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February, 2010

  1. David Rose: Why NY Angels Charges Entrepreneurs

    February 27, 2010 by Matt Mireles

    The reason we charge a fee is because we're between a rock and a hard place. The unfortunate but accurate fact is that 90% of all companies requesting funding are simply not fundable, by anyone, anywhere…no matter how earnest the entrepreneur might be. The larger VC funds get upwards of 10,000 plans each year, but that's ok for them because they either completely ignore over-the-transom submissions, or have them read by a paid associate.

    Since all of us are volunteers with day jobs who are doing this in our spare time out of love (and bit of masochism), we simply can't process that kind of deal flow. So our choice is either to take the route that many VCs and quite a number of other angel groups do, and ONLY accept deals as referrals, or else TRY to have some kind of system which will at least dampen the flow of deals that should never have applied in the first place.

    Charging $150 is a pretty poor way of making sure that an entrepreneur at least stops and takes the time to read our criteria before applying, but as Churchill said about democracy, "it's the worst form of government there is…except for all the others." I plead guilty to having contributed to making the problem worse by developing Angelsoft, which is now used by virtually all of the world's angel groups to handle their deal flow. Since it functions much like the CommonApp for colleges, it is now very easy to apply to multiple angel groups for funding, whether you really should or not. The current flow through Angelsoft is around 40,000 applications annually. Should I have not done that, but instead gone out of my way to make it harder to apply?

    With regard to Nate's comment, he's not quite correct. There are several ways to get to present before New York Angels, but the 'free' one is what we call our "EZPass" system: if one of our members is *already* committed to investing in a company, and there is a completed term sheet that other investors can sign on to, that member can bring the opportunity directly to the monthly meeting without a charge (because, if you think about it, this is exactly the kind of deal most likely to be fundable by other angels.) So absolutely, we will all tell you that by FAR the best way to get funded by NYA is for you to network your way to one of our 75 members, get them enthusiastic enough that they agree to invest individually, and then have them present you to the whole group. However, by offering an alternative, open-door policy that allows 'un-connected' entrepreneurs to at least apply, we thought we were being helpful, not harmful.

    But at this point we have taken so much criticism that I'm beginning to think it's just not worth trying to be good guys any longer. So we're currently thinking about simply dropping the fee entirely, but also dropping people's ability to directly apply to us. In that way, we'd function like many (most?) of the "savvy" investors you mention: no charge, but also don't bother applying directly. Just use your entrepreneurial mojo to convince someone we know to recommend you to us…otherwise, if you can't figure out how to do that, we probably shouldn't be funding you in the first place.

    Would that be rational? Yeah it would. But I think that ultimately the ecosystem would be poorer for it.

    via www.metamorphblog.com

    Got this comment earlier today from David S. Rose, the Chairman of the New York Angels. Very thoughtful and well-reasoned. Gotta say the man is winning me over a little bit. Still ruminating…

    This is a response that came from the comments on my previous post: Is NY Angels a Pay-to-Play Scheme?

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  2. Comfortable with Uncertainty

    February 27, 2010 by Matt Mireles

    Comfortable with Uncertainty

    Posted on: Friday, February 26th, 2010

    When do you know? I mean, really know?

    Slumped into my couch, pale from a lack of sleep, nose red from the cold he can’t shake, the CEO shook off my suggestion about this being the time to hire an assistant.

    “I know, I know,” I said, “you’re a cheap bastard,” and we both laughed.

    “It’s not that,” he said after a pause, “it’s just that—well I know we should be hiring for what the company is going to look like in six months but what if it turns out I have to fire them down the line. What if I’m ahead of the game?”

    I told him: “You’re at that point when, if you don’t hire enough firefighters, you’ll never get out of firefighting mode.”

    “This little start-up of yours,” I continued, “is about to become a company.”

    And he looked at me with a mix of relief and sheer terror—and just a touch of nausea.

    Later that week, I got an email from another client returning from a board meeting.

    “We’re not dead,” he said in a slight nod to Monty Python. They’d given him one more quarter before they’ll decide if they’ll fund that last half million everyone thinks will take the company to break-even. Of course the problem is this is the third “half-million to break even” the company has needed in the last year.

    Still another client calls. He’s preternaturally calm. Spooky, even.

    “Well my man…we’re burning a quarter million a month and I’ve got a million in the bank. If we don’t close this deal [a deal that will net the company a few million as the result of a sale of an asset], then it’s all over.”

    But then he says the really spooky thing; he says: “I think.”

    When do you know it’s time? When do you know it’s really time to start the business, shut the business, expand the business, invest in the business, quick your job, end the job search and take the offer on the table, leave your spouse, marry your girl/boyfriend, move to Australia, come home from Australia? When do you know?

    “A warrior accepts,” writes Pema Chodron in Comfortable with Uncertainty, “that we can never know what will happen to us next. We can try to control the uncontrollable by looking for security and predictability, always hoping to be comfortable and safe. But the truth is that we can never avoid uncertainty. This not-knowing is part of the adventure. It’s also what makes us afraid.”

    I think the only answer to the plaintive poignant question of “When do you know?” is embedded in the bit of Buddhist wisdom: You can’t know–not really, anyway.

    Maybe the hardest part of leadership—be it leading a company, a family, a relationship or simply your own life—is that often times you don’t know and you have to still have to act. Leadership in some ways is built on learning to be comfortable with not knowing, with imperfect knowledge, with the inherent uncertainty of it all.

    via www.themonsterinyourhead.com

    this came from Jerry Colonna, Fred Wilson's old partner at Flatiron Partners.

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  3. Is NY Angels a Pay-to-Play Scheme?

    February 26, 2010 by Matt Mireles

    UPDATE: David S. Rose, Chairman of the NY Angels, responded in the comments below and I broke it out into its own post.

    In the comments of my previous post, Nate Westheimer, the NY Tech organizer and former EIR at Rose Tech Ventures, wrote this as part of a long, thoughtful comment:

    To start, the NY Angels isn’t a pay-to-play scheme. Come on. If you networked with any of the members — many of whom devote their lives to helping entrepreneurs (David Rose, Jeff Stewart, Roger Eherenberg, Brian Cohen, etc) — I bet you’d get in without a charge. The “shmoes” who pay are those who haven’t had the sense to meet up independently with its members, excite them, and have you get in front of their colleagues without having to pay the administrative fee. [Emphasis added]

    I was wondering when someone would bring this up. Here’s the thing: it’s not about me or what I can finagle because I have connections. It’s about the guy who has no connections and is a broke nobody. And for that guy, the price to apply to MAYBE get a chance to pitch some of New York’s richest people is $150. And that’s not cool.

    See, I’ve got a bit of a chip on my shoulder regarding this particular point. I wasn’t poor, but I didn’t grow up with money. When I was a student at Columbia, I worked as a paramedic in Harlem and the South Bronx to pay for school. Two jobs. Two very working class jobs. I started off doing it cuz it was fun, and ended up having to do it because I needed to eat. I was a poor boy in a rich man’s world. No connections. No network. Another schmoe.

    And yeah, I’ve gotten myself into a place where I’m a little bit of a somebody since then. But that doesn’t matter. What matters is how we treat the least among us.

    Unfunded entrepreneurs should not be asked to pay investors to pitch. Period. It’s exploitative and just wrong.

    And if you’re right and the members are in fact truly devoted to helping entrepreneurs, then I challenge them here and now to drop their $150 pitch application fee and to instead embrace the model pioneered by the Open Angel Forum and fund their efforts by charging service providers instead of entrepreneurs.

    Honestly, I think there’s more than just a moral imperative involved here. By killing the application fees, they’ll get savvier founders, better startups, and improved deal flow––a true win-win for the New York ecosystem.

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  4. NYC vs Silicon Valley

    February 26, 2010 by Matt Mireles

    There's been a lot written lately about the NYC startup scene. It's exploding. It's hot. Etc. And all that is true. 

    But as a first-time founder trying to raise capital and achieve product-market fit, the question for me is not "Is NYC hot?" or even "Is NYC becoming a better startup hub?"so much as it is "Is NYC the best place to locate my startup?" And on that question, I'm not sure the answer is yes. 

    See, here's the thing: As far as I can tell, startups face two main environmental challenges:

    1) Raising Capital
    2) Finding Talent

    Here's how NYC scores on this…

    Raising Capital

    Good: Folks like Chris Dixon, Betaworks and Fred Wilson are here. Smart, visionary investors. 
    Bad: Folks like Chris Dixon, Betaworks, and Fred Wilson are a TINY fraction of the market. 

    In reality, the capital markets in NYC are flooded with Wall Streeters turned venture capitalists. These are people who know how to analyze and pick in assets, not people who know how to build companies. These are people who do dumb shit like ask about pricing for a premium version of a genuinely novel product (in a category with no existing market) that hasn't even launched yet…in the first meeting. #VCFAIL (Ok, there's some exceptions, but not tons…)

    And in this environment, the entrepreneur-investors stand out in sharp contrast to the platoons of walking checkbook geniuses that roam Manhattan. Yet the founder types are few and far between. 

    So what does this mean for the Founder/CEO trying to raise money in NYC? Well, from what I can tell, a few things…

    a) Weak Angel Network
     Good luck finding angels in NYC who understand early-stage tech investing. Technically, they're out there…somewhere. But they're fucking hard to find. 

    And let's get real: Smart founders want angels, not VC's! Angels are the ones who invest at the earliest, most risky stage. They're the startup equivalent of breast milk. And NYC has a big fat shortage. (e.x. "NY Angels" is one of those pay-to-pitch schemes that Jason Calacanis is crusading against)

    b) Only a few bullets
     A corrolary to the weakness of NYC's angel network: There's only a handful of top-tier folks in the nieghborhood and if you don't get one of them excited, you're SOL. This means you better wow 'em right out the gates. No learning on the job. 

    c) Harder to create competition around a deal***
     As my peeps at Venture Hacks have so adamantly advised: Founders should ALWAYS try to create competition around a deal. The more competitors in a market, the easier it is to get the swarm mentality going. And of course, the converse is true as well: the smaller the number of players, the lower your chances of gettting someone excited and tripping off the investor feeding frenzy.

    This is especially true at the seed and angel stage, which remain stubbornly local as far as capital markets go. 

    Think of it like going to a party: the more women at the party, the more likely one of them likes you, the more likely it is you get laid. Lesson: Go to parties with more women…err, VCs. 

    d) Lower valuations
    The logical outcome of this dynamic: lower valuations and shittier deal terms. Now, to be clear, I'M NOT SPEAKING FROM EXPERIENCE at this point. But it makes sense: If you're a young startup with an unproven team targetting a big market, the good investors are investing as much in you as they are in the product/market/idea. If you have fewer sources of capital investing in this type of good (because so few of them made their money in tech, where this is normal), a simple economics model will tell you that the cost of capital will rise––ie lower valuations and shittier terms.

    e) Slower deal cycles
     So…if it's harder to raise angel money and create competition around a sale of your startup's equity (ie a "deal"), then it's probably gonna take more time to raise money.

    f) Competetive disadvantage
     In startups and war, SPEED KILLS. And let's get real: Raising money is a gigantic waste of fucking time. Each minute you spend hobnobbing with and strategizing RE: investors is a minute you don't spend on product or customer development. This is why at SpeakerText we've developed a hierarchy regarding our priorities as a company (actually, we just ripped it off from Johnson & Johnson):  Customers > Employees > Society > Investors.

    Essentially, raising capital is a gigantic-if-neccesary waste of time. Having to spend more time on this task puts you at a strategic disadvantage versus your competition. 

    Finding Talent

    Good: NYC has gobs of technical talent from amazing schools. Many now unemployed.
    Bad: NYC has gobs of technical talent from amazing schools that are used to being paid inordinately  high wages and don't value stock options.

    a) Wall Street has been a huge talent suck for a long time. 
     If you're a hotshot software engineer, the default dream varies depending where you go to college:
        -West Coast: Work for Google.
        -East Coast: Work for Lehman.
     So what's the problem? Google's a lot more entrepreneurial, gobbles up and spits out a lot more founders than our dearest Goldman Sachs (birthplace of the CDS). The mythology is all wrong. 

    b) Wall Street Quants make A LOT of money. 

    This is a problem because founders make barely earn a living wage before they exit. While it might average out better in the end for startup Founders, the delta in wages is pretty hard to stomach. It requires a fundamental change in lifestyle for people of who take the leap. This is especially hard when there's not a mythology of garage-to-riches built up in the engineers' minds. 

    c) Silicon Valley has a bunch of Googlers who got rich from stock options. New York, not so much.

    It's about the existence of a mythology. In the Valley, there are lots of engineers who just do startups. They get it. They understand it. The huge payoff down the road is a very real prospect. It's their thing. 

    While there are definitely engineers in NYC who are into the whole startup mythol
    ogy, they tend to be outliers as opposed to the mainstream. 

    d) Specialized technical talent is harder to find in NYC than the Valley (or Boston).
    I hate Boston. Would never live there. So ignoring that city, where are you going to find, ohh, let's say Speech Engineers? Theoretically, you can find stragglers from the old Bell Labs days in New Jersey. But they're not exactly easy to find. On the other hand, the Valley is teeming with peeps w specialized skillsets and advanced degrees who WANT to work for startups. So if you're shoping for talent (as we are), it seems––yet again––that the Valley is a better place to shop.

    Conclusion
    New York is great if you're Chris Dixon or Dennis Crowley or anyone else who's already built a successful company and had a real exit under their belt. These people have their own angel and seed capital networks that transcend locality. And since they have no problem raising capital, they have no problem attracting top tier talent. Realistically, the amount of resources they have access to means they could be in any minor startub hub and make it work.

    But if you're a schmoe like me and you've got a big, world-changing dream, NYC is not the best place for you. The odds are already stacked against you. Being outside the Valley just stacks them higher. 

    Ok, so I don't know if this conclusion is actually true, so I'm heading out the California on Monday to test it. Honestly, I hope I'm wrong, because I hate driving, hate the suburbs, and love urban living, but we'll see.

    UP NEXT: My trip to Silicon Valley: Testing the Emerging California Thesis

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  5. Mike Maples is the Shiznit

    February 21, 2010 by Matt Mireles

    I wanna pitch this guy. Just, umm, yeah. My kind of dude.

    (Wish Vimeo's API could play nice with SpeakerText. Sadness…)

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  6. Picking a Startup Lawyer in NYC

    February 16, 2010 by Matt Mireles

    After spending a considerable amount of time scouring the scene for startup-oriented law firms in New York City, I think I’ve picked up some solid intel for fellow founders.

    • There’s A LOT of lawyers/firms out there marketing themselves as “startup saavy.” Most of these people are full of shit. The NYC startup scene is booming and Wall Street is contracting. Hence, lots of lawyers are re-focusing their efforts towards nascent startups. This does not mean they know what they’re talking about. BUYER BEWARE.
    • Read Chris Dixon & Fred Wilson’s blog posts on how much legal fees should run in first round financing. Answer: $10k max. Drill this into your head, then drill it into your lawyer’s head. Print out both posts and take them to whatever lawyer you hire. Great negotiating tactic. Hard to argue w Fred Wilson. BONUS: Capture the look on their faces when you bust out the printouts with that “$10k” figure underlined/circled/highlighted. Priceless.
    • While my search was not exhaustive, I did talk to a lot of firms. Based on my search, there’s only 3 firms in NYC I’d recommend…

    Wilson Sonsini––talk to Selim Day sday@wsgr.com
    Gunderson Dettmer––talk to Steve Baglio sbaglio@gunder.com
    Buhler Miles––talk to Heather Miles heather@buhlermiles.com (ex- Gunderson, super-friendly and cheap!)
    UPDATE: Heather’s practice has been acquired by Wilson Sonsini. You can now email her at hmiles@wsgr.com. See I told you she was awesome.

    • One firm to avoid: Lowenstein Sandler. They had come to me highly recommended and had some seemingly strong credentials. However, when we talked, they wanted to charge me $20-60k for a first round financing and then told me I absolutely, positively could not me raise $$ from non-”accredited” investors. Nice guys, but #FAIL (There are legit reasons for why you’d want to avoid/limit avoid non-accredited investors, but the blanket prohibition is stupid––this was from a senior parner, btw, not an associate.)
    • As a general rule, assume that most firms in NYC are totally fucking clueless when it comes to startups. DO NOT ASSUME COMPETENCE. Be skeptical. This is not the West Coast. As one lawyer told me (who we subsequently hired): it’s a difference in mindset––Risk Mitigation (East Coast) versus Wealth Maximization (West Coast). You want a lawyer and a firm whose focus is the latter, not the former.
    • Many lawyers will ask for a piece of equity in return for deferring fees: JUST SAY NO. Or you can say be polite: “Sure, how much $$$ would you like to invest? I’d love your support!”
    • Remember, people will expect you to be the stupid, clueless first-time founder who hasn’t done his homework and who can be bilked for all you’re worth. This is ESPECIALLY TRUE OF PATENT LAWYERS, although they may in fact be just technologically clueless, in which case they’re not trying to bilk you, but are doing so as a default position. Haven’t quite figured that one out…
    • Special Note on Patent Lawyers: I highly recommend: C. Andrew Im formerly of Fulbright & Jaworski. He told us our invention probably wasn’t patentable, then offered to file a provisional patent for cheap, which we we would write mostly write ourselves and he would edit. This is WAY cheaper than what anyone else offered. One quality dude. And smart as fuck too. Everyone else tried to bilk and bullshit us. <---UPDATED: Andrew has since left Fulbright and started his own firm, IM IP Law LLC. You can reach him by email at aim@imiplaw.com
    • Let the firms know you’re “lawyer shopping.” (I literally told them that in emails.) This will cause them to sell themselves more, kiss your ass a little, and talk shit on the competition. The result will be good intel for you. Interestingly, they will also sometimes say nice things about the competition, more accurately, they’ll explain to you who the real competition is (or at least should be). Interesting tidbit: Neither Wilson Sonsini nor Gunderson talked much shit about each other. In fact, they both said the other one “Gets it.”
    • The more competent the lawyer, the cheaper they are. This is a result of economies of scale––i.e. a lawyer who writes Convertible Notes 24×7 will spit one out in his/her sleep versus one who has to spend 4 hours doing research, looking stuff up, etc. This does not mean they’re cheaper on an hourly basis, but it’s even more reason to shop around and hire a true expert rather than the first lawyer you meet.
    • The more lawyers you talk to, the more you’ll realize how opaque the market is and how easy it is to end up totally hosed and not even know it. This is all the more reason to Do the Lawyer Hop!

    Just a reminder, all the usual caveats apply to this post: I am (mostly) just a clueless, self-promoting hack––not an expert on legal matters. Any actual knowledge or insight contained in this post is entirely incidental….in all seriousness, I really am just learning and making stuff up as I go along, so please be skeptical of my advice. I am a newbie founder trying to make my startup work, not a guru or industry veteran. BUYER BEWARE.

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  7. Hubris & the Meaning of Life

    February 14, 2010 by Matt Mireles

    This post is a follow up on my previous post: A Rigged Game, which itself was a response to Jordan Cooper's Full of Potential = Full of Shit… Jordan has responded to my post and now we're locked in an epic debate re: the Meaning of Life. Here's an excerpt from his latest post, Trees, Sharks & Change. My response is below…

    I was talking to my friend Brett yesterday and he said something that made a lot of sense to me. He said, “you and me, we are like sharks…we like to be moving all the time, and if we stop moving we die…most people aren’t like us.” I thought about this for a while and I realized that the reason why I didn’t detect a shred of despair in my previous post (while many people read it that way), is because the state that I am happiest in is one of change. Through that lens, the reason I keep introducing what the most ardent critic, Matt Mirelis, would call “unattainable” accomplishments/timeframes as points of reference to measure my own progress in life (i.e. those who accomplish amazing things very early in life), is because with the knowledge that more is possible than what I have or am doing, comes the reminder to keep moving and never become complacent.

    I think many people work towards defined goals in life (money, wife, house, kids, cars, corner office), and once they achieve them, they stop creating new goals and become complacent. I will call these people “trees” (once a tree grows to be a certain hight, very hard to move it). In this complacency, “trees” find happiness, but that is because they are not “sharks” as my friend Brett would say. Reveling in the satisfaction of what you are doing in the present or what you have done in the past is a recipe for slowing the rate of change in one’s life. This is a completely valid ambition, to reduce change, and some of my closest friends are unhappy during transitions, and extremely happy in routine…but “sharks” crave constant transition.

    via jordancooper.wordpress.com

    Dear Jaws,
    Ahh, hubris. Never fails.
    Hmm. Where to begin….
    Although the motive makes some sense, I think it is dangerous for you to place yourself in a separate class of humanity. The "sharks" vs "trees" categorization envisions a pretty static view of human psychology, your understanding of which seems deeply flawed.
    The problem (that this model doesn't seem to account for) is that in reality, today's "shark" is very often tomorrow's "tree." Sharks swim and swim and swim and then, say in their 30s, begin to ask the question: What's the f'ing point to all this swimming and chasing and running and movement?
    All too often, the answer is: there is none, there is no point. (Thoreau: Masses of men live lives of quiet desperation). And so    , faced with this existential crisis, people attempt to give meaning to their lives. How? They have kids. And they become "trees."
    Some people, of course, never figure it out. And they spend there whole lives on the shark treadmill, probably congratulating themselves for being so in shape.
    But at the end of the day, what's the point? Are you hustling just to keep up, or is there some bigger meaning, some larger ends, some purpose for all this effort and strain and movement?
    To imagine yourself on a pedestal, claiming you have some sort of different, special DNA than us mere mortals is a classic mistake of youth, a classic act of hubris. I think you're probably better off doing some more introspection and asking yourself: Why is it that so many "sharks" like me end up as "trees" later on? What is it about their worldview and circumstance that causes so many smart, ambitious people like me to end up thinking this way? How do I avoid this fate?
    Because in truth, you're really not that extraordinary. You really don't belong to a separate category of human being, except perchance by luck of birth, education and economics. And that's not something you earned.
    This frenetic search for the next, for the new––it is a classic marker of the highly competitive, outlandishly privileged, prep schooled elite. You and your friends alone have been given this special training, fed this special sauce that makes you "sharks," or so you have been indoctrinated to believe. I went to those schools. I get it.
    And it is from this "sharkiness" that you derive pride and a sense of identity. And part of that is cool. You have been conditioned to run fast, to work hard, to constantly push. The same was true when I fought fire on a hotshot crew––we were conditioned to work, to push, always just go, go, go without question. It ain't a bad tool to have in your playbook.
    But at some point, you gotta reflect and ask the question: What's the point of all this movement? To what ends do we struggle? Why am I working so f'ing hard?
    And that's my whole point:     Are you a shark simply swimming in circles because you need to move, because you have to move, because moving is all you know, because if you don't, you die. Or are you fucking going somewhere? Is there a direction? Is there a point?
    -Matt
    PS You misspelled my name: It's Matt MirelEs.


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  8. Well, I tried to Flip Off Google Street View…

    February 12, 2010 by Matt Mireles


    View Larger Map

    Almost worked….

    Category Uncategorized | Tags: | 1 Comment

  9. Startup Lessons for the Proto-Founder

    February 11, 2010 by Matt Mireles

    I started SpeakerText in October 2008 during the financial apocalypse. No one funded us. No one was gonna fund us. And I’m definitely a nobody. We launched in January 2010 after burning through just $4k of cash. While I’m still mostly a clueless hack, there are a few things I learned along the way that I think founders and proto-founders reading this blog might find useful. Here’s a few them, in list form:

    • Fake it ’till you make it. No one is interested in the company you’re going to start in the future. Starting is a declarative act. Just go for it. People won’t follow unless you lead. And once you convince yourself that you’ve got something, it’s a lot easier to convince others to join you.
    • Pitch like a mofo. The difference between your initial idea and your ultimate product is the difference between a slab of rock and the David. There’s a thousand problems you need to solve, and the only way you learn about them––much less solve them––is to pitch, pitch, pitch and pitch again to every smart person you meet. Listen to what they have to say and regardless of how jumbled and contradictory their suggestions or complaints are, try to look for patterns and distill the deeper underlying pain points or problems with your model. Think of it as crowdsourcing. The masses have much to teach you, if you let them.
    • Advisors, they’re easier to find than you think. This goes along with my above point about pitching everyone you meet. Most people are afraid of embarrassing themselves, so they keep quiet, especially around successful, important people who could help them. Don’t. I landed my first advisor––Joe Kennedy, the CEO of Pandora––when I pitched him after a talk at Stanford. He gave me his card; I followed up. There was no formal arrangement or anything, but I was persistent, hit him up with questions only when I was truly flummoxed (ie didn’t waste his time), listened and kept him updated on our progress.
    • You need a Co-Founder, not an Engineering Bitch. Lots of business-y, idea-type people who say they’re looking for a co-founder are, in reality, looking for what is best described as an “engineering bitch.” Here’s how the pitch sounds from the engineer’s perspective: ‘For ten whole percent of equity, you will slave away to build a prototype out of my shitty idea, not have any say in the decision-making process…and oh yeah, you could be fired at any point.’ This does not make for a happy long term relationship. Instead, find someone you know and trust––I called up an old college friend––who will call you out on your bullshit and push back when you overreach. Date for a bit, then split the equity.
    • Recruit college kids. They’re young, hungry and don’t need of a living wage. Experienced, talented software engineers have lots of options in life, and most of them involve getting paid. College students, on the other hand, have less options, and probably have their living expenses covered by financial aid. Thus, the opportunity cost of joining your half-baked venture is dramatically lower than it is for legit professionals. For students, your startup is more like a resume-enhancing ‘extra-curricular’ than a regular job. The right person will love the responsibility you’re handing them. Score for you, score for them.
    • Go to job fairs. You’ll be the only startup there. This is a corollary to the previous point.  I went to the Columbia Engineering Career Fair in October 2009 and left with ~150 resumes. We hired three guys from that batch and paid them in iPhones. Doubtful we’d have access to such a rich employee pool any other way. Bonus: Distinguish yourself by being the approachable guy in the T-shirt. Lots of the attendees will be wearing suits for the first time––and hating it. Your casual garb will looks very enticing.
    • Sell the Vision, Not the Reality. You may or may not have a working product. Your product may or may not suck. You “team” may not really exist. But that doesn’t matter. What matters is your vision of what the product will be and how it will change the world. That is what gets people excited. That is what will make people work like dogs for no money, tell all their friends and drop everything just to get a product built.
    • Treat everyone you hire like a co-founder. In normal jobs, people put up with a lot of grief and bullshit because they’re getting paid. In a ghetto startup (like mine), that’s not really an option. Treat people well, be honest, and don’t bullshit them. Trust and your rep is all you got. Err on the side of sharing too much. It builds trust and earns buy-in from the people you hire.
    • Try before you buy. When you’re hiring folks, don’t promise equity upfront. Specify some sort of trial period where the person is to accomplish a specific, delineated task. Make sure you own all the IP created during this trial period, and make no promises for later. After the month or so is over, then sit down and talk equity. Making this clear from the outset will put both parties at ease.
    • “Stealth Mode” = FAIL. Your idea, as it exists today, sucks ass. Ok, let me rephrase that: My idea started off sucking ass. But I pitched smart people…and dumb people––and learned from both. Originally, SpeakerText was going to be a tool for journalists (I was a journo) to automatically transcribe and search within their audio interviews. Tiny, contracting market. Huge upfront software licensing fees. Customers are technophobes. #FAIL just waiting to happen. Had we kept our plans a secret, SpeakerText would probably just be one big bucket of fail today. Instead, after having tons of holes poked into our idea by friends, cousins, VCs, baristas, entrepreneurs and bored women at parties, we turned SpeakerText into a tool for video publishers and even our crappy v1.0 works with the massive market that is YouTube. Outcome: last night a Biz Dev guy from Disney/ABC sent me an email asking about partnering with some of their online properties. Reminder: we launched on just $4k.
    • In case you missed it earlier: PITCH PITCH PITCH. Over the last 15 months, I have pitched nearly every sentient being I have met. This includes a guy I met at 4am after doing CPR on his mom (I’m a paramedic). The dude turned out to be a senior partner at a major international corporate law firm, and 6 weeks later he offered to take me on as a pro bono client. My point here is that you never know who can help you and you never will until you open your trap and pitch. Not only will this help you find help, but it will DRAMATICALLY improve your pitch and lower your fear/nervousness when time comes to pitch real investors. Plus, it adds big time on the competition research front, because your friends/acquaintances/ex-girlfriends will see articles about competitors and share them with you on Facebook.
    • Vest, young man. Starting a company without vesting your stock is like getting your girlfriend pregnant on the first date. Sure, it could work out, but if it doesn’t, you’re completely hosed.
    • Get creative with compensation––use the iPhone Payment Plan. Imagine you’re a highly-trained software engineer. A crazy guy with a “startup” (i.e. me) approaches you about doing some work. Scenario #1: Dude, I’ll pay you $2,000 for 150 hours of work…3-4 months from now. Scenario #2: Dude, promise to build this and I’ll give you an iPhone right now. Plus, as long as you’re working on it, I’ll pay your phone bill. If I like it and it works, I’ll toss in an extra $250 at the end and we’ll talk equity then. If not, you can keep the iPhone and I’ll even cover the cancellation fee if you want to ditch AT&T. We tried both approaches at SpeakerText, and surprisingly, Scenario #2––despite being a lot cheap––actually worked out a lot better. There’s something about the psychology of receiving a cool gadget that doesn’t quite equal out to the cash equivalent. Also, paying up for the iPhone upfront fosters trust, which in turn boosts productivity.
    • Yammer is an awesome tool for fostering camaraderie on distributed teams. Use it.
    • Build something people want before you attempt to raise money. The word for “visionary investor” is “entrepreneur.” If you’re an unproven schmo with no credentials like me, people generally––and investors in particular––will tend dismiss you and your crazy idea.  (If you’re a former Google VP, then you can probably ignore this tidbit.) The only––and the strongest––track record you can have is the product you’ve built and the traction/market feedback you’ve gotten.
    • Need legal advice? Do the Lawyer Hop. Every lawyer will give you an hour of their time for free. Remember that. Need 10 hours of legal counsel? Talk to 10 lawyers. Need to learn about IP, patents, etc.? Call a patent lawyer! More questions? Call another one! Don’t feel the need to restrict yourself to a local geography either. You can call up America’s leading legal luminaries and get an hour of their time for free, every time. This won’t work for producing legal documents, but it will work for fundamental questions of “is this legal?” “do I need to patent this?” etc. Also, different lawyers have different perspectives, so the lawyer hop a good way to get a holistic, composite understanding of a particular issue. Plus, when you need to actually hire a lawyer, you’ll know what a good one sounds like––and have a fat rolodex of people you’ve already talked with to draw from.
    • Patent lawyers will always want your money…except the good ones. Asking an IP lawyer, “Is my invention patentable?” is like asking a car mechanic “Does my car need any work done?” Unless you find a good one, the answer will always be yes. That’s how they make their money, but not how you make yours. Buyer beware.
    • Start a blog. Sound intelligent. Be interesting. The same reason you’re probably dying to pitch Fred Wilson and/or Chris Dixon is the same reason you should start a blog. Again, if you’re a no-name nobody like me, you’ve gotta build a name for yourself from scratch. Writing an intelligent sounding blog and then submitting posts to Hacker News, Digg, etc. is a great way to put yourself on people’s radar. Just last week I met up with an big time seed investor from the Valley. He had messaged me on Facebook after seeing one of my blog posts on Hacker News. Now he’s making intros to other big dogs and generally helping to legitimize our brand.
    • Tell a good story. Deep down inside, all Americans love entrepreneurs. People are suckers for the crazy, epic shit we do as founders. Don’t downplay it; wear it your on your sleeve like a badge of honor. Although it may not feel like it now while you’re in the trenches trying not to die, you’re living what lots of people (especially older, middle-management types) consider the dream. Tell your story to the right person (i.e. the frustrated wannabe founder with 3 kids and a mortgage) inside of a big organization and they’ll become your champion, guiding you through the sales process and giving you lots of actionable intel.
    • Comment on Brad Feld’s blog. But don’t kiss his ass. Important point to remember: powerful, successful people tend not to like having their ass kissed. People do that to them all the time, and my sense is that they hate it. And if they don’t, fuck ‘em––don’t waste your time on people who want you to kiss their ass. More often, people in positions of power crave genuine interaction. The more powerful the person, the more they are surrounded by sycophants. Don’t be a sycophant. Outside of intros, a good way to approach these guys is to comment intelligently on their blog. I turned an exchange in the comments section of Brad Feld’s blog into a pitch for SpeakerText that turned into an intro to someone else. Never met Señor Feld before, but we had a legit exchange in the comments and took it from there.
    • Help people. It just feels good. Honestly, I feel very lucky to have been helped and guided by lots of smart people who probably had much better things to do with their time. Guys like Seth Sternberg, the Founder/CEO of Meebo. Awesome dude. Sequoia-backed. Ridiculously helpful. When I grow up, I want to be like him. Starting a company can be really stressful and scary; depending on the day, it’s easy to lose hope and dwell on how fuct/clueless/ready-to-fail you and your startup are. If for no other reason, helping people who know even less than you do will make you feel good about yourself, boost your ego and as a result, make you into a more productive founder. Win-win-win.
    • Tenacity is impressive. A lot of people “start” companies, but very few actually have the tenacity and drive to bring a product to market, hire people, etc. People will expect you to quit, and part of how you will impress them is by simply keeping at it, iterating your idea/product/vision, and making progress. As my Dad likes to say: Persistence and determination alone are omnipotent.

    Category Uncategorized | Tags: | 119 Comments

  10. Mental Toughness

    February 8, 2010 by Matt Mireles

    Back in 2004, before I lived in New York City or attended Columbia or even dreamed of starting a company, I fought wildfires for the Modoc Interagency Hotshot Crew. Hotshot crews are the US Forest Service’s equivalent to the Marine Corps: the elite infantry in their perpetual (and stupendously wasteful) war against fire. Modoc Hotshots 2004––the above video––is a highlight reel of that season, my third and last fighting forest fires for the government.

    Honestly, it was the worst 6 months of my life. The guys I worked with, well, most of them hated me, and I hated them. I was lonely, friendless, and miserable. They tried to break me. They tried to make me quit. But I didn’t break and I sure as hell didn’t quit.

    I showed up at the hotshot base in May 2004 weighing 175lbs and was in what I thought to be excellent shape. Little did I know. As it turned out, I had two problems: 1) I couldn’t hike fast enough, and 2) I couldn’t swing a tool in the dirt for long enough. 

    Hiking. Sounds like a pleasant, leisurely activity, doesn’t it? Well, in the hotshot world, hiking––since we operated in the mountains, by and large––takes on a bit more urgency. Our packs weighed ~50 lbs. plus a 10 lb. tool, and add an extra 35+ lbs if you were carrying a saw (as in chainsaw). We hiked at altitude, rapidly, and always in a straight line up the hill. I sucked at it. 

    As the FNG (Fucking New Guy) and an urbanite, the odds were already not in my favor. Our crew was based in the true armpit of California, the northeastern most corner, in a town called Canby, population: 135. And not only could I not hike, but I had a big mouth and didn’t believe in the pecking order. Bad combo.

    On top of that, I couldn’t swing a tool to save my fucking life. After 10min, my arms were shot. To put this in context, we were a hotshot crew. Our râison d’etre was to dig fireline with handtools and chainsaws along the burning edge of a wildfire for hours and hours on end. I was like a construction worker who couldn’t lift bricks: useless. 

    And so, naturally, the guys tried to break me, to expunge me from the clan. A hotshot crew is a clan: 20 people living, breathing, eating, sleeping, shitting and working together almost every day for 6 months straight. When assigned to a fire, we typically worked 16 hours a day for 14 days straight, then got 2 days off before heading off to another fire. Rinse, repeat. 

    My first big fire was also the most miserable. Much as with the entire hotshot experience, it started off as a dream come true: We had got assigned to a fire in Alaska, the mythic home of the last frontier (see the shot of the moose). Promptly, we were assigned to a .5 million acre wildfire outside of Fairbanks. Contrary to all logic or local fire fighting norms, our boss ordered us to dig proper fireline…through the 8″ tundra and all the way down to the permafrost. It was fucking horrible, pointless, backbreaking labor. The axe head on my tool quickly dulled, and half the time I’d swing as hard as I could just to have my tool bounce off the tundra. That day, half of my hand went numb, and I didn’t regain feeling in it until a year later. 

    Let’s just say I bitched loudly about a) the hardness of the work, and b) the futility of our task. Did not win me friends. #Fail.

    Senior crew members hazed and harassed me. No one wanted to talk to me or sit next to me. Quite simply, it was hard, miserable, lonely work. I had failed. And I got depressed. I started drinking everyday after work (we lived in govt barracks on the base itself, and slept in the dirt when on assignment). My self-confidence turned to shit. But I didn’t quit. And when I wasn’t drinking my loneliness away, I worked out after work. I hiked. I ran. I lifted weights. 

    By mid-season, I had gained ~20 lbs. of pure muscle and was weighing in at 195 lbs. Finally, I could keep pace with the hikes. Even better, I could swing a tool for hours and hours on end without discomfort. I was fast and I swung my tool (a pulaski) hard. They still hated me, but at least I was good at my job. 

    To be honest, I wanted to quit; I wanted to quit so bad. But I had debt I needed to pay off and money I needed to save for my impending move to NYC. Mom & dad sure as hell weren’t gonna bail me out. So I pressed on and used alcohol to self-medicate.

    By the end of the summer, I was so used to taking abuse that I honestly didn’t give a fuck anymore. I had tried so hard to fit in, and my efforts had failed. I had made every concession I could think of, improved my strength and endurance, all to no avail. So I adapted my thinking: Fuck them, and if you don’t like who I am, fuck you. It was adaptive, really, but also liberating.

    I was no longer the sensitive, empathic writer who had dropped out of Berkeley to write a book. No, I had since joined Lord of the Flies, thinking it was gonna be a chapter from the Hobbit. A hard, lonely lesson indeed. And yet I came out the other side.

    Yes, I was scarred. It took me 3+ years to be ready to take risk again, to desire another grand adventure having had the last one blow up in my face. But in all the pain and misery and loneliness, fighting fire taught me something invaluable: to be hard inside, to be mentally tough, to inure myself to social rejection, to deal and cope with loneliness and pain and still function. 

    The best part, now that it’s over, is that I know that nothing I ever do in my life will be as hard as those last six months I spent fighting fire. Nothing short of prison could be more lonely, and no work I do will ever be physically as painful. It is the zero with which I weigh the rest of life’s struggles, and I am glad to have it as a reference. It serves me well.

     

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