Building Assets in a Startup

I’ve been thinking a lot this week about building assets, especially how it relates to my startup, ShelfMade.net. Any time you are in the initial stages of a starting a business, things seem simple. “Here is how we are going to make money.” As you progress further towards that first dollar in revenue your perception begins to change a bit – it’s probably called experience.

When starting out you see the transaction, and at the beginning an interesting transaction is all that is needed. For ShelfMade the transaction means people Shelving articles online and purchasing a magazine that includes those articles. This transaction solves a problem for the customer. At ShelfMade we help people read interesting articles in a better form (print vs. computer screen) and for me personally it improved the way I surf the Internet – now I just find article online, which is easy, and I read them offline, which is also easy.

Although the transaction is the exciting part, I came to find out that we need to build many assets to make the transaction happen.

The first asset, especially in web startups, is the technology or website. For ShelfMade the website allows users to tag an article, save that article and have it appear in the next issue of their on demand magazine. In any case, this asset creates value, but it cannot work alone. Many companies stop at this step (no offense to the geniuses building great technology). If the idea is right, at this point you can sell to Google and they can use this technology to leverage their other assets. I think this is the plan that most startups have. Build an awesome tool (Writely for example) Google purchases and Google’s users now have an added feature. Brilliant!

Once the technology is built startups need to sell their way into a market or find that market, which is their second asset, a user base. To be fair, even if you plan on a quick sale you need to build some type of user base. The point that I am making is the bigger user base you can build, the greater the asset you own and the more valuable your company is. YouTube sold for much more than Writely did because of their community.

ShelfMade needs to build our market through individuals or communities like Meetup. For most tech companies having users and a product that users/advertisers will pay for is the name of the game.

What I really love about the ShelfMade concept is that we can (need to) build a third asset, supply. In this case our supply is a network of content that our users want to read, save and share. We need bloggers and content owners to opt-in and make their writings Shelvable so that users can include them in a personalized magazine. When all is said and done, I think this content network will be our biggest asset.

Of course what I really love about ShelfMade is that this content network has many benefits for content owners, not just our company. We are paying royalties every time an article is included in a magazine, we promote the content owners on our site, and most importantly their ideas will reach a wider audience through magazines. What we are building is a permission asset, not to market to people, but to help them spread their ideas.

So the takeaway here is to concentrate on building all of your assets not just one. It is easy to get hyper-focused building your website and then thinking that is the end game. Most companies need more than just a cool technology to be successful and you should be thinking about that from day one.

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Finding Non-Tech Founders

A few days ago I wrote a post to help entrepreneurs find technical co-founders. Surprisingly many of the questions I received were from programmers trying to find non-programming founders.

The funny thing is that every schmo walking down the street has a business idea they think is great, and they would love a programmer as a co-founder. I’m guessing that when you tell a stranger that you build websites they always talk about their boring ideas. The real trick is separating the wheat from the chaff and finding serious people with the ability to build a business.

Here are my thoughts on finding a co-founder to focus on business.

1. Start Freelancing.
No matter where you live, you have Craigslist, answer ads. The people that are looking for help are serious about their projects, or at least willing to spend money. Plus you will build a resume of interesting projects.

Also, if the right project comes along you may have your foot in the door and already know the team. If you’re a good programmer, have experience on the project and ask to become part of the team, there is no way that you get turned down. The real value in freelancing is that you meet people doing interesting things.

2. Build Something.
You may not have a billion dollar idea or the business acumen to build an organization, but you can easily create a website that some people will find useful. Take your time, make it simple and make it smart. There is no pressure to ever make money with the site so just make something that you would use.

Doing this not only gives you relevant experience, but it also puts you in front of people. Even the smallest promotion of your site will attract startup-type people.

3. Network.
Stereotypically programmers like to sit in the dark, order in food and leave the house once a week. Of course this isn’t true, but you really have to make an effort to meet entrepreneurs. Wherever you reside I can absolutely guarantee there is someone in need of a programmer-as-founder withing 5 miles.

And even better news, when you do met entrepreneurs they’re going to love you. Which brings the most important part of this post.

4. Evaluate Entrepreneurs and their Ideas.
Remember you are looking to be a co-founder, so don’t expect the other founder to have a million in the bank and tons of experience – in that instance, he would just hire you. It’s important to be able to evaluate startups so that you don’t waste your time. Here is how I would look at things.

Do you understand the idea? The idea may be great even if you don’t get it, but how effective will you be if you are not on the same page.

Can you have a beer with the founder? If you’re thinking about leaving a cushy with benefits to start a venture you should like the people you are working with. If you can’t stand your partner it won’t work.

Is the founder determined? As much as we’d all like to believe that you have to be smart to be successful it is just as important to be determined. You should look for some qualities in your co-founder that you have seen in good managers or owners of companies that you have worked for. I would say determination is a great ingredient for a successful startup.

Get Opinions of others. You don’t have to rush into this project. Talk to other people to find out how good the concept is.

Programmers, please leave comments as to other ways you evaluate startups.

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Finding Founders

One of the most common questions that I hear at networking events and on social news sites deals with finding a co-founder with hacking skills, specifically when the person asking the question isn’t technical. Having been in this situation I wanted to give a few tips that should be useful.

Although I truly believe it comes down to being in the right place at the right time or just dumb luck. This is one instance where you have to make your luck happen. Here’s how I would start.

1. Develop a Remarkable Idea. Of course you think your idea is great, but do other people? Are people that you meet (point 2) passing you the names of programmers?

Regarding our project, ShelfMade, I find that people either love it or hate it. They think it’s genius or the dumbest idea ever. (For the record the vast majority like it, but a few just walk away) Now that may be good or bad, but at least a programmer hasn’t heard a similar idea a million times. At least the idea isn’t bland. If your idea sounds anything like “A social network for ______” you probably need something else.

2. Talk the Idea Up. There is honestly nothing worse than when someone is starting a new web business, but they cannot tell you the concept. It’s like a joke with no punchline. Simply put, I didn’t want to talk about my great idea, but for some reason I did and that allowed me to find people that wanted to help. If I would have kept my mouth shut I would probably still be looking for a co-founder.

3. Be Realistic. Make sure that your idea doesn’t need 2 years of full time development. It’s probably best to grow a simple idea than to build out a complex scheme. You want your new co-founder to see the business (and hopefully the potential) as you are explaining it.

If you’re a non-tech guy you probably should be looking to build a tech enabled business instead of developing a new technology.

4. Start Without Your Co-Founder. This has got to be the most important tip. Get as far as you can without a co-founder even if it means making decisions that will probably change. Why? First, it shows that you have initiative and drive.

Look at these 2 ways of approaching a potential cofounder.

1. “I have this idea”
OR
2. “Here is my business card. The company blog explains things better, but the basic concept is ____”

The different cost is about $10 for business cards at overnight prints, but the impact is enormous.

Getting started on the business also helps you define exactly what you are looking for. Even if you find a great programmer he isn’t going to bring an out of the box solution with all of the answers. You need a plan and a sitemap. That is something to get started on immediately.

5. Bring Something With You. The potential co-founder can start any number of businesses without you, locked in his room, not having to deal with your stupid vision. What can you do for the company that your potential co-founder cannot? At the very least you should have an understanding of the market and the ability to write a business plan.

6. Get Lucky. This is worth saying again. If the idea truly has potential and you have a chance to make a go of the concept then you need to stick around long enough to get lucky. Finding a co-founder is definitely a huge step, but it is only the first step in starting a company. If you can’t get over this hurdle and get 1 skilled person excited, how are you going to get 1000 or a million people to give you their email address.

Finally, tech companies are awesome, but if you are not willing to be a tech guy you may want to think about starting a business that doesn’t rely on technology. If you really plan on taking care of the business and marketing aspects of a successful company then it is good to have relevant experience. Starting any type of company will give you an idea of what it takes and also build your credibility with possible co-founders.

Good luck and all feedback is welcome.

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Best Article You’ll Ever Read and Not Understand

Being a web entrepreneur, yet not a hacker, is a bit of a strange place. I’d have to imagine it would be comparable to training to be an astronaut. I know that I’m heading into a certain direction, the rules will have changed, but it cannot simply be explained to you. And moving in that direction, you’re constantly obsessed with the unknown.

It’s in that mind frame that I am posting a great article from Joel on Software. Joel presents a (would seem to be strong) case for an Ajax standard helping to make a tremendous fortune for a developer and changing the web for everyone.

Whether you are a programmer or not the article is worth reading. At least stick around until he talks about Google and Paul Graham’s Ramen noodles.

But then, while you’re sitting on your googlechair in the googleplex sipping googleccinos and feeling smuggy smug smug smug, new versions of the browsers come out…

Cheers, be sure to let us know if you understand the article. Check out YC News for additional comments.

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Ohio Voting Machines

I’m not sure if this story has made the mainstream media because frankly, I don’t watch or read  televisions and newspapers. This story regarding Ohio Republicans blocking the testing of voting machines has been a big headline online.

I am linking to the story on Daily Kos who quotesthe NYT talking about the issue. This story has been bouncing around online for days – which is a very long time. It often seems that with the Internet stories come and then go and can never seem to stick. This is rather important, so I am glad to see it stay in the headlines a bit longer and I’d like to see some resolution.

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CEO “My company should have failed”

Denny K Miu is the CEO of Gigamon Systems, a 2 year old technology company. In his extremely honest post about Why Startups Fail he takes a look at the turbulent times that he was building and leading his small business. He speaks very frankly about his potential shortcomings as a CEO.

It turns out that in a startup, it is not about making the right decision but about making the decision right. In other words, it is about the CEO truly accepting the awesome responsibility of being the ultimate “Decider” while refusing the temptation of being a dictator.

The author talks extensively about the dynamic in his startup, but I wish he focused a bit more on the lucky breaks or determination to overcome certain obstacles.

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Long Tail + On Demand

We are huge fans of Seth (isn’t everyone) so we’ll link to his site and his articles often. His writing style, philosophy and the volume of his output align very well with what we are trying to do at ShelfMade.net. We kind of stole our idea from Small is the New Big.

Today Seth talks about Sweet Spots in marketing – the product built for the masses that the big guys, NYT and Oprah, want to talk about. I think what he is really talking about are the not so sweet spots, after all the sweet spot is a very small part of the tennis racket. What if we are not in that spot?

Bloggers around the world are discovering that it’s cheaper and faster and more effective to build their own media channel than it is to waste time arguing with the old ones.

When you are not in the sweet spot, you’re in the long tail. The great news in 2007 is that as long as people can find you, and you are doing/saying/selling something worthwhile, you don’t need to be in the sweet spot.

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