change again. You need to ask what activities are value-creating or wasteful? In traditional business, value is created by getting products or services to customers. In a startup today the product and customer are unknowns.

The unit of progress in a lean startup is validated learning. in the world of the startup, typically the problem is unknown and the solution is unknown. Lean startups are about learning what we need to learn at the lowest cost. Do you need to develop software to learn that customers don’t want it? Often not!

Fisher Price Guide to Lean Start Ups by Eric Ries

Minimise the total time and money it takes to get through iterations of the feedback loop, continuous deployment.

LEARN faster

• Customer development
• Five Whys

BUILD faster

• Continuous Deployment

MEASURE faster

• Rapid split Testing

LEARN

Five Whys Technique for continuous improvement. Ask why something unexpected happens – five times… Behind every technical problem is usually a human problem. Make proportional investments in prevention at all five levels of the hierarchy. (Do the minimum possible to fix). Do not do zero, do not do perfect solution that will fix everyting for ever). Fix the cause, not the symptom.

BUILD

Continuous Deployment Principles

• Have every problem once
• Stop the line when anything fails
• Fast response over prevention

Continuous Deployment means in practice

• Deploy new software quickly (IMVU time from check-in to production is 20 minutes)
• Tell a good change from a bad change fast
• Revert a bad change quickly (and shut down the line)
• Work in small batches (At IMVU, a ‘large batch is one coder’s code for three days)
• Break large projects down into small batches

Minimum Viable Product is fine. Why? If you are a startup the only people who will talk to you are early adopters. Visionary customers will fill in the gaps on missing features if the product solves a real problem for them.

MEASURE

Rapid Split Testing. A/B testing is key to validating any action through measurement. The three As of measurement: Actionable, Accessible and Auditable. Measure the macro. Only ship things that make customer behaviours better. over time, your product will be more effective, even if it is not prettier.

Eric’s book is coming out in a year or so. The publishing industry doesn’t do lean startups.

Eric Ries takes questions

“Are you afraid to truly make an impact? The opportunity for linchpin organizations and the people who run them.”

Bio – Seth Godin writes the most popular marketing blog in the world. He is a renowned speaker and bestselling author of 10 books that have been translated into 20 languages, and have transformed the way people think out marketing, change and work. He is responsible for many words in the marketer’s vocabulary including permission marketing, ideaviruses, purple cow, the dip and sneezers. His latest book, Tribes, is about leadership and how anyone can become a leader, creating movements that matter.

Seth Godin

The big idea. If your idea doesn’t naturally spread, you have no business. Marketing moved from a world where you create a cute, edible mascot for your idea, you anthropomorphise your business and that was enough. It moved to a place where you just SPAM people with your idea but now there are too many brands spamming your brain.

Brand Bombardment Seth Godin BOS2010

So brands tried begging but that doesn’t really work because no-one cares enough. The only way to sell your product is to find people you want to sell to, get them to engage with your work and get your customers to talk to others about you. People WANT, DESIRE, NEED to belong to a tribe. People are waiting to be led.

The need for belief is infinite Seth Godin BOS2010 - a Gaping Void?

• If you can write it down, someone can do it cheaper.
• Software that is boring will never turn into a movement.
• Competence will drive the cost of boring software to $0
• Avoid anything that is like bowling (maximum score is 300). People don’t watch it because you cannot score off the charts.

Competence is no longer a scarce commodity Seth Godin BOS2010

Seth Godin’s rules of scaleable business ideas:

• Does this connection between people create demonstrable value?
• Is it easy and obvious for someone who is in to recruit someone else that is in?
• Is it open enough to be easy to use but closed enough to avoid becoming a zero-cost commodity? (Too open means there is no money).

Do you have to be some kind of genius to make all this happen? Einstein has skewed our understanding bout what genius is. Henry Ford was a genius in a different way. He created process and made people interchangeable. Public school was created and developed in order to train people to do what they were told for 12 hours – working in a factory, a call centre, a coding farm. In 1800 there were less than 400 corporation in the United States. Now there are millions or corporations. Almost everyone works for one.

Now we should all strive to be artists. Marchel Duchamp placed a urinal in an art gallery, it was art. Second person to put a urinal in a gallery was a plumber…

When you think about the mission of your company, is it to churn out yet another version of the same thing or is it to create something like art? The opportunity for software people is to realise that you have the most scaleable, useful, valuable thing there is. Software site at the top of the Hierarchy of Value:

• Create and Invent
• Connect
• Sell
• Produce
• Grow
• Hunt
• Lift

Value sits at the far right of this chart.

Pay vs Hours of work Seth Godin BOS2010

Richard Branson works and creates value for 4 minutes a day but those are the most important 4 minutes in the business. Seth worked for about 60 minutes – 35 minutes of talking and then a great Q&A. Art and value created.

Talk – “Building A Great Software Business: Notes From The Field”

In this session, he will attempt to condense many of the lessons learned from pretty successful companies like Constant Contact, DropBox, Kayak, FreshBooks, ZenDesk – and of course, HubSpot. He’ll talk about all sorts of things but mainly how to get customers, keep customers and grow revenues and profits. [Note: This description has been intentionally left sufficiently vague so as to allow a complete rewrite of the content at 2:00 a.m. on the morning of the conference. That’s just how Dharmesh rolls.]

Bio – Dharmesh Shah is the founder and CTO of HubSpot, a venture-backed software company offering a hosted software service for inbound marketing. Prior to HubSpot, Dharmesh was the founder and CEO of Pyramid Digital Solutions. Pyramid was a three time recipient of the Inc. 500 award and was acquired by SunGard Data Systems in 2005. Dharmesh is also the author of OnStartups.com, a top-ranking startup blog with over 20,000 subscribers and 100,000 members in it’s online community. He has a B.S. in Computer Science from the UAB and an M.S. in the Management of Technology from MIT.

Dharmesh is co-author of the recently released book Inbound Marketing: Get Found Using Google, Social Media and Blogs. The book has been in the Amazon Top 100 business books for 21 consecutive days. [Because it is REALLY very good – ML]

Dharmesh Shah

What has Dharmesh learned at Hubspot?

Venture capital is not a necessary evil. – it is neither necessary nor evil. BUT, once you take VC money, you move from solving your customer’s problem to solving your investor’s problem.

Thinking about SaaS businesses, Dharmesh asks how much money the typical SaaS company has raised before it IPOs. Answer for publicly traded ones is median number is $42 million. In a SaaS business, you are spending huge amounts of money up front in order to buy customers. You are basically financing your customers.

Startup 101. The important, obvious and simple basics that most people forget:

• Cost of Customer Acquisition (COCA) is Total Cost of Smarketing (Sales & Marketing) divided by Number of Customers
• Life Time Value of Customer (LTV) is Annual Revenue Per Customer (ARPU) * Expected Lifetime of customer.

LTV should be > Cost of Customer Acquisition!!!

Absence of churn = Presence of Delightedness

Three key value drivers in the business

1. Sales Velocity
2. Lifetime Value
3. Acquisition cost

Improving one often degrades another. (Sounds a bit like the Project management – time, quality, cost equation). Balancing the three is incredibly tricky. what do you do?

Don’t improve the product, improve the EXPERIENCE.

• It is easier for sales people to sell
• Customers stay for longer and talk about you
• COCA goes down

Everybody wins. Hubspot has moved from investing in sales and marketing (sales team is now 60 people) to investing in customer experience.

Don’t make customers happy. Make happy customers. Hubspot measures the Customer Happiness Index (CHI) of all its customers every month. It is a single number that ties to the likelihood of a customer to continue to pay to work with us. Ingredients of number change but at Hubspot, the basics are:

• Frequency of use
• Breadth of Use
• Sticky Features

Sticky features is really important. Irregular users who use sticky features trump frequency and breadth of use.

Think of the customers. Hubspot has an empty chair in all meetings that represents the customer. Marketing Molly is required to hit quorum for management and board meetings. Very few meetings happen without someone saying, ‘Bullshit, what would Molly say?’ Customers should have a voice, not a veto. Customers are often better at identifying their problems, not the solutions to those problems.

Hubspot's Marketing Molly

Services are low margin. Except when they are not. Hubspot charges $125 an hour for ‘on-boarding’ (I think that is American for setting up), customer support etc. Felt like it would be about a break even business but in fact that does not account for increased use of Hubspot by customers which leads ti increased use and lifetime value. Tried giving it away for free but in fact customers didn’t value the sessions as much. Charging $500 for a 4 hour customer training session means that customers make sure that the real people get value.

Hubspot has customer success managers who monitor customer happiness and then call those people and do all sorts of stuff to make them happier. They say, “I think you’re unhappy. What can I do to make you happy?” About 30% of those unhappy customers still end up ditching Hubspot but that means they are keeping 70% of a bunch of customers that would have walked away.

Don’t make XXXX software, make XXXX Superstars. In Hubspot’s case, Don’t make marketing software, make marketing superstars. the answer is not to make a better XXXX, it is to make a simpler XXXX. Hubspot offers a bunch of tools that are readily available in other packages but they are packaged simply.

Transparency Trumps Secrecy. Most Hubspot information is available to all barring salary/compensation information. Makes being a manager much easier – don’t have to worry about what should be kept private or not. Have not made this a policy that opens this information to public sharing as they cannot see the upsides. Vacation Policy is that they have no Vacation Policy. If someone is likely to abuse the policy,they have hired wrong.

Dharmesh packs an afternoon of talk into 45 minutes.  A phenomenal speaker.

Hubspot's Dharmesh at Business of Software

The Power and Perils of Freemium. Free is NOT about tricks and traps to make people pay. (The opposite of the Salesforce model).

Build a Brilliant Brand. Brand is what people say about you after you have left the room. The most important thing apart from building a brilliant product, is not screwing the customer. Be a good egg. The path of truth is paved with profits. If you are looking to build the next multi-billion dollar business, people will talk about you and find out if you do bad stuff. Oracle, Microsoft and others got away with it in the past. No longer. (So what about Salesforce that have done just that? Dharmesh thinks they may have been the last one…).

Dream Big, Execute Small. If you get an offer for your business before you have built a billion dollar business, think about taking it. It gives you cash. Cash will fund your next dream.

“Company Culture and its DNA: “For Better For Worse, For Richer For Poorer …”

Bio – David Russo is Founder and President of Eno River Associates, Inc., a coaching and consulting practice which advises companies and executives on employee engagement issues, “Employer of Choice” initiatives, optimizing executive search efforts, and Human Capital Management best practices including HR technology choices. He is also the author of a “wake up call” talent management book, 17 Rules Successful Companies Use to Attract and Keep Top Talent. Previously, David was Chief People Officer for Peopleclick, Inc., the world’s premier vendor of strategic workforce acquisition software and services. He is also a past Vice President and Secretary/Treasurer for the world’s leading human resources professional association, The Society for Human Resource Management (SHRM), and served on the Board of The SHRM Foundation.

David Russo

Leading a company is not a charitable event – being a great leader is not about being Mother Theresa.

The founding leadership in a business sets the world view, the tone for the culture that decides whether a business will succeed or fail in the long haul.

Three critical issues feed into the ‘DNA stew’:

1. How do the leaders see and value people in the work place?
2. How much control do those leaders need?
3. How do you attract and retain people? What is the bonding agent between company, institution, enterprise and individuals?

DNA stew driven by:

How you select people?

Often, the first HR person in a business is CEO’s assistant, CFO is a part time person who works with one of angel investors, head of sales is first sales person etc. Networking is a key part of growth plan – I know someone… Needs are immediate and critical NOW. Not nearly enough thought goes into thinking about what is needed in the future. Everyone is always firefighting. Growing a company from the ground up means you are ‘birthing a tribe’. Need for cultural fit and camaraderie is critical early on in a business. Don’t just hire your friends and family, because it sucks when you have to fire them.

How do you control/unleash/co-ordinate people?

How do you control and move people? Charismatic leadership or process?

How do you attach and retain people?

Money is tangible compensation. The work in a startup is a key part. sending people on an important journey, do something important, be a part of something important. Love, for the community, camaraderie, liberte, egalite, fraternite’.

Three ingredients mix to create five distinct models of company culture.

• Bureaucracy Model
• Autocracy Model
• Engineering Model
• Star Model
• Commitment Model

Bureaucracy Model – selection based on current competence. Coordination and control through policy and procedure. Most public institutions work on this basis. Attachment/retention based on the work and its value. BORING!

Autocracy Model – selection based on current competence. Coordination and control is direct – “When I want your opinion, I’ll give it to you” – WalMart. Attachment/retention based on money. No consensus management.

Engineering Model – selection based on current competence. Coordination and control is cultural. Retention based on doing cool stuff. Value is on achievement.

Star Model – selection based on potential upsides – stars from elite sources – Harvard, Stanford, Cambridge, Hull (I lied about that last one). Coordination and control is about professionalism. Push me, pull you. Attachment/retention based on meeting the challenge and being all that you can be. Value – autonomy, independence, rapid growth.

Commitment Model – selection based on fit – one heartbeat for whole tribe – Southwest Airlines. Coordination and control is about cultural fit – a band of brothers. Horizontal management – WH Gore doesn’t have job titles. Push me, pull you. Attachment/retention based on love. Value – long term relationships, a family. It hurts when people leave.

Start ups tend to be about disruptive innovation, enhancement of existing products, delivering different sales/marketing/services or about cost reduction. What does this mean for a Radical Disruptive Businesses which typically represent about 50% of all startups? Almost impossible to be radical within first three types of model.

Organisational Models vs Company Type

Should you consciously adopt a model from the outset?

Most types of business gravitate towards certain cultural models. Changing your model is incredibly disruptive to the business – it reduces the likelihood of an IPO by about 50%. People hate it and the people in the organisation get thrown off their feet.

Commitment models have shown that they are fastest to go public, are most financially successful and are least likely to fail.

Founder philosophies and organisational design have lasting impact but not for the reasons that always appear on the surface. If you are sure of the market value and desirability of your product or service, but have doubts about the long term health of the organisation, DO NOT CHANGE THE MODEL, CHANGE THE MANAGEMENT PRACTICES.

The Signs of High Performance Management

David Russo's Signs of High Performance Management

High Performance Management

High Performance Management

In a commitment company model, there is no need for leaders to manage. the people in the business can manage the people in the business. Leadership is about looking up, not down, in a company. Leaders are in the service of the company & the employees, not the other way around. Everyone in this room knows what to do but there is a huge gap between knowing and doing because of the fear of doing something wrong. You can manage nobody and create a great deal of leadership.

If only ByteNight was in the summer…

The weather this week has reminded me that not only is it definitely not summer anymore, but that you should never agree to go camping in the UK after September. Luckily I didn’t agree to go camping. But I have agreed to sleep rough in Cambridge on the night of  October 8th in support of the national ByteNight campaign for Action for Children.

Care to join me?

When I return from a week in Boston on 8^th October, I will be getting off a very comfortable plane, (even in coach), and heading up to the Cambridge Science Park to spend a night sleeping rough in support of Action for Children. Our team includes David Mardle, Tim Ferris, Bill Thompson, Alex Kelleher and Vero Pepperel. They will be joining myself and about 50 other people in Cambridge as part of national ByteNight which involves over.

You would still be welcome to join us or, failing that, you could ‘outsource’ your involvement by making a donation, however large, to sponsor our team. We are hugely appreciative of all the support that we have received so far. Thank you but we would love some more. Please consider giving time or money to help. Thanks.

Action for Children helps nearly 156,000 children, young people and their families through nearly 420 projects across the UK. Go to http://www.virginmoneygiving.com/team/ByteNightMiscellany to find out more about the work of Action for Children, to see one of the more eclectic teams to participate in ByteNight and and MOST IMPORTANTLY, to sponsor us online. Thank you very much for your support and think of us on October 8^th.

http://www.virginmoneygiving.com/team/ByteNightMiscellany

Thanks.