Thursday, August 18, 2005
It seems to be the week to discuss the idea of "adaptative ability" and its importance to the Bootstrapper.
I was re-reading Warren Bennis' book, Geeks and Geezers,
a book on leadership. Bennis argues that leaders are made by entering a "crucible
" and once there, by their adaptive capacity
to deal with the challenges the crucible poses. This seems very similar to Joseph Campbell's "Belly of the Whale
" concept within the Hero's Journey archetype; it is here that the hero must use their abilities to get out of a tough situation. It is also where they discover their own unrealized powers. Amar Bhide's notion of "opportunistic adaptation," which I mentioned in a previous post, is very similar.
Taking an informal check of the Bootstrappers I have studied - Bill Gates, Richard Branson, Scott Cook, Anita Roddick, Michael Dell, Larry Ellison and others - this indeed rings true. At critical times, each of them reacted in a way that adapted to the unexpected situations. One example: when IBM came knocking at Microsoft inquiring about an operating system, Bill's initial reaction was to connect them with CP/M, the then dominant PC OS company. Microsoft was, after all, in the computer language business, not the operating system business! But when CP/M rejected IBM, Bill showed his adaptive capability by purchasing Q-DOS
(Quick and Dirty Operating System) from Tim Paterson, and then licensing it to IBM. Similarly, Virgin got into the Record Store business when their music mail order business was threatened by a postal worker strike
It seems that "adaptive capability" would be the key defining "skill" to teach Bootstrappers. Indeed, business plan writing or functional areas such as Marketing, Finance, etc., which are the traditional purview of a business school curriculum, really seem quite irrelevant to the bootstrapper's success; and perhaps even counterproductive. Is it any accident that most of the very successful Bootstrappers never went to business school?
Tuesday, August 16, 2005
I enjoyed Michael Hamman's manifesto
on change and creativity. The notion of continuous adaptation - and particularly, that we have to learn this capability as human beings - speaks volumes to what bootstrappers have to do every day. It also relates with Amar Bhide's ideas on opportunistic adaptation, which I addressed in a previous post.
Friday, August 12, 2005
Bootstrap Survival Guide: Hunting Big Game
I have been working on doing some elephant hunting lately in order to grow the business. I don't have a financial partner like a VC to outfit us with the latest sales hunting gear from their portfolio companies and cash to pay the smooth service companies that feed on fresh start-ups. I'm on the hunt for that elephant of a deal that can feed us for six to twelve months and provide the energy and capital to expand the business. It's going to have to be a six or seven figure deal so there is no point in calling on folks that can’t stomach that. Luckily, millions of years of evolution have contributed to making me a natural born killer and I’m ready to feed.
Picking the prey
The companies I am looking to sell to are ones that have cash to spend. So I focus on public companies and venture backed start-ups, since they appear to have the best promise for revenue. I look at a number of criteria to match them against things that analysts, customers, friends, and advisors had said that our technology would be good at solving. Since it takes a lot of energy to hunt each company, I like to pick the right ones. Companies that are having a problem or are in distress can be more attractive than others because they can be taken down the easiest. So I surf to Monster.com and peruse the job boards. My objective: to see if they are hiring in areas which indicate they need support with building desktop applications for organizing content. I find one elephant this way that looks like a good fit. They are hiring a Sr. Product Manager to lead a product team locally for a product that could use our technology and knowledge. So I mark them for a hunt. I also read the news about companies worth checking out. To do this, I subscribe to Google news. More recently, I have been using our own product to search RocketInfo to get the latest news feeds and blogs about companies. In general, change is good at a prospect site. A good change of management makes everyone unstable including existing vendors. The new management may not be ready to buy immediately but the first in is the most likely to win.
Tracking and studying the game
I have grown to love the Internet as a source of information to quietly approach the game. Plenty of clever start-ups have provided tools which leave most individuals exposed to a phone call or email. For my targets, I first want to look deeper at their organization. LinkedIn provides a host of information about individuals that is quite incredible. I generally don't care much about whether I am linked to each person. It's more that there is a person named John Smith who is the VP of Engineering at Elephantco, who used to work at Elephantcoacquiredsub. And Frank Black, who used to be the VP of Engineering at Elephantco is now working at Gazelleco. LinkedIn's business model means they are giving me tons of value and I don't pay for it (but that isn’t my problem!). Years ago I used to dream of having a resource like this to find people’s names, interests and roles. Sometimes I’ll even use the tracking tool in LinkedIn to see how I’m connected to a person. In one case recently, I knew someone who was a former employee at the target company that was a new colleague of one of my former colleagues. I didn’t actually use LinkedIn to contact the person. Instead I called my old buddy and asked for an introduction.
But the social network rigmarole only goes so far. Most people aren’t directly connected to me and I don’t mind hunting alone. At some point it is just me and the game out there in cyberspace. When it comes down to that, I need to get some contact information and make an approach. The site zoominfo.com is a good companion to LinkedIn because it provides utilities to send an email to the contact. They have a form where you can forward an email to the person and propose something like a meeting or call. The email comes from you so they will reply to you. I don't use this tool often but you have to try something to get through. An alternative is to guess the email address. Companies have corporate standards for email addresses and they look like this email@example.com, firstname.lastname@example.org. You don't need to guess a seven digit number to put an inquiry into a person. I’ll try five or six people at the same company over the course of a few weeks to see if I can get anyone to bite. It only takes one to get started.
But email is a little indirect and the telephone is a very useful tool. While in hunting mode, I like to make a lot of phone calls to very important people. Some people find this intimidating but it is actually a fun contact sport and an essential part of the hunt. To make it a little less intimidating, think about it this way: if you are selling something worth $100,000 then it must have an ROI to the buyer of over $500,000. You aren't making a call to take $100,000, but instead to announce that the person you are looking to reach is the lucky winner of $400,000. You are the Publisher’s Clearing House, the lottery - the good guys! People should love to talk to you.
The telephone attack
But they don’t like being cold called. The avoidance strategies by the prey to block me from calling and reaching my targets are significant. They include hidden extensions, people who don't answer the telephone and rerouting of calls to irrelevant peons. To handle locating the extension of the person I am looking for, I just call the main number and ask for John Smith, the guy I found on LinkedIn. People's blogs also can work well, although it is sloppier to use them. Since I have the name and their title, I normally get through to the right extension. That worked for me the other day and I'm in the process of negotiating an elephant opportunity that came from it. But it is often more complex than that. If I don't have a name because the management team isn’t networking on LinkedIn to find their next gig, then I need to interrogate someone on the phone directly. The administrative people in companies are actually quite nice and want to be helpful, since they are in an outward facing customer service role. They can be reached using the "0" key on the telephone. Chatting with them can help build a map of people with names and titles that aren't available anywhere else. Then I can pull the same trick of calling and asking for a person whose name, title, and favorite sports teams I already know.
Often, when I get to the target person, their response is to fob me off to that guy from the Capital One commercials who says "NO" in twenty languages. This is a typical response: "Wow that's a great idea. You should talk to people in product management about that." I have come to learn that it is best to play along and use it as a hook to get back to the real buyer. So I'll talk to whoever they want and then call them back to explain how it went. Sometimes the referrals really are sending me through the whole political route to get the approvals, etc. to make a big sale and it isn't the end of the world if this means actually making progress.
The waiting game
The big game don't fall quickly. It is good to have a lot of time on your hands when hunting these big companies. Really good ideas take about six months to percolate through them before they can regurgitate the $100K meal. I like to use this to my advantage and spend less time working on them when they are making me wait. I prefer to gamble with them by telling them I am ready for meetings that I'm not ready for. So I'll say something like, "We've been working on the proposal and we are hoping to present it tomorrow." This roughly translates to in my mind to, "I think you are going to schedule a time in two weeks to go over the proposal. If you do schedule something then I'll put together a proposal." This strategy does carry some risk, but my time as a bootstrapper is very valuable and experience with these elephants tells me that they can't move as fast as me. In order to avoid spending lots of time making a proposal, I’m going to first get on the schedule with them and make sure the right folks will be there.
The kill…. To be continued.
Sunday, August 07, 2005
A friend once asked what my process was for finding new customers. "Serendipity," I answered somewhat jokingly. In a recent interview, I made the same point, couching it in spiritual terms such as "the Universe."
Serendipity does not imply that one sits around waiting for the all-providing Universe to drop something in your lap. Indeed, Bootstrappers tend to be "lucky people" as defined by Richard Wiseman, in his book, The Luck Factor
. This article
summarizes his findings. Richard found that good luck had as much to do with a positive inner mindset and an active approach towards discovering the opportunities in life. He articulates four principles that guide lucky people:
1. Maximize your chance opportunities
2. Listen to your Lucky Hunches
3. Expect Good Fortune
4. Turn Bad Luck into Good
A great Bootstrapper is a "serendipity seeker" who uses Wiseman's four principles to cross through multiple Valleys of Death.
Valley of Death? What Valley of Death!
In chapter 2
of his book Amar Bhide
beautifully captures the bootstrapper's approach withthe term.
. This chapter is a must-read
for every bootstrapper as "opportunistic adaptation" is exactly the strategy we need to take in the Valley of Death!
Bhide points out that Bootstrappers have little reason to devote to prior planning and research
. Indeed, "the lack of research and planning...has a sound economic basis" (pg 53
) and, "costs of extensive planning in a startup exceed the benefits." Bhide's further finds, "..we cannot find any correlation between startup success and planning." So much for the maniacal focus on writing business plans!
One entreprenuer he interviewed likened the process to "jumping from rock to rock up a stream, rather than contructing the Golden Gate Bridge from a blueprint." Entrepreneurs, "start with a sketchy idea and which they alter and refine as they encounter unforseen problems and and opportunities."
Friday, August 05, 2005
Looking big while feeling small
A big software company that we had cozied up to was giving us the opportunity to have our software be downloadable on their add-ins page.Survival tip: The bureaucracy of the big boys is an invitation to partner
There is more of a story to it than that but the short of that story is that small companies should partner with big companies where possible. Us little guys can do things without the inertia and trouble that the big companies have. So when a big company may be making a similar product to yours that won't be ready for 18 months, they may want to partner to have a similar product on the market much sooner. Big companies have all sorts of problems getting new products to market including 18 month delays because the products needs to be translated, security checked, architectural review boarded, IRB approved, HIPPAA compliant, uncrackable by Chinese hackers, alpha, beta, gamma, integration, smoke tested and terrorist screened. That doesn't even begin to mention the MRD and adjustments to the field sales compensation plan that need to be filled out in triplicate and delivered in person to Anchorage Alaska to get the engineering resources available to fix the bugs in the product. So before I return to the story I started, the main point is that us little bootstrappers look great as an execution engine for getting real things done fast. We are always the little mammals scheming against the dinosaurs. But they know it and if you drill deep enough and high enough into the big guys there is someone who will champion partnering with you. Ask Bill Gates if you can get through to him.Survival tip: Borrow graphics styles and get cheap illustrations
So this large software company was willing to add a link to their plugins page featuring our software and was ensured to be a lock-in for at least 45 days before anyone else would make it onto the page due to circular reasoning being used at our large partner company around obtaining the rights to change the page and the resources to do so. Bureaucracy is your friend. The first folks through may be the last. But this great opportunity included a logo at 170 X 170 pixels. As a bootstrapper my first instinct was to call the graphic arts department at my company. When I picked-up the phone I realized that the graphics department was me futzing with some old versions of Adobe Illustrator and Macromedia Fireworks because it was the only thing I had handy. If you have neither try GIMP - it's a free knock-off of Photoshop.
So I created the graphic below that showed my utter lack of skill at designing logos at any size. Upon showing this to my partners they suggested that we call in favors from a graphic designer friend. Unfortunately we had already used those favors. If you have a graphic designer friend I strongly encourage pretending you are a pledge in their fraternity doing their laundry, giving them rides, cooking them breakfast, whatever you can do so that when you ask for that favor they will be there for you. Bijoy told me that he cut a deal as a revenue split on his book with a graphic designer
But favors were not available for us. We just had me, the marketing guy who is graphically challenged. But Shelley, a key partner, suggested we look at licensing images from istockphoto.com
. At first I was skeptical about doing so since licensing images normally costs billions of dollars and stealing images puts me at risk for legal action from angry mobs of photographers with deep war chests. But on istockphoto.com I was able to acquire about five icons in vector format for under $10 total that looked like professional WindowsXP graphics. They pasted into the graphics programs like champs and by copying a logo that I liked from Microsoft. While the logo isn't great, it was done the bootstrap way.
First awful embarrassing graphic
Microsoft image imitated.
Imitation is the sincerest form of bootstrapping.
Cheap knock-off image done by bootstrapper Dan using istockphoto.com for $10
I just created a post on the Bootstrap Austin Blog
articulating the vision for Bootstrap Austin. These principles will guide us as we grow the Bootstrap Network.
Wednesday, August 03, 2005
Survival tips for the Valley of Death: Before you start
You can find plenty of survival manuals for when you are lost in the woods or on a desert island that explain what types of plants are poisonous vs. edible, how to build a shelter, and how important it is to have fresh water. The bootstrapper is luckily a few rungs up, although sadly not very many rungs up on Maslow's hierarchy of needs from the poor shmuck marooned on a desert island. Please watch Survivor to cheer yourself up when things are looking particularly bleak. The venture financed start-ups like to watch bootstrappers when their worlds get bleak but we don't have our own reality TV program yet.
While I don't have the time at the moment to write a comprehensive guide of survival tips for the struggling bootstrapper here are some bare essentials as you get started and I'll try to add more in subsequent entries.
Some tips before you enter the Valley of Death...
Pride tastes good. Get used to swallowing it
You will soon find yourself in plenty of situations asking your network of friends, family, and peers for help either financially or otherwise. These people can help you and your venture survive. It can be tough to ask for an investment or a favor but the same pride that makes you wary to do this is the stuff that makes you confident that you will succeed.
Layoffs and unemployment can be your first investors
If you are lucky enough to have a job then keep in mind that being forcefully removed from your job is a good thing financially for you. I am not advocating any actions out of the movie Office Space
but a good time to start a new bootstrap company is when you have a check coming from somewhere but you don't need to work.
Unemployment pays about $528 per week (or at least that is what they paid me) for 10 months or until you are making enough money to pay yourself what you need to eat that Raman soup. So you can seek $20,000 in investment or just go on the dole for 10 months. Uncle Sam wants you to start a company to create new jobs and increase the overall employment rate in the USA. It's good for the economy. Layoffs aren't as reliable as your Uncle Sam but they can provide a nice cushion on your way out the door from your last full time gig. Six to Eight weeks pay can tack some time onto your runway before needing outside capital.Take stuff from your last job
I don't mean that you should steal office supplies but a good bootstrapper takes what they can from the resources that they have. The things you can take from your job ethically include your contacts and relationships, knowledge, and other things you can buy cheap. Employers have to get rid of things like that old laptop that you have been using. You can offer to buy back products you have been using from them at very low prices and they may be perfectly happy to do so. If they chucked you in a lay-off then they may have a lot of equipment they need to get rid of before closing the office in Chicago, etc. And someone who is willing to pay $100 per computer could be a welcome way to dispose of the hardware they don't need.License stuff from your last job
A more interesting set of things that I have seen people take from their former employer is intellectual property and products that the company didn't have any reason to bring to market. So imagine that someone builds a very fancy custom software solution internally for a hardware manufacturer to configure their products. The hardware manufacturer can only use it but a good entrepreneur can sell it to other manufacturers. Similarly in a research laboratory they can only take technology so far before it needs to be commercialized. Every university and big company has a TLO, technology licensing office
, where you can buy your inventions and even other people's inventions for a percentage of revenue in future earnings of your venture. So before doing tons of R&D you may be able to get a product that has already been funded to the tune of $1,000,000 or more if you are willing to pass back royalties and give back some ownership to the folks at your last job. But consider the license back to be your investment capital.Contract back to your last job or at least contract somewhere
It is amazing how people at your former job can't get their work done without you once you are gone. If this is not true you may not want to become a bootstrapper. I have a friend who became fully employed as a contractor at three times his salary and then could 2/3 of his time doing start-up work. If the last job isn't an option then doing high end contract work part-time is a good way to avoid raising capital. In my current start-ups case, Viapoint
, we are doing datamart consulting for a healthcare company while our product business, which has yet to generate much revenue, is the main marketing and development push we do. The consulting work pays over $100 per hour which leaves us with three days free to work on the product. The contract work also helps to provide clarity regarding what people are actually willing to pay for. If we can't make it with our consumer desktop organizer product we can always fall back on creating a health care datamart product.Get a free space to operate
Commercial office space rent is expensive and you may not need to pay for it until you are in growth mode. The first free zone you have is your own living space. The world is flat, nobody cares where you are operating as long as you show up to the meetings in the right dress code. But if you want to avoid having the baby crying in the background during the conference call, other than giving the baby a pacifier, find someone with open office space. Now in my case the people who had open office space for my first venture were my parents and my current venture is one of my partner's parents. I can't generalize this too much but your relatives may own property that is suitable for you to operate a small start-up business in. I like the deals we cut with our parents because they have lots of incentives to not charge rent to us. Among them is the fact that I'll probably get some inheritance sooner or later and this is a double dip tax avoidance strategy for them. They can write-off the lost revenue in the rental property and don't have as much inheritance tax to pay in transferring the value of the asset.
But most people's parents don't have office space so the other options are to find people desperate for someone to occupy their office space, cheap sub-lets in big company buildings where they are stuck with an inflexible lease due to the bubble, borrowing space at a university, change your residence to rent a place with a bed and shower, working from a desktop while at a contract job. One friend of mine is convinced you can live in a geodesic dome tent on the roof of an office building since it is wasted space. If you are a good bootstrapper you will find the cheap space to operate in.
That's about it for today. Good luck.
Monday, August 01, 2005
I have mentioned Richard Branson's autobiography
in this blog and in The Human Fabric Blog
In the Prologue
, Sir Richard says: "If there is a theme in this book, it is about survival. Most people who start from scratch don't survive..."
Truly, this defines him as a quintessential bootstrapper! The VoD is THE defining time in every Bootstrap venture - it's the time when the venture is fighting for its life and survival is the key focus. I often say that, "In the Valley of Death
, lies the salvation of the bootstrapper." And the Evangelist is the key driving force in the Valley of Death. Indeed, we see how this works in the evolution of Virgin. Barely coming out of one Valley of Death, the company is pushed into another. But each succeeding challenge results in the discovery of a new business.
His first venture was Student
, a magazine for school-going teenagers. He started the magazine with a $4 (Pound, actually) loan from his Mom. To get it going, he practiced the Bootstrapper's art of selling before the product was even made
! It took a year before they sold a single advertisement - the power of persistence! It was during this time that Sir Richard discovered the Power of 2
and his natural roles as the Evangelist, counterbalanced with a Maven partner.
It was through Student
that Sir Richard discovered Virgin's next business
- mail order music. Students were willing to spend money on music and he saw it as a great opportunity. Virgin Mail Order Records was born. Again, he discovers the beauty of receiving payment first
before having to deliver the goods! (Michael Dell, another great Bootstrapper, discovered this when selling computers out of his dorm room).
A postal worker's strike in 1971
almost put Virgin Mail Order Records out of business. This prompted Sir Richard and Nik, his partner, to start a record shop. Thus, Virgin got into the retail business. This was soon followed by Virgin Records when he recognized that the real money in music was not to be made in retail, but in recording
. The story continues with Virgin's many subsequent lines of business to their current extremely diversified portfolio
Perhaps Sir Richards' defining bootstrapper characteristic is his ability to roll with the punches and keep turning every crisis into the next business venture. Indeed, this is the very "salvation" that comes from the VoD - it causes the bootstrapper to innovate!