Starting Up a Startup

wireless startup & investment money

2006-10-22T01:37:00.000-07:00

Here's an interesting comment I heard at a recent wireless roundtable sponsored by the Alliance of Angels: if you're creating a wireless application and you're off to raise capital, Dan Shapiro of Ontela observed that, in order to work with carriers, you should seek VC financing.

The days of independent developers getting their products to market on the backs of carriers seem to be behind us. Dan Wright of mporia agreed, noting that it took them about a year and a half to get a carrier involved.

On the other hand, if you are not planning to work with a carrier - that is if you plan to go "off-deck" and deliver directly to the end-user - then you may be able to forge ahead with angel financing.

observations from serial entrepreneur

2006-10-15T17:22:00.000-07:00

Okay, I'm a bad blogger. I kept a journal when I was backpacking in Africa - same thing. I just trailed off...not that nothing happened - I just never seem to make the time to blog. There just aren't enough hours in a day to do a startup - doubling the team size only doubled the workload. Resolution: blog regularly. Fortunately, I can wait until New Year's to put the resolution in action :)

Anyway, some good thoughts about human resources from serial entrepreneur, Michael O'Donnell, the founder of iCopyright and many others. He calls it the 1:3 Rule. Basically, you can divide your employees into thirds. A third of them are the stars and performers; they do two-thirds of the work. Another third are coasters - they do their share of the work: a third and no more. The last third are the slackers. They contribute nothing.

Startups can't afford the slackers or even too many coasters like big companies can.

So far, nothing really profound. Now here's the point that I thought was interesting.

Mike noted that stars tend to slide down at least to slacker levels if not worse. To counter this he posts an ad on Craigslist for the star's position every six months. The result? The star rises back to star quality!

The verdict is still out for me as to whether this is something I would adopt but it is definitely something to keep in mind.

Burger on the go

2006-08-23T15:25:00.000-07:00

I am happy to announce that Bob Burger just joined Positive Motion as Chief Operating Officer. Bob has over 24 years of experience in the wireless industry and comes to us, most recently, from Surewest Wireless where he oversaw operations as Senior Vice President and COO for seven years and took the company from a startup to $35mm in revenue. We're excited to have Bob on board and look forward to working with him as we shift into high gear for the new academic year.

motor-mouth podcast

2006-08-17T00:55:00.000-07:00

Hmmm...now I know what those folks meant by saying I should talk slower (see previous post). Sometimes hearing your own voice is the strangest thing and I've had the frightening experience of hearing my own voice - eeeek! I was approached by the Chris Pirillo Show to do a spot for their podcast. This is a great show and Chris is a funny and effective interviewer. They get about 50,000 downloads for every interview, which is impressive.

Unfortunately, the day they wanted to do the interview was the day I was on a long trip - from Seattle to San Francisco for a meeting in the morning and then to L.A. for an afternoon meeting. The only chance I had was to do the interview from a car in a parking lot in L.A. where there were a lot people of all sorts walking by and peering in at some guy yelling into his cell phone while balancing a laptop on his lap.

So, with spotty signal at best and not knowing the questions beforehand but knowing there was a time limit I switched into motor-mouth mode. They did a great job of making me sound somewhat reasonable but I definitely need to work on my act. I used to do quite a bit of public speaking, having led the Phi Beta Kappa Association of New York (and that was a lot of blabbing) - but I guess it's one thing to be able to control your timing and quite another to feel like you need to get everything out before they cut you off.

I guess I need some training on this. The Northwest Entrepreneur Group has a pub night (which I just returned from) where selected folks are given 3 minutes to present everything or the gong lady strikes the gong. But it is a pub night and, given the atmosphere, folks are encouraged to go overtime so the gong can kick in. I think I'll shoot for that to get some practice in next time...

a company in five minutes

2006-08-16T22:04:00.000-07:00

I did a little breakfast presentation recently for NWEN - I was given five minutes to do a PowerPoint for the attendees before the main show went on (Mike Davidson from Newsvine, who was really good). Five minutes is not a lot of time to cover everything but I was able to get everything out there. I just got the feedback today- a lot of folks thoughtI talked too fast. Heh heh. (Actually, the feedback was overwhelmingly good, which made me happy.)

The paranoid entrepreneur

2006-07-20T17:38:00.000-07:00

A couple of friends asked me about non-disclosure agreements last week, the favorite document of a startup entrepreneur. It must be that time of summer when the ideas are flowing. Here's a quick summary of useful tidbits:

Have one ready - either get one from your lawyer or, if you don't have one yet, tailor one to your needs (e.g., start with something like Nolo and go from there)
Work out what you can say without an NDA - you may want to ask folks to sign the NDA after you've started a dialog to initiate a formalized relationship
Do's and do-not's - potential partners/employees should sign them, do not ask VCs to sign them (they see too many deals that may overlap with your idea)
Protect yourself in other ways - mark sensitive material as "confidential" (e.g., include disclaimer at bottom of your e-mails); this could be really handy if disputes occur later

A bit of paranoia in an entrepreneur is a good thing - the buzz and adrenalin beats any caffeine in getting you to pull those extra all-nighters to push things out even sooner.

But don't get too carried away - I've seen this one guy at a number of conferences who kept asking anyone who would listen about how he could raise money for his amazing idea that he can't reveal. I even overheard him ask the president of an angel group to sign an NDA. I wish him luck but, so far as I can tell, he hasn't gotten anywhere but he has turned more than a few people off...

Thoughts about Privacy

2006-06-22T15:12:00.000-07:00

Someone recently said they wouldn't want to enter their telephone number on-line to get Mobile Prep delivered to their cell phone because they worried about getting unwanted text messages, etc.

That's a reasonable concern so I should first note that Positive Motion will not use, sell or otherwise do anything with the telephone number except to deliver user-initiated downloads (and to troubleshoot the download if necessary).

That said, the reason the number is requested is because most folks do not know how to get applications for their cell phones. It may be as easy as pointing the browser on the cell phone to the right web site but most folks do not know how to get to the browsers on their phones. The recent AP/AOL poll indicate that less than a third of cell phone users access the internet on their phones.

There are few things more annoying than getting unsolicited ad text messages. The FCC has issued a ban on such spamming so you should definitely make sure you're not on any list you don't want to be on. The trick is to make sure that you're not agreeing to be on any lists as a result of the fine print in the Terms of Use agreement. Most folks don't read these agreements so do be careful. If you tend to skip these as well then, to set your mind at ease I'll say again, Positive Motion does not use your telephone number for any reason other than to facilitate the delivery of our application to your phone.

Positive feedback

2006-06-20T23:06:00.000-07:00

We got a good review on Mobile Crunch today! I was told my postings on this blog can get long-winded so I'll try to keep things short but I did write a doozy of a long reply to the review. It had a "small gripe" against Dots, our digital credits system. Quick version: we didn't do it for profits (we generally make nothing on dot transactions); we do it to protect our users from fraud. The extended mix at Mobile Crunch explains why.

Positive Motion launched (...for Dad)

2006-06-20T01:31:00.000-07:00

The switch was flicked today and the Positive Motion site is now officially live and flying above the radar. It would have been a grand day, with the company's very first press release about Mobile Prep going out and burnouts drowned by drinks planned for everyone involved, remotely interested, or just randomly within reach.

Instead, the mood was subdued and somber, the activities and events of the day weighed heavily by thoughts of my Dad, who passed away this past Saturday.

A lot of things had to be done before the site went live and it was difficult to focus but, because of a desire to pay tribute to the man, the determination to successfully launch the site became a strength. This one's for you, Dad.

How do I set up my startup as a "real" company?

2006-06-15T15:06:00.000-07:00

I get this question a lot from friends who are thinking about starting up startups. Another one just asked so I figure I'd put up this entry about making your startup into an "official" company since I'm creating this blog in part to help other entrepreneurs with advice I wish I had when I started my first company...

First a disclaimer: I am not a lawyer and what I say should definitely not be taken as legal advice. It's just my experience from having done this a few times and, from what I've seen, a lot of folks get stuck on this point as if it's some mysterious peak to conquer when it's really just a tiny molehill to get past...at this point. I'll get you past the molehill part but do keep in mind that lawyers and accountants have their jobs for a reason: this stuff does get deep and, as you roll ahead, you'll want to dig deeper either through reading or by consulting professionals. I just want to help you focus on starting up your startup and not to get caught up on something that probably looks more intimidating than it really is at this stage. So, without further ado, here are my observations:

Do you need to incorporate? At some point, you'll probably want to and, if you plan to raise capital, you'll definitely need to but, as you start up, keep this in mind: the number one thing about incorporating is limiting liability. You don't want to lose everything you have because your company goes under. So, the question really is, at this point: are you already worried about your company going under before you've even gotten it off the ground? Hopefully not! So, really, you can wait a bit. In fact, you may even wait until your potential investors ask you to incorporate as a condition to investing and, if you've gotten that far, you're in a pretty good position. But you may want to do it somewhere between just implementing your ideas and securing funding. (When I say "implementing" I'm thinking technologies; I'm focusing more on technology companies because that's what I know, if you're more of a pure business play, then you may want to incorporate earlier - again, it's the liability thing so the time to look at this is when you're ready to go above the radar in whatever form.)

What sort of entity? This is where it can get confusing (there's a reason fat books are devoted to this) but if you're just starting up, you don't need to go deep enough to get confused. So here goes...There are all sorts of entities you can create but I'll just touch on the four really relevant ones: DBA, S-Corp, C-Corp, and LLC.

Doing Business As (DBA) Actually, this is not a form of incorporation at all but I'm including it here because I think it is useful and relevant for entrepreneurs. My first company was a DBA. I created a piece of software, wrote some press releases and put it on download.com. I got some notice in the press, was written up on in a book and Microsoft even contacted me out of the blue. But I never needed it to be anything more than a DBA. I would've been liable if bad things happened but it was a relatively innocuous piece of software (although it did get a patent later :) and I was happy with it just being shareware put out by a company I made up. DBA basically just allows you to call yourself a company.
C-Corporation My last company was a C-corporation and unlike a DBA, my liabilities are limited and protected by the corporation. That is, I won't lose everything I own if the company fails (well, it can get a bit more complicated than that for founders but you can worry about that later). C-corporations allow all sorts of investments to happen: you can have a zillion shareholders, each with a different "class" of stocks. I raised some capital for that company and, because they were in separate rounds we had different classes of stocks (put simply, each class offers stakeholders of that class particular nice things that other classes may not have). If you're hoping to raise a lot of capital in successive rounds, you're going to need to be a C-corporation at some point. But you don't need to from the get-go. Why not? One reason is "double taxation," (where you pay personal taxes and corporate taxes on the same money) which leads us to...
S-Corporation My current company, Positive Motion, is an S-corporation. I'm limited to 75 shareholders and one class of stock. If I need to change that, I can always convert to a C-corporation. Caveat: Only U.S. citizens or resident alien can create an S-corporation (non-U.S. citizens can start a C-corporation). There's no double taxing on S-corporations and so it is a fairly popular way to start a company while getting liability protection.
Limited Liability Company (LLC) This is a fairly new entity that affords liability protection but is much easier to set up than a corporation. Like an S-corporation, you are not double-taxed. But if you are looking to raise capital or attract employees with stock options, you'll want to convert it into a corporation since you are not allowed to issue stocks in an LLC.

Well, that's about it in a nutshell. Sure, there's a lot more stuff, like C-corporations allow you to deduct health insurance for your employees, blah blah blah...do you really need to know that at this point? You can cross that bridge when you get to it. Right now, focus on building your company.

Finally, incorporating is easy enough to do yourself but cheap enough to get a lawyer to do if time is as much a factor as money. And lawyers will probably not make mistakes when they do this stuff since this is what they do. On the other hand, if you've been pulling all-nighters and wearing too many hats, long forms make start looking a bit blurrier than they should if they're to be done properly...

Cingular, Dev Sites and Mobile Phone Applications

2006-06-15T10:34:00.000-07:00

I recently had a chance to chat with Deanna Garcia, the Director of the Developer Program at Cingular and lickety-split, I got an answer to a question I'd long ago given up even asking, much less hope to have answered by going through dev sites.

Not that dev web sites aren't great - they are. I signed up for all the carrier, manufacturer and generic dev sites I could find when I first got into the mobile applications space (about four years ago). What could be better than to have all sorts of dev tools given to you for free? Motorola even gave away Code Warrior, a dev environment worth a couple of hundred dollars, at least.

But the mobile landscape was changing so much and so quickly that the dev sites had their jobs cut out for them trying to keep up with the latest tools and specs. And, in keeping up with the dev sites, the developers had their jobs cut out for them. I reached the point of diminishing returns really quickly and, pretty soon, it became almost a fulltime job just keeping track of all the dev sites, how to navigate through yet another re-design and what old things need to be removed due to incompatibility with new things.

When I was ready to submit the first version of my educational application, I couldn't even figure out how to do that. Games were easy; they wanted those. But other than that, it was pretty tricky to figure out how particular dev sites wanted particular things done. I'd check every so often and followed the changes but it seemed more and more like a lost cause. The process became a major time-sucker.

Talking to Deanna changed all that. She confirmed for me, definitively, that I should stop wasting my time. If you want to submit a mobile phone application that is not a game, you might as well try to submit your leftover dinner from last night. No chance. Not interested.

No surprise, either, I guess. Those sort of companies are not known for being on the leading edge from a technology perspective. I appreciated the response: At last, I can feel good about risking all the resources I did in figuring out how to deliver cell phone applications to users directly and without going through carriers ("off deck delivery"). I had been really torn between going down that road, which was quite nerve-wracking at times, and digging deeper into the dev sites looking for that submission entry form I thought/hoped existed. The gamble paid off and now we have what I think is probably the simplest way for users to get a mobile phone application (just a click on a website)...and the comforting knowledge that it was the right approach to take.

I still wouldn't mind having the carriers open up some non-game categories but I suppose it's up to us little guys to show them what killer-apps may exist outside of games... posted by Positive Motion @ 10:02 AM

Starting up a Startup

2006-06-03T11:26:00.000-07:00

I'm about to launch my startup, Positive Motion, and I'm hoping I'll do a better job of keeping a diary this time than I did with my last startup, the Funky Monks Syndicate, where the notes I kept were scattered all over the place and making sure they stayed organized wasn't very high on my list of things to do.

That's a shame because if I had a chance to go over all the ups and downs of that venture, maybe I wouldn't be back starting up a startup again...well, maybe that's not true. We actually had a really good run, the team was amazing and we launched our product on time and to great response. I even wrangled the Editor-in-Chief of Internet World to visit for a private demo at our office, which was decorated like a monastary but on the cheap: I painted the walls and built the chandeliers and desks myself, all for less than the cost of a single Herman Miller chair all the startups were rushing to get at the time (our chairs were freebies offices around us were willing to give us). He found our product impressive enough to promise us a feature article, assigning it to the reporter who came with him...if only we didn't become a casualty of the bubble burst turning yours truly into a couch surfing CEO, running up credit cards and sacrificing basic things like shelter to keep the company going. Rough times...but I'm told entrepreneurs tend to be people who believe they have the answers to particular problems and are crazy enough to believe they can live off of their abilities to realize those answers. So here I am, at it again...

My current company, Positive Motion, is in a space combining mobile phones, social networking and education so I'll be jotting down my thoughts about those areas as well as sharing war stories about starting up startups that will hopefully be useful to folks looking to start up companies.

I'll kick things off with an observation about getting into the educational arena. Just about all the conferences I've been to has had some speaker - and usually a big one, like the keynote speaker - make an appeal for making our education system better. But none have proposed any sort of action plan and, when approached, would invariably offer some sort of platitude that seems to suggest the speech was doing little more than staying within a safe subject: who, after all, can say no to the need for better education?

Enrique Godreau, Managing Director at Voyager Capital was far more informative. He told me that every year, they conclude from an internal study that education is ripe for an infusion of new technologies. But, they also conclude, year after year, that investments in such ventures are particularly risky given the layers of bureaucracy that need to be navigated through before any new technology can be introduced into the classroom. He has a good point and it's difficult to argue with that.

I'm hoping our approach at Positive Motion will get around that problem but that remains to be seen. We'll have to launch first and for that - well, stay tuned...