Mom directing Dad & the St. Bernadette men’s choir at Christmas Eve Mass

2011/12/24 Leave a comment

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There is no such thing as a free lunch. Not even on the internet.

2011/12/17 Leave a comment
A large chunk of the internet is allowed to exist because it is supported by an advertising business model. Instead of users paying directly for services, brands pay for the opportunity to market their goods and services to users. Yet, even with a third-party in the value chain, users still pay a price for their free content and digital services: we pay with time and attention. And while neither of these is properly valued, time and attention are two of our most valuable, non-renewable resources, and we should be more careful with how we spend them.

Advertising is not inherently unproductive. In fact, the "Patron Saint of Advertising" is none other than Benjamin Franklin, one of the more productive figures in history. I personally benefit each day from ad-supported productivity tools (Gmail, Google Maps, LinkedIn) that I am able to access because they are supported by this business model. But a few of my smarter friends are staunch advocates of Adblocking tools, and I'm starting to wonder if they're on to something.

Time is something that interests me greatly. My business exists for the sake of saving people time. As an entrepreneur, I have come to respect the fact that while money, talent, equipment, customers, and real estate can all be replaced or swapped out, time has finite, unchangeable limits. Advertising consumes a measurable quantity of my life. How many years worth of TV commercials have I sat through? For what percentage of my daily commute am I listening to the radio (yes, I still listen to terrestrial radio) and hearing ads, not music? Even interstitial ads on major news sites or popular YouTube videos bite into my time.

Attention is a bit less tangible, and more difficult to measure. Back in June, I realized that I had developed a good control over my time, my control over my attention was subpar. One factor that was affecting this: sleep. About 6 months ago, I was notoriously opposed to sleeping. This summer, I decided to start tracking my sleep, with the goal of moving my nightly average from 6 hours to 8 hours (I'm averaging over 7 for December). The result: I've felt more focused throughout the day, I have been more productive (currently quantified by percentage of daily goals set, then achieved). Because of the way that time and attention work in concert, I am actually producing more during fewer hours of work. So while I haven't quantified attention yet, I know that it has an affect on my productive output similar to time.

All of this goes to say that we should not take for granted the things (like advertising) that can sap away our attention, and thus cost us the human energy we need to be a productive society.

Three productivity articles from this week that helped inspire this post:
7 Things Highly Productive People Do (hint: they don't get distracted)

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A few thoughts on accelerators

2011/12/11 Leave a comment
Depending on who you ask, we might be in an accelerator bubble. That, of course, depends on how you define "accelerator" and "bubble". While I don't feel qualified to assess the latter, I do know a few things about accelerators. My company, BuildingLayer, participated in Betaspring over the summer, I have several friends who have gone through other accelerator programs, and have a few mentors who almost started one back in 2008. This may not make me the world's foremost expert, but as the model is not yet a decade old, I feel qualified enough to provide some useful, high-level information.

Because I have been running a startup in the Midwest (where it's rare that someone reads the latest Techcrunch posts over breakfast) I frequently get asked about how accelerators work. It's an intriguing proposition, as many people would love to help create the next Dropbox, AirBnB, Occipital, or Sendgrid. But there are a few intricacies that make this model a bit unfamiliar. Often, the people asking are experienced entrepreneurs (but usually not from a software background), investors (usually not in technology companies), and economic development officials (from both government and academic perspectives). I've recently realized that my somewhat coherent picture of a modern accelerator can greatly differ from the more well-known business incubators of the past. For clarity, here's my definition of a typical seed-stage accelerator program:
  • Finite time (typically 3 months)
  • Mentor-driven (it's not about the money, it's about the people)
  • Batches of multiple early-stage companies (typically 10)
  • Equity investment in companies (the accelerator's economic driver)
The important note here is to differentiate the accelerator program from "business incubators", which often don't have a finite time period (at least not as short), don't rely as heavily on a formal mentoring process, accept companies as they come rather than in batches, and may not take an equity stake in companies in exchange for these services. Both fulfill a need, but they are not the same thing.

While I discuss accelerators frequently, a recent question sparked this particular post:

"It seems as if every accelerator program is focused exclusively on technology/internet based companies.  I know that being "capital light" is reason for this, but I am trying to understand why other types of businesses aren't typically included?  There are certainly plenty of great ideas and foundations for successful businesses that don't fit the typical accelerator company model that could really benefit from a similar program."

This question is very important, as it relates to the core reason that a group of people choose to start an accelerator. If the goal of a program is for benefit of the community and of the entrepreneur, there are certainly companies that could benefit from a program similar to an accelerator. If the goal of the accelerator program is to improve the likelihood of success for high-risk, high-reward investments, and to make money for the investors and entrepreneurs, then I see a few reasons why we have seen the emergence of accelerators that focus on a particular type of company.

I think the low initial capital requirement of web/application companies is only one of the reasons that they fit well into the accelerator model. I think there are 3 other reasons that are more important:

1. New Technology -> Disproportionate value creation
Founding (and funding) startups is a high-risk, high-reward endeavor. The entrepreneurs and investors involved are not typically looking for a small return, even if it is guaranteed. To justify the high risk, and accomplish a much larger return, startups need to either use or create technology that is dramatically better than what currently exists, or that enables them to access a previously inaccessible market. Software companies (the majority of modern technology startups) also have the advantage of having a near-zero cost-of-goods-sold, so when sales volume increases, revenue often increases disproportionally to costs (ie low variable costs).

2. Web = broader, cheaper, more targeted distribution
The web provides a significant advantage as a distribution channel, even for businesses that are selling traditional products/services (such as retail). The web enables any business to reach almost any consumer in the world. It does this for a far lower cost than was previously possible. Part of the reason that this cost-of-customer-acquisition is significantly less expensive is the ability to target the right customers, instead of using spray-and-pray mass-marketing techniques. This and other waste reductions has allowed online retailers to quickly become viable competitors to brick-and-mortar retailers in a much shorter period of time. Additionally, this rides a trend of increased business and consumer internet usage, and an increase in online purchasing habits.

3. Risk profile: fewer types and faster mitigation
For most technology/internet (read: software) startups, there are often fewer regulatory risks than other types of businesses (no FDA trials, no restaurant health department inspections, no OSHA requirements). Financial risks are lower, as the primary costs are keeping the founders alive. The primary risks are technology and market. On the technology side, many startups make use of an assemblage of open-source software components (such as Linux & Apache to power servers). By building on top of proven software (that someone else maintains for free), this reduces the number of technology failure points. On the market side, the challenge is determining product/market fit. Based on the advantages of the web as a distribution channel (and the near-zero COGS), technology companies can more quickly iterate toward product/market fit. Based on this risk profile, it's reasonable to expect that a web/software startup could significantly mitigate key risks during a 3-month period, while other companies (such as medical device companies) could take several years. This risk reduction makes the startup more attractive to investors, and as getting a startup to a "fundable" state is one of the primary measurable goals of an accelerator, this is important.

I do think that other types of companies with low capital requirements would benefit from three months of mentoring and focused work on their business. A non-profit that does this (such as the SBA) could provide great value to a community. However, small businesses and startups are different, and I don't think that small businesses can provide the potential return to the investors who fund a for-profit accelerator. In order to make enough progress in 3 months to achieve the effect that accelerators are designed to foster, an accelerator company needs to take advantage of the technology, distribution, and risk profile advantages that typical startups embody.

One disclaimer: I live and breathe this world of early-stage software companies. It is entirely likely that I am overlooking some opportunities. If you have insight into another type of company that would fit into this model, and provide the desired return to investors, I would love to learn more about that.

Finally, my business partner Brian is at a Techstars Network conference this weekend. I'm really excited to see what comes out of this meeting of the partners and alumni of the leading incubators from around the world.

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The 3 Types of Email Newsletters for Startups

2011/10/17 Leave a comment
Scenario: you and some hacker friends built a cool product, then you attracted some users, so you started a company, and maybe have some investors. All you have to do is keep the product working, the servers spinning, and things are good, right? Not so fast.

Soon, all those users/customers will have questions. And if you have investors, they'll want to know where things are headed. And if your little team outgrows the back seat of your Toyota Corolla, then you will have to do that dreaded thing called…COMMUNICATION. But don't worry, it's actually not too bad. 

I like to separate communication into two buckets: reactive and proactive. Reactive communication involves responding to requests from others. It can take the form of feedback tools (Olark, GetSatisfaction), Twitter/Facebook, or phone/email/IRL conversations. Reactive communication is time consuming because it's unpredictable. If done well, proactive conversation will save you time by reducing the amount of reactive communication you'll need to do. Two popular types of proactive communication are blog posts and email newsletters. This post will cover some strategies for the latter (letter…latter), as I've recently spent some time doing email newsletters for my crowdsourced indoor mapping startup, BuildingLayer.

There are three main groups of people with whom your startup needs to communicate: users/customers, investors/mentors, and your own team. Your message should be different for these three groups. The tone of your conversations, the content of your messages, and the frequency of your updates will vary according to your audience. Here are a few quick tips for each:

  • Tone: Let your personality shine through. Micah Baldwin of Graphicly is awesome at this. I don't even use his product, but I read each one of his user newsletters.
  • Content: New features. User/customer success stories. Awesome people who have joined your team. 
  • Frequency: Don't leave people in the dark, but don't spam them. No more than once per week.

  • Tone: Be yourself, but focus less on personality than in user/customer emails. Choose "concise" over "flowery". Your audience here is busy. Respect that.
  • Content: Milestones. The key thing these people want to know is that you can set and achieve goals. There are two responses you are looking for from these messages: a pat on the back for hitting your milestones, or an offer for help in achieving them. One HUGE reason to send these newsletters is to get help when you need it. Things will go wrong, but the sooner you can get help in fixing them, the better for all involved.
  • Frequency: If you're in really early stages and making rapid progress, once per week. The goal here is to show consistent growth. Once per month to once per quarter may make more sense as you mature.
Your Own Team
  • Tone: Be yourself. Similar to investors & mentors, don't hide anything from your team. If times are tough, they need to know. If times are good, let everyone join in the celebration.
  • Content: Progress on products, funding, new marketing campaigns, new customers, new team members.
  • Frequency: This is one way to have fewer time-wasting meetings. Once per week to once per month.
While effective communication takes time, proactive communication like this will often save you in the long run. While blog posts and social media status updates can be helpful, being in someone's inbox is still one of the most effective ways to communicate with groups of people. Finally, if you arrive at the question of "should I communicate or not?", always favor the side of overcommunicating. I have never had an investor, customer or team member (…or parent, or girlfriend…) say, "I wish Nick would keep me less up-to-date".

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Living life in fast-forward

2011/10/11 Leave a comment
Startups are like living life in fast-forward.

Before I started a company, my life already seemed to be moving fairly quickly. I like change, and there has been no shortage of it in my life. But since my team at BuildingLayer was accepted to Betaspring, it feels like life has been moving a bit faster. I think this is a normal thing for today's startupers. In a world where digital trends rise and fall in a matter of weeks, you have to move quickly to build an MVP, capture mindshare, and continuously iterate toward product-market fit. And the need for this speed, this focus on only the most important things, has been echoed upon the recent passing of Steve Jobs. While Apple is far from being a startup in terms of age and financial situation, its founder never stopped moving at startup pace.

A few examples of this increased pace:

Where is home? During my life, I've previously experienced relocation at an above normal speed. My family moved every 2-3 years when I was growing up. In the past 6 months, I've spent at least a week living at 6 different residences. Our office has become my only reliable mailing address.

Email volume. My normal email influx for the last 2 years has been about 25-50 emails per day. Now, it's in the 50-100 range. And I'm pretty good about filtering spam (thx, Gmail) and other notification content out of my inbox. I'm now seeing more of these messages, from potential investors, partners, and customers, that also require prompt responses.

Travel. I've traveled enough during the last month to witness Occupy Wall Street protests in 5 cities, but I still don't know what they're protesting. Hopefully it's not the salaries for CEOs of pre-funding startups 😉 But I mention this to highlight an element of focus. Someone else could travel to these exact same cities and derive an entirely different value (say, participating in the protests, or seeing all the touristy sights). My focus has been on meeting people who are important to the indoor mapping ecosystem. It's not the location that matters, it's the context.

New People. I've been experiencing an increased rate of meeting new people. While there are some parts of this "life in fast-forward" trend that are of debatable value, I love this part. Every time I'm on a plane, I get to meet at least the one person who is seated next to me. While the long duration of flights make for more in-depth conversations, I also enjoy the brief, surface-level interactions with strangers when using public transit. Yet another reason commuting by car is inferior. More importantly, from a business standpoint, I get to meet the people who matter in my industry. By becoming a player in the game who offers a key component, I get to meet some of the bigger players who can benefit from our work at BuildingLayer. And while I love reaching out to these people, it's amazing now that it is now at the point when people start calling us! The world is truly smaller than I ever thought it was, especially within entrepreneurial circles.

Old People. No, I'm not talking senior-citizens (although the average age of my friend groups has increased disproportionately to my age increase since graduating from college). When life is moving faster, there are more changes to discuss with old friends and family members. And with so much in flux, it feels increasingly important to seize whatever time we can share together. This means more "hey, I'm in town, want to grab coffee/lunch?" interactions. And these times are amazingly fulfilling. I got to have coffee with the pastor from my church yesterday after we shared a connecting flight from Lexington to Washington, D.C. Then I had lunch with a good friend from college, now getting his PhD at MIT. This situation seems to happen most frequently with Team Alpha and Solar Car Team alumni, who are inherently highly-motivated (and now geographically distributed) people.

New ideas. The core idea behind our company has matured significantly over the past two months. What started off as AwesomeTouch, a giant touchscreen interface for city tourism maps, has become BuildingLayer, a crowdsoured map of the indoor world. The process we went through is well illustrated by The Squiggle (even the mathematically invalid movements to the left along the time axis). As we have bounced between the feedback of different advisors, partners, and customers, we are finally closing in on our niche. One piece of advice for teams on this: bouncing around can be incredibly frustrating to your product team. Communicate this up-front, and properly calibrate your team's expectations. I told my team that the months of August and September would be messy, and they were. October is shaping up to be much more linearly productive. We have iterated enough on our idea and gathered enough "if you build this, I will use it" testimonials to feel confident about our chosen direction. Now, it's time to execute.

Even with this increased pace, there is still a long grind before anyone becomes an overnight success. But, to be successful, we must keep moving fervently. Answering emails, meeting new people, refining our core idea, and building new iterations of our product. So here's to all you who are following your passion, and living life in fast-forward. May your work enable others to soak up life in a more fulfilling way. And thank you to Steve Jobs, who showed quite a few of us how thinking differently, looking at life as a fleeting moment, can help us make the world a better place.

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Noticing increases in our Luck Surface Area

2011/10/09 Leave a comment
When I was growing up, my dad hung a few of those Successories posters on the wall in my bedroom. He is a sales guy from birth, and is big into the management theories of Stephen Covey and the like. There was one poster that I remember particularly well. It had a photo of a tattered baseball glove on it, with the words "The harder you work, the luckier you get." After forming our company nearly two years ago, and growing through several upward pivots, my team and I have first-hand knowledge of this statement's validity. 

I just read a brilliant post by Jason Roberts: How to Increase Your Luck Surface Area. With that, he saved me the effort of writing a full-fledged blog post, so here is the half-fledged version:

  • Startups are hard
  • You need help
  • People want to help
  • Don't be secretive
  • Share your passion with the world
  • Good things will happen
My additional comments on his post:

"I woke up this morning to two text messages from friends/former co-workers with leads on potential technology partners for my startup, BuildingLayer. Following some press (ie talking to a large audience about what we do), we've had top-notch mentors and potential investors reach out to us. Startups are hard, so anything you can do to increase the probability of your success is helpful. Having an army of friends/mentors/fans who know what you do, have experienced your passion for it, and can be your scouts and messengers is a huge asset. 

After experiences like these, I almost wrote a similar post, but opened up the Startup Digest Reading List (thanks, Chris), and liked the way you articulated it. Keep up the good work, Jason!"

PS: Thanks to Chris for sharing Jason's post via Startup Digest Reading List! (you should sign up)
PPS: Copious amounts of this also goes a long way.

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Don’t be late to the party at 83(b)

2011/09/27 Leave a comment
My co-founders and I recently formed a C-Corp, and have been learning some of the formational intricacies that we avoided in our last company (which was an LLC). One of these is the need for founders/employees to make our IRS Section 83(b) elections. There are some great posts out there by people like Dave Naffziger and Startup Company Lawyer to explain this in depth, but I wanted to share some personal context, and hopefully add a few words of wisdom.

So, what is this 83(b) stuff? It's a section of the IRS Code of 1986 that permits a special tax designation that can save startup founders & employees from incurring large capital gains taxes ($10k+) on stock issued through a vesting agreement as compensation (essentially worth $0 in early days).

The highlights:

Who: employees (for startups organized as Corporations) who are receiving stock on a vesting schedule

What: a form (no standard from the IRS, but there are some basic docs out there) that identifies founder/employee, number of shares he/she owns, date when shares were awarded, tax year, Fair Market Value (FMV) of each share (based on your supposed valuation), the Amount Paid by the founder for each share.

When: you must file within 30 days of issuing stock (this is a HARD deadline, so don't mess with the IRS on this, all you Pareto devotees and procrastinators!)

Where: umm, yeah, nothing to put here, but I was told to use these 5W's and an H…

Why: without the designation, founders/employees pay taxes on the stock grant, and at each vesting interval. With the 83(b) election, you can defer taxes until your shares in the company are sold (ie a liquidity event, when you can hopefully afford to pay those taxes!)

How: send the form to the IRS (usually via your lawyer)

A few pieces of advice I was given that I didn't see listed anywhere else:
– It's likely a good idea for your FMV and Amount Paid to be the same. Hence, no gain. (please, correct me on this if I'm wrong).
– You'll probably be guessing on your valuation, so don't get too hung up on the number you choose. This might range from Par value (something like $0.001/share) up to $1/share. See example in Dave's post.

– File this within 30 days of awarding shares! (Ok, I saw this advice everywhere, but worth repeating)

So, startup founder, I hope this saves you some time so you focus on building your business and changing the world! As for me, back to indoor maps

Disclaimer: I'm not a tax expert, yatta yatta. And if you know better, please discuss on the comments!

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Some thoughts on frozen toothpaste

2011/09/17 Leave a comment

What remains of my toothpaste, post-TSA
This is what remains of my toothpaste: 0.8 ounces. I started the day with a full-size (4.8 ounce) bottle of toothpaste, which exceeds the TSA’s limit of 3.4 ounces of liquid per container. The thought behind this regulation is that the possession of certain types of liquid in sufficient quantities can be used to make a bomb. While I am glad that someone is looking out for my wellbeing as an air traveler, a few of the security measures simply don’t make sense.
What if I froze my toothpaste? The TSA’s restriction is not on toothpaste, but on liquids. If I initiated a state change and turned my toothpaste into a solid, would it suddenly be permissible?

This doesn’t make sense.

Also, how effective are those full-body backscatter scanners? The thought is that these machines help TSA personnel quickly detect dangerous objects with increased sensitivity over other methods. I noticed the machines were only in about half the lines at the Denver Airport. Half the passengers are invasively scanned, while the rest simply pass through metal detectors.

What if someone with malicious intent simply chooses to bypass the more thorough scanner?

This doesn’t make sense.

These experiences remind me of an aspect of conversations I’ve had recently with entrepreneurs about their startups: it’s vital that your story makes sense. There are two pieces of this:
1. Actually have a logical story
2. Communicate your story clearly & concisely

In the case of the TSA, their story actually has a very simple logic (however flawed their “product” is under the surface): you want to feel safe, so our systems filter out dangerous stuff and make it safer for you to travel. ZipCar is also great: you don’t need a car, just the service of using a car when you need it. We make that process really easy, and while you pay us for that convenience, you still save money over owning or traditional car rental. Boom. Logical. Everybody wins.

Does your startup’s story make sense like this? Do you solve a human need in a clear, logical way? Or, like the toothpaste regulation, is it easy to poke holes in your logic? Mastering your story can certainly be an iterative process, but you should always be trending toward a simple, logical, easily understandable series of thoughts. This will make your conversations with users, customers, partners, and investors much more productive (and likely, more successful). And to accomplish this, your product team and marketing team (likely the same people in an early-stage startup) need to work together. As form follows function, it’s much easier to convince your audience that a hammer can do the job of driving nails than, say, convincing them that a feather could.

Lesson learned: nail your product, then tell a clear story about it.

Note 1: TSA liquid regulations

Note2: way to go, L3 Communications on selling those backscatter machines and apparently making loads of money by reducing people’s fears! Killer combination of powerful technology, and an even more powerful marketing campaign.

Hello, Denver. Thanks for this map. Why isn’t it a touchscreen?

2011/09/13 Leave a comment

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Back at our favorite Sheetz, near Harrisburg, PA.. #LexKY-bound

2011/09/10 2 comments

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