Entrepreneur Colloge follow-up

I just got back from the Entrepreneur College at Wilson Sonsini Goodrich & Rosati (WSGR). It was great! I highly recommend going if you are remotely close to WSGR or a satellite office (see link in my last post about how to sign up).

The speaker today was Mark Reinstra, a partner at the Palo Alto office. He specializes in corporate law, M&A, and VC. Today's discussion was focused on incorporation and stock option pools. The session was quite interactive, with great Q&A brought on by the audience relating to incorporation issues, stock option grants, vesting scheduling, NDA's, employees, liability, etc.

Mark was also available afterwards for more specific questions. I had a word with him about creating an equity pool without incorporating, since we're focused on spending our money on our project and not on legal fees, incorporation fees, and potential tax liability. Something he mentioned, which we knew a little about, is that WSGR offers legal services for startups, for deferred fees, pre Series A. What this means is that they will offer you legal services for free before you raise money and will simply get paid back when you raise your Series A. No money technically comes out of pocket up front. I say technically, because it will eventually come out of the company. A few other companies offer deferred payment terms so you'll have to look into it with whatever legal team you want to represent you.

Bottom line: If you're a typical software startup like we are, you're going to want to incorporate as a C Corp, in California or Deleware, with 20% equity set aside for employees (these are the things I was most curious about).

Earthquake!

Tonight we splurged. Jeever (my business partner Rajiv) bought us some Domino's. They have this new crispy cheese pizza that really sold us on Domino's. Normally we're "Hut" guys. In fact, there's a sit down Pizza Hut here in San Mateo with the classic $5.99 all you can eat buffet. We did that a lot at the beginning of starting this business, but there's only so much "Hut" one man can take. I broke my old record with 9 slices and two salads last time we went. I had to put an end to that indulgence. Anyway, back to Domino's. Considering the budget we're on, we had to use the 2 large pizza coupons. And that didn't come with the crispy cheese. It was a bit of a bummer.

Anyway, 55 minutes into waiting. The apartment started shaking. Jeever thought I was stomping on the floor - incensed that the pizza hadn't arrived. I thought the washing machine (which was on) was doing a crazy spin cycle. Instead, it was a quake. The largest I've felt for the 7+ years I've been in the Bay Area. The whole place was shaking...we actually got underneath doorways. Jeever was laughing his ass off because I was under a non structural doorway, unknown to me. Had it been worse, I would have been first to go. Glad he was laughing.

It turned out to be a 5.6 quake, centered fairly close to Foster City - near Milipitas.

Entrepreneur College

This Wednesday there is a great event at Wilson Sonsini called the Entrepreneur College. It's a 14 week series of presentations on startup issues. This week is: Forming and Organizing the Start-Up & Founders Stock. This speaker series is available on location at their offices nationwide.

Network, Network, Network

As a nice continuation of my last post on legal advice, this past weekend, I met-up with a friend I had met in Hong Kong when I was on exchange at HKUST (during my MBA at Berkeley). He was visiting from Spain with a fellow friend who was over here for the CTIA conference. His friend was a lawyer, very knowledgeable about startups and legal issues, and was great at giving me advice for all of the intricate questions I had about my business. She's offered to meet with me further to discuss any of the questions I come up with.

What I've begun to realize is how important networking is. I had always heard that sentiment echoed while going into and through my MBA, but I always took it for granted. The reason was simple, I couldn't stand doing it. It just felt too fake, both when I would approach people and when people would come and speak with me.

That's where things have recently changed for me. From a professional sense, I have found something that I'm incredibly passionate about. I can now search out people who share this interest and have found people incredibly receptive, informative, and helpful.

And so, tomorrow I'm heading to San Francisco to meet with someone I've been emailing with to discuss UI design - which is something I'm interested in getting right with this project. I think too many sites get things incredibly wrong - but I'll save that for a future post.

Bottom Line: Network, network, network. But while you do it, make your approach genuine. It will pay dividends.

When is the right time for legal help?

Legal help and legal representation are two separate issues. It's never too early to speak to some lawyers for advice, but it can definitely be too early to get representation. We learned this on the go though, because very early on we wanted to incorporate and really solidify our commitment to the company. After speaking to several friends who were lawyers, they all told us it was way too early. We thought differently. So against their advice, we went to meet with potential legal representation. We met with a few high powered firms in the Valley, and they all said the same thing. We were too early. Incorporating brings a few responsibilities to a company that generally aren't worthwhile early on. The first is that you face a tax burden as soon as you incorporate. Second, if you enlist the expertise of a top firm, which I felt necessary, you will generally pay for their services, which at startup, can be significant. If you don't pay (through deferred payment deals with certain law firms), you will pay down the road when you secure financing - and at that point, the fees can be exorbitant. Either way, these costs can be a burden. Since we were bootstrapping, the $3K or so in fees would have prevented us from completing more important tasks.

As an aside, Rajiv and I both felt that Fenwick & West was the best firm we met with. They were both professional and very knowledgeable about technology, as well as excited about new opportunities.

Bottom line: when do you need to incorporate?
When you start raising money/financing.

What about options for early employees?
This can be done through contracts written up yourself - there are plenty of examples online. I would advise speaking to someone about how to structure this, what percentages to give out, etc. I have a meeting next week with an attorney friend about this. I'll follow-up with details.

What about NDA's and other legal documents?
There are plenty generic ones available for download online.

What about everything else?
Ask your friends. Find a lawyer friend of yours, ask for help, ask for recommendations to others who can help.

Go Sawx!

So I'll probably lose a few people here, but I'm a staunch Sox fan. As most of you know, the Series is ON. Back to Colorado tonight. It's a bit strange to have our second WS in four years. I'd waited almost 20 years for the hope that we could make it back to the Series and break the curse. My most vivid memory from the Sox growing up was listening to the game in the car on the way to pick my parents up from the airport. Game 6. Sox vs. Mets '86 World Series. A painful loss for a 10 year old. Man I hated Buckner.

Getting Help, Psychological Help!

So we had an idea. What next? Our idea involved experts in a field we weren't very familiar with. Psychology. We didn't even know what type of psychologists we wanted or needed. And thus began our most difficult task to date. Finding an adviser willing to lend us a hand and people to help develop our product.

I called a psychologist friend of mine. I figured he'd be willing and able to help. And that's where I began to learn of the vast field of psychology - clinical, educational, forensic, health, human factors, industrial. The list goes on. He helped us narrow down our search to something in the behavioral/personality and industrial organizational realm. Now that we had that, I thought it would be easy from there.

I must have sent 300 emails to professors at leading institutions, to experts in the field gathered from google searches, to friends and family, to anyone who would listen. And I got maybe 2 responses. Even from Berkeley, which was my alma mater, professors wouldn't write back. I couldn't believe it.

But what I learned is that all it takes is 1 response. 1 person to help us out. It turned out that a professor at Berkeley did write me back eventually. And though she was intrigued by the idea, it wasn't what she was trained to do. So she turned me over to Haas professor. And this is where I learned of a great trick. Referrals! I found that the response rate of people when you are referred to them is exponentially better than random emails. Somewhere in the 90% success rate. So if you know you want to speak to someone, find a connection to them and approach them through a referral. It works wonders.

Dr. Cameron Anderson, a Haas organizational behavior professor, was our first advocate. He liked the idea and was shocked that it wasn't being done already. He agreed to help, in a limited capacity, because he was on tenure track this year and too busy publishing.

That's what really got us started. Finding the people to do the work was even more agonizing. But I'll leave that for the next post.

Lesson 1 - Socialize Your Idea

I've had a number of ideas in the past, some good and plenty more bad. One of the more recent of these ideas was a shirt box to keep shirts from wrinkling during travel. Another was a variable intensity braking light so you could tell how hard a driver was slamming on the brakes in front of you (BMW is doing it here, and they have another cool idea as well, here). A third was a pump up bicycle helmet (that, as you can see above, Reebok/Bell eventually made), and there were many more. The only way to really determine the feasibility of an idea is to socialize it. I'm not advocating telling everyone, because certainly people may steal your ideas, but I think talking to people you trust can help determine if your idea is worth pursuing. I'm sure there are ideas out there that people think are crazy, that eventually work out, but it's a whole lot better and easier if you have support.

I first realized that this idea had some merit when my parents gave me the nod. They are usually my biggest critics in terms of idea evaluation, which at first was tough to handle, but in the end I've realized that they've saved me a lot of heartache! They are much more rational with my ideas than I am. And naturally, my judgment is sometimes clouded the by excitement of a new idea.

The takeaway: Talk to people you can trust about your ideas - it'll save you lots of time.

How it all came together - The Business Plan

After graduating from school, Rajiv and I were still playing around with the idea of actually starting this company. I left for Beijing to go interview for a few companies and Rajiv went to backpack in Europe before he started his full-time job.

It was in China that I had lots of downtime, between my lack of language skills and my desire to stay inside - because Beijing is quite smoggy/polluted in the middle of the hot summers. I began writing the business plan - an essential piece in starting a business.

Lots of people out there have different opinions about a business plan. Is it worthwhile or a waste of time since "VC's don't read b-plans anymore anyway". Well, regardless of what VC's do, I find writing a business plan incredibly valuable. And so does someone like Guy Kawasaki, so don't take my word for it.

In short, a business plan helps you to formulate your ideas, set a time-line, understand your competition and barriers to entry, and really organize every aspect of your business. I learned more about our business during the month of writing my plan than the 6 months that I had previously been thinking about it.

Even though some claim that if you're not looking for financing, don't do it. We're not looking for financing yet...and I still stand by my claim.

As I began to get through the business plan, Rajiv and I would IM and email when we could. We began to iterate through ideas and finally got to a point when we had a product that got us both FIRED UP.

Rajiv and I made a deal. I was giving up my ambition of working in China and he was going to give me a roof over my head. Together we'd make it happen.

I left from China in August and returned to the Bay Area. We've been at it ever since.

So what's the company anyway... and what time is it?

After a punishing Saturday night, my roommate and business partner (Rajiv) decided we can't binge drink anymore. That'll probably last a week. It's like a New Year's resolution, except even less likely to be followed. Speaking of business... anyone watch Flight of the Conchord's...and know what time it is? (Video above).

On the topic of business, I thought I'd talk about what our company is and how it came to be. This will be short - I'm sure I'll get into more details in future postings.

So, Rajiv and I are avid travelers. We felt that travel sites out there don't really cater to individual preferences and tastes as well as they should - so we decided to improve on this. Realizing that people, even friends, share wildly different preferences for what they like to do, we spent months trying to figure out a way to connect the millions of unconnected users in cyberspace who are outside your "circle of friends" (ala MySpace, Friendster, Facebook, etc.)

We came up with a science to do this. It's not the semantic web, but rather a complement to it. We're focused more on the user. We want to empower you and allow you to define who you are and how you use the information online. We hope it works. It will make finding information a more efficient and productive process.

1999. Deja vu, all over again.

I went to a launch party last night for a company called MadeIt. A company that creates invitations that "keep the party going" - and allows you to share stories, videos, pics, etc, in one place after the party. It's a step up from eVite, a site that has failed to evolve as the internet moved forward - which means there is an opportunity (and a lot of other players: Renkoo, Socializr, goovite, and doodle to name a few). I liked all of the founders I met, but what was really interesting, was the fact that there were two parties going on at Harlot in SF. One was for MadeIt.com and one was for Videobox - a porn site, as the name aptly refers (the #1 site on the Net).

In addition to two startup parties, I ran into several friends from the old .com days - Jared Kopf (entrepreneur) and Johnny Manzari (graphic guru). It really brought back ideas of the heyday.

I'm hoping we're not in a bubble. People claim that we're not, that everything out there is actually useful, and that users are all that matter. I remember eyeballs being all that mattered back in the day. That didn't save anyone.

I guess only time will tell if things will work out, but what I am getting excited for is another round of startup party madness, 10 billion dollar startup valuations, and money being thrown around the valley (some of which is already happening)!

A little more serious. Maybe.

So, there are two real reasons why I decided to write this blog. The first, or actually, the second, was to help other entrepreneurs who are starting their own companies. Going through all of the experiences of starting a company has been trying, difficult, and at times, rewarding. One of the things that I wish there had been since the start, is an instruction booklet. But there isn't, and one thing I've realized is that there's no right way to do this. Every business is different and therefore every decision you make is going to be unique. One of the things that's always reassuring is knowing that someone else has faced the same difficult problems.

In terms of helping others out, I'll, at times, offer websites that are interesting, details about things I've gone through or accomplished, or entertaining stories that have nothing to do with my business.

The second reason I wanted to write this blog is because I wanted to see if there was value in doing so. I wanted to see if other entrepreneurs were interested in what it's like to do a startup - especially people who haven't done it before.

Feel free to help me eat a meal one day or buy a beer or something. I'm poor as hell - so go ahead, click that donate button to the right.

Welcome to my world!

Well, I was sitting around last night, wallowing in my own misery, wondering how to make ends meet while starting a company. So I went out and drank myself into oblivion. I woke up with a brilliant idea to start a blog. And let everyone else in on my successes, but more often than not, my catastrophic failures. People like reading about other people failing. I'm not sure why. I guess even I do. So this is my debt to laughing at the rest of you for the past 31 years. Enjoy.