StartupHoodlum

An excerpt from Fortune about the early “office” of facebook:

“The house at 819 La Jennifer Way, with a resident population of seven guys, felt like a dorm. Some people — female and male — stopped by for days and just hung around. Stanford University was only a mile away, so the housemates would announce parties using a Facebook feature that enabled them to target specific schools. They were mobbed by Stanford students and townies.”

We are recreating this atmosphere of high energy openness and are inviting brilliant hackers, designers, ideators… you name it… to drop by and work, hangout, and live with us (seriously, we are only using 2 of the 5 bedrooms in this place so let me know if you are looking for a sweet place to live).

The house is in Midtown Palo Alto and has a huge open working space for whomever wants to come. We work 18+ hours a day (somebody is always awake), have a constant supply of snacks and beverages, and invite hackers around the world to drop by anytime, 24/7 to work, live for a bit, hack with us, play a game of ping pong or just hangout. Email me anytime to get the address and drop by or say hello. evan dot reas at gmail

One of the greatest things about being in Silicon Valley is that we are surrounded by amazing people that can offer advice from personal entrepreneurial experiences or from what they have observed from successful (and failed) startups over the years. This is a huge advantage for being here but can also turn into a significant distraction. It is easy to spend all your time meeting with people to get 1,000 different views when you should be spending time on product and seeing how people are using it.

I much prefer having fewer advisors that are extremely committed, helpful, and really understand my business than having dozens of people that I call upon which have a 10,000 foot view and nobody being fully involved. The difficult part is figuring out which people that are truly committed to helping… in good times and bad. When you are doing well, everybody and their brother will help as much as possible, but when your analytics show a blip, the low-quality advisors will disappear rapidly.

I like to come up with tests and use them early on to see whether a person will stick with me/my company over the long term.

One simple test is to ask potential advisors/investors/mentors for their cell phone number. If you are feeling extra bold, ask for their cell phone number and follow up by saying that you won’t abuse it but want to know that you can use it in emergencies absolutely anytime, 24/7, if you need to reach them. I have found that my best advisors are not only happy to give me their cell phone number, but they will voluntarily tell me to feel free to use it anytime if there is an emergency… and I have. Others will explictly tell me the best way to get to them if nothing else works (“send me a text and I’ll respond asap”).

These days, everybody carries a cell phone- all of the time- and if you ring or text somebody, they will get it… and they will get it now. There is no such thing as being off-the-grid anymore and so having their cell number is a powerful thing.

If somebody promises to be a great advisor to me/my company, but won’t give me their cell number (or is quite hesitant to share it), they aren’t giving me 24/7 access to themselves and effectively saying that I am not in their inner circle of people that can contact them. That is an immediate warning flag that they don’t have the commitment, seriousness, or trust level that I am looking for to make them an important part of my team.

Don’t abuse the cellphone… especially if it is somebody who is extremely busy.. but do use the cellphone test to see how committed and willing to help they truly are.

Over the past year and a half that I have been involved in running startups, I have already had a half a dozen experiences with lawyers of all shapes and sizes (immigration lawyers, incorporation lawyers, trademark lawyers, financial regulation lawyers.. you name it).  Generally speaking, the experiences have been abysmal.

With one of the top firms in the Valley, I convinced the senior partner into helping out my last startup on some legally intensive matters and it was a huge mistake. Not only were his costs exorbitant, but he was utterly useless as he was inaccessible without an appointment setup a week ahead of time and most of the time I would be sent to some recent law school grad who had very little information and would spend hours (aka my $$$) trying to learn as much as I already knew about the space.  Further, throughout this entire process, apparently I was accruing fees which were non-transparent to me until 6 months later when I received a bill that was about 3 times what we had originally negotiated.  This wasn’t a one time occurrence, either.  I have had to use lawyers on numerous occasions and 1) have not been able to get them when I really needed them and 2) the fees for small things were so exorbitant that I would generally just skip them on issues that would have been great to get their feedback on.

I don’t have time to be going back and forth about fees or to try and figure out how I can schedule a 2 minute phone call to ask if I filled out the right employee stock option form.  Generally speaking, I do not like lawyers in the startup world and feel that they are immensely overused and overpaid by startups.

That being said, there are exceptions and our current lawyer is one.

Matt Bartus, of Cooley, is the best startup lawyer in Silicon Valley. Period.  Yes, over all the celebrity startup lawyers from top firms out there.

He gets it.  He understands startups.  He understands the valley.  He understands that sometimes an entrepreneur really needs a document or advice at 8pm. He uses twitter, quora, facebook and understands technology today.  (Even the most prominent startup lawyers are not users of many of the newer, mainstream consumer internet sites).

Since the day Matt and I were connected, I knew this guy was great.  A friend of mine and I were grabbing a drink in SF and I told him I had terrible legal experiences and he said “let me connect you to matt.. he is different.. and will probably respond within 20 minutes.”  He sent a quick intro and sure enough, five minutes later, Matt had responded.. around 10pm.. on a Friday.   Now I don’t expect him to do that all the time, but it showed me that he doesn’t mess around.  He gets things done.  He is fast.. and he won’t push me off to some paralegal to do something that I want done by him.

Matt runs his practice like a startup.  If there is something that needs to get done by a certain time, he will be in the office getting it done no matter how long it takes.  He also knows that sometimes an entrepreneur needs something and needs it now… and he is available and FAST.  I want every person that I work with to act like a startup does… urgency, availability, doing only what matters, figuring out solutions, caring about customers…  this guy does it and that is why he will soon be known as the top startup lawyer in the valley.  Every startup service provider (especially lawyers) should watch how he works with entrepreneurs and learn from it.

Very interesting preso on trends/ideas/companies to lookout for in 2011:

http://www.slideshare.net/jwtintelligence/2f-100-things-to-watch-in-2011-6306251

Over the past couple of months, numerous startup friends have been asking me how much equity to give to their first hires.  After searching around and talking to startups around the valley, I think VentureHacks has pretty good basic guidelines.  The full info is here: http://venturehacks.com/articles/option-pool-shuffle .  I have copied the most relevant info from VH below (keep in mind this post is from 2007, but from discussions with folks, it seems to still be about right):

“To allocate the option pool from the hiring plan, use these current ranges for option grants in Silicon Valley:

Title	Range (%)
CEO	5 – 10
COO	2 – 5
VP	1 – 2
Independent Board Member	1
Director	0.4 – 1.25
Lead Engineer	0.5 – 1
5+ years experience Engineer	0.33 – 0.66
Manager or Junior Engineer	0.2 – 0.33

These are rough ranges – not bell curves – for new hires once a company has raised its Series A. Option grants go down as the company gets closer to its Series B, starts making money, and otherwise reduces risk.

The top end of these ranges are for proven elite contributors. Most option grants are near the bottom of the ranges. Many factors affect option allocations including the quality of the existing team, the size of the opportunity, and the experience of the new hire.

If your company already has a CEO in place, you should be able to reduce the option pool to about 10% of the post-money. If the company needs to hire a new CEO soon, you should be able to reduce the option pool to about 15% of the post-money.”

I’ll add that advisors can sometimes be given from .1%-.5% (sometimes I have heard even 1% or more, but I think that causes long term problems because I don’t believe an advisor will ever be as valuable as a lead engineer to a startup… but there are exceptions to every rule).

The Hot companies to keep an eye on in 2011…

1.) My company, Hawthorne Labs.  We will be executing some crazy stuff and I guarantee we will be fun to watch.

2.) Quora.  I have written about them before and think this killer company and killer team is sure to be a $billion+ company.  If you haven’t used it, sign up now.  The mechanics involved (and beautiful design) incentivize people to contribute high quality content like no other site before.

3.) Tumblr.  Incredible growth and just starting to go mainstream as the main “quick-blogging platform” as it expands from being a primarily East Coast company to taking over the rest of the US.  Just took a large round from Sequoia.

4.) AirBnB.  Extremely disruptive product.  Never bet against a team of great designers.

5.) Square.  Great product.  Great team.  Huge Market.

6.) Palantir.  The most underrated company in the valley with, on average, the smartest engineers.

7.) Eventbrite.  The most underrated entrepreneur in the valley in Kevin Hartz.

A couple areas where there will be big hits, although I don’t see clear winners yet are:

Social Commerce (Blippy and Swipely have the idea right but are off on the current execution thus far),

Intimate Social Networks (Path is one example of taking advantage of the fact that people want more control over whom in their network they show certain things… fridge is another and there are sure to be more coming soon),

Banking/Financial Services for Small Businesses (banking and financial services for small businesses are such a mess right now.. keep an eye on indinero and banksimple),

Mobile Commerce (huge growth area, both from the mobile buying and selling sides.. I like the idea of eggcartel and think there will be a ton of innovation in this space).

1. Poor hiring decisions. The team is the most important piece of the startup puzzle and one wrong hire can lead to its downfall. Hire for skill, intelligence and tenacity first. See Keith’s answer at How do you build a great team for a successful startup? for good thoughts on this. It is easy to fall into the trap of hiring people who are “good-enough” when a startup is trying to ramp quickly, but it can be deadly. If you do make a mistake, fire fast.

2. Lacking 100% commitment. Part-time doesn’t work. A startup must be your number one priority 24 hours a day.

3. Lack of focus on customer acquisition. Customers don’t just show up, even with a great product. Not only does your product need to be better, but your customers need to know it and be constantly reminded of it.

4. Not being in Silicon Valley. If you want the best chance to succeed, you need to surround yourself with the best community of advisors, investors, entrepreneurs and potential hires.

5. Focusing time/energy on things that don’t matter. I have seen people (mostly ex-consultants) spending MONTHS on an investor powerpoint presentation, making sure every image/icon was perfectly aligned. Your idea/team/market should be so compelling to investors that having a pretty preso doesn’t matter. Time should be spent on creating, selling, and hiring.

6. Too many features (or generally too much complexity) from the beginning. The initial product should be as focused as possible on one value proposition.

7. Beginning in too broad of a market – often, it is best to start with a small niche which you can dominate and then expand into other areas rather than going for the big win right away.

8. Spending cash on the wrong things. Cash should be spent only on 1) customer acquisition 2) hiring and 3) employee productivity.

9. Valuing experience over intellect/hard-work. Many startups list they are looking for team members that “have 5-10 years experience” before they consider looking at them. People in startups need to constantly be learning fast and their ability to learn and get shit done should be placed over “years of experience.”

10. Not taking enough risks. Startups are in the unique position of having few users and less publicity spotlight on them and can try-out (and make mistakes with) bold things that larger companies can’t.

I love this quote and try to constantly think about the “10 years” anytime I read about a company that is successful. People or companies don’t become successful by chance. Sometimes, people hit the lottery and things takeoff like crazy, but the back-story is almost always filled with hardship, challenges and failures. It is the persistence to keep going that creates the “overnight success.”