One of the unavoidable realities facing a startup is the need for unpaid help to get things going. But how free that labor is has become more and more unclear to me recently.
My current set of patents will spawn at least 4 companies (I hope 2 will make it...) and I need marketing research help, patent legal aid and development work to get things to the point where I can get a good Round 1 investment.
So the legal folks keep "re-prioritizing things" and I am STILL waiting to get patents filed. The marketing research people are "hopefully going to start working on things soon" and I only have one developer besides myself willing to work on the cheap. Note - on the cheap not free. In fact all of the money I have raised thus far has gone to pay this one developer and he has lived on my startup for 5 months while I yet to make anything on it.
So how free is free???
Tuesday, September 29, 2009
Friday, September 25, 2009
Money vs. Time
Now that we are building out our next proof-of-concept, we are starting to obtain a completely different perspective on money. Whereas we were looking at giving up 33% of the company to get started 2 months ago, in another two months we will actually obtain more money and yet only have to give up less than 20% of the company.
At the same time, we are faced with a 4 month delay on a project that will take a total of 6 months to build out to the point where it can be sold. So this appears to be a negative but I am not sure how negative it really is.
OK there is the whole "end of year" thing - you know where companies tend to spend most of their budget at the end of the year. That said, the economy is still recovering and it might not be until next year that Big Checks are written. In fact, our current timing places us in the second quarter of 2010 and that might end up being perfect.
On the flip side, we are missing out on the holiday season and who knows how that might affect us in the end. It is interesting to ponder as I had a friend ask me if the savings in equity was worth the time delay - I simply do not know.
Not that we had a choice in the matter...
At the same time, we are faced with a 4 month delay on a project that will take a total of 6 months to build out to the point where it can be sold. So this appears to be a negative but I am not sure how negative it really is.
OK there is the whole "end of year" thing - you know where companies tend to spend most of their budget at the end of the year. That said, the economy is still recovering and it might not be until next year that Big Checks are written. In fact, our current timing places us in the second quarter of 2010 and that might end up being perfect.
On the flip side, we are missing out on the holiday season and who knows how that might affect us in the end. It is interesting to ponder as I had a friend ask me if the savings in equity was worth the time delay - I simply do not know.
Not that we had a choice in the matter
Thursday, September 17, 2009
Hourly vs. Monthly
While we are building our proof-of-concept - and if anybody knows how to go from 32-bit images to 8-bit images please LET ME KNOW!!! - I will post some things on non-VC-related items. Today is all about hourly vs. monthly payments.
In the hourly corner, I have clients that blissfully pay me rather large hourly rates, completely screw up what they want and then pay me even more money to fix their mistakes. Based on these clients, the hourly game is a good thing.
On the other hand, I can get many more clients to sign up for a monthly retainer based on the number of hours they think they need from me - and this is what takes me to the next level. In the hourly game, I am limited to about 240 hours per month (60 hours per week) and at, let's say for this example, $250 per hour, that comes out to $60,000 per month. Good money but not the end game.
When I book monthly contracts I ask people how much work they want from me and then how many hours they feel this work will take. Now I have a great capacity to work significantly faster than most people so this type of negotiation really works in my favor. I then give about a 20% discount off of my hourly rate and then sign people up to 6- to 12-month contracts. Back in July, I had 5 such contracts each paying an average of $20K per month - MUCH better money!
Of course I gave all of those contracts up to build my new company because, in the end, even the monthly contract game has a low ceiling. While $100K sounds awesome per month, it fluctuates wildly and I have yet to break $600K for a year. To put that in perspective, most lawyers I know consistently make $800K to over $1M with much less experience in their field than I have in mine.
However, even starting up a single company is not really the end game - rather starting a company that generates companies is the final goal. To that end, I do have yet another patented invention that, once built, will automatically generated 12 spin-off companies (at least) without further effort on my part. While this is a good start, I am constantly noodling for better company-generating concepts as this, to me, is the ultimate money-generating solution.
In the hourly corner, I have clients that blissfully pay me rather large hourly rates, completely screw up what they want and then pay me even more money to fix their mistakes. Based on these clients, the hourly game is a good thing.
On the other hand, I can get many more clients to sign up for a monthly retainer based on the number of hours they think they need from me - and this is what takes me to the next level. In the hourly game, I am limited to about 240 hours per month (60 hours per week) and at, let's say for this example, $250 per hour, that comes out to $60,000 per month. Good money but not the end game.
When I book monthly contracts I ask people how much work they want from me and then how many hours they feel this work will take. Now I have a great capacity to work significantly faster than most people so this type of negotiation really works in my favor. I then give about a 20% discount off of my hourly rate and then sign people up to 6- to 12-month contracts. Back in July, I had 5 such contracts each paying an average of $20K per month - MUCH better money!
Of course I gave all of those contracts up to build my new company because, in the end, even the monthly contract game has a low ceiling. While $100K sounds awesome per month, it fluctuates wildly and I have yet to break $600K for a year. To put that in perspective, most lawyers I know consistently make $800K to over $1M with much less experience in their field than I have in mine.
However, even starting up a single company is not really the end game - rather starting a company that generates companies is the final goal. To that end, I do have yet another patented invention that, once built, will automatically generated 12 spin-off companies (at least) without further effort on my part. While this is a good start, I am constantly noodling for better company-generating concepts as this, to me, is the ultimate money-generating solution.
Monday, September 14, 2009
Side Work
So the frustrating thing about startup - especially when you are building proofs-of-concept - is that the primary inventor needs to look elsewhere for money. Sure I dumped all of my major clients but now I have to feed my family for the next 4 months and that means begging for scraps.
It is not that the money sucks - quite the contrary - but I am switching between extremely smart developers and lawyers from my startup to people who send me the same email questions on a daily basis and NEVER READ MY RESPONSES. "Oh, was I supposed to read that?!?"
I think this is the biggest hit to my ego - after all of the "we are going to change the world", the only thing that has changed is my ability to tolerate ignorant clients...
It is not that the money sucks - quite the contrary - but I am switching between extremely smart developers and lawyers from my startup to people who send me the same email questions on a daily basis and NEVER READ MY RESPONSES. "Oh, was I supposed to read that?!?"
I think this is the biggest hit to my ego - after all of the "we are going to change the world", the only thing that has changed is my ability to tolerate ignorant clients...
Friday, September 11, 2009
The Challenge
So we have determined that we are going to use the following calcualtor:
http://mobile.clauss-net.de/touchcalc/screenshots.php
to prove our invention to our critics. The proof of concept is straightforward - make this iPhone calculator run on a Blackberry device without ever placing any of the code from that calculator on the Blackberry, without reverse-engineering, using device emulation or a custom compiler.
To be honest we already know we can build this - it is just going to take a couple of months to build out our platform.
Of course our critics are CONVINCED we are idiots and will never build this solution...it is ON!
http://mobile.clauss-net.de/touchcalc/screenshots.php
to prove our invention to our critics. The proof of concept is straightforward - make this iPhone calculator run on a Blackberry device without ever placing any of the code from that calculator on the Blackberry, without reverse-engineering, using device emulation or a custom compiler.
To be honest we already know we can build this - it is just going to take a couple of months to build out our platform.
Of course our critics are CONVINCED we are idiots and will never build this solution...it is ON!
Wednesday, September 9, 2009
Here We Go...Again
So we had our Big Meeting yesterday and I got the investors to give us one more shot at proving that we know what we are doing. Of course there is no money now and we have two months to build our next proof-of-concept.
It is interesting to hear investors discuss how little value that actually ascribe to any deal - even if the deal have a very large potential. They simply see to much and have seen too many failures. Sort of like a stripper trying to impress a long time bouncer at a strip club - it is just not easy to do...
Maybe I need to work out more...
It is interesting to hear investors discuss how little value that actually ascribe to any deal - even if the deal have a very large potential. They simply see to much and have seen too many failures. Sort of like a stripper trying to impress a long time bouncer at a strip club - it is just not easy to do...
Maybe I need to work out more...
Tuesday, September 8, 2009
Marketing People Are Crazy
So Marketing People - you know those people that are brought in to Move Your Company Forward, Sell Your Idea - are crazy. Let me provide you with a couple of actual stories that proves my point.
Mr. Seriously?!?
I met one guy when I was first getting my universal mobile company together (I will write about my equity nightmares another time). He was a nice person, young (maybe 26) and very energetic. Over the course of a few weeks he got what I was building and he even had one of his friends provide a (complete worthless BTW) pre-money valuation of $20M that would, according to the report, probably sell between 10x and 20x within 12 months.
So I then meet with this guy to discuss terms of a possible equity deal. I first ask him what he is willing to do and what he wants for his effort. He said that he could introduce me to a few companies and set me up to possibly obtain partnerships and that this effort would take him up to 3 weeks. I said that sounded great and I offered him a, rather rich, 5% finders fee for his efforts.
At this point he actually got offended. How DARE I suggest that a finder's fee would be sufficient - he was MUCH too valuable to be anything other than a core part of the team. He demanded that he be a CMO or higher. To be clear, I told him that, based on his own valuation I was giving him $1M in equity that his own report said would be $10M to $20M within a year. "That is not enough for my abilities" he responded - seriously?!?
I then asked him what major things had he done in the past to warrant such a position. Well, he had actually not done much of anything. I then asked how he was going to connect me to various companies. Through direct and indirect friends he responded but not through any direct contacts. Now he was doubly upset that I had the gall to question his credentials - even though he had no credentials that were worth anything. He got so offended that he dropped everything and left the $1M in equity to return to his $120K a year job as a salesperson for another startup! Crazy.
Mr. Invention
Early on in the development of the universal mobile company, my Deep Technologist (Mr. DT) and I went through numerous scenarios in order to determine the best way to monetize our invention. We knew we needed to place something on a mobile device but would that something be very simple or much more complex. The underlying question came down to whether we were building out technology or an actual retail company. We decided to build out and sell the technology using a rudimentary mobile platform that would prove our invention but not support full retail capabilities.
I then discussed this invention with Mr. Invention. This is important - we had TWO conversations about this invention - that is it. While he did discuss other items with me about the company they were all in the aim of obtaining funding. We agreed to a set finder's fee (I guess he was better than Mr. Seriously...)
So during our two calls Mr. Invention pushed me hard to go down the retail road. Since I am not a marketing guy, I listened and we decided to pitch that idea instead of just the technology. Mr. Invention understood that he did not actually change anything other than how we presented the concept to investors.
So we meet investors and - LO AND BEHOLD - we are told that going down the retail road is death and that we will be MUCH better off building and selling the technology. Yes folks, just like Mr. DT and I had thought originally.
OK, now the fun part. I am discussing equity with Mr. Invention and listing out his finder's fee and possible future equity should he do any work down the road. "But what about my upfront contribution?" he asks me. Thinking I missed something, I told him that we agreed that his efforts to land money was why he got the finder's fee. "No, no", he responded, "I helped you guys form your core invention."
So I asked him what he meant and he said that his efforts to push us into the retail space was core. When I showed him that we already had a rudimentary platform and he agreed he did not help with that part. I then got him to agree that we were not going to build out a retail component. "But I still gave you the retail idea", he said. He then agreed that the "retail concept" did not change the actual invention and that it only appeared as vaporware in a couple of presentations.
"But I still pushed you guys down that road". Sure, I said but first we explored that road prior to you and rejected it and, second, you took us down a road no investor agreed was a good idea. Did not matter to him - he felt he deserved at least 5% of the company for his contribution. To put things in perspective, I only have 30% and I have been paying people, writing patents and developing code for 6 months. His "contribution" stems from 2, 30-minute conversations that we ended up not using. He now refuses to talk to me and is still upset about only getting a finder's fee.
Crazy, right?
Mr. Seriously?!?
I met one guy when I was first getting my universal mobile company together (I will write about my equity nightmares another time). He was a nice person, young (maybe 26) and very energetic. Over the course of a few weeks he got what I was building and he even had one of his friends provide a (complete worthless BTW) pre-money valuation of $20M that would, according to the report, probably sell between 10x and 20x within 12 months.
So I then meet with this guy to discuss terms of a possible equity deal. I first ask him what he is willing to do and what he wants for his effort. He said that he could introduce me to a few companies and set me up to possibly obtain partnerships and that this effort would take him up to 3 weeks. I said that sounded great and I offered him a, rather rich, 5% finders fee for his efforts.
At this point he actually got offended. How DARE I suggest that a finder's fee would be sufficient - he was MUCH too valuable to be anything other than a core part of the team. He demanded that he be a CMO or higher. To be clear, I told him that, based on his own valuation I was giving him $1M in equity that his own report said would be $10M to $20M within a year. "That is not enough for my abilities" he responded - seriously?!?
I then asked him what major things had he done in the past to warrant such a position. Well, he had actually not done much of anything. I then asked how he was going to connect me to various companies. Through direct and indirect friends he responded but not through any direct contacts. Now he was doubly upset that I had the gall to question his credentials - even though he had no credentials that were worth anything. He got so offended that he dropped everything and left the $1M in equity to return to his $120K a year job as a salesperson for another startup! Crazy.
Mr. Invention
Early on in the development of the universal mobile company, my Deep Technologist (Mr. DT) and I went through numerous scenarios in order to determine the best way to monetize our invention. We knew we needed to place something on a mobile device but would that something be very simple or much more complex. The underlying question came down to whether we were building out technology or an actual retail company. We decided to build out and sell the technology using a rudimentary mobile platform that would prove our invention but not support full retail capabilities.
I then discussed this invention with Mr. Invention. This is important - we had TWO conversations about this invention - that is it. While he did discuss other items with me about the company they were all in the aim of obtaining funding. We agreed to a set finder's fee (I guess he was better than Mr. Seriously...)
So during our two calls Mr. Invention pushed me hard to go down the retail road. Since I am not a marketing guy, I listened and we decided to pitch that idea instead of just the technology. Mr. Invention understood that he did not actually change anything other than how we presented the concept to investors.
So we meet investors and - LO AND BEHOLD - we are told that going down the retail road is death and that we will be MUCH better off building and selling the technology. Yes folks, just like Mr. DT and I had thought originally.
OK, now the fun part. I am discussing equity with Mr. Invention and listing out his finder's fee and possible future equity should he do any work down the road. "But what about my upfront contribution?" he asks me. Thinking I missed something, I told him that we agreed that his efforts to land money was why he got the finder's fee. "No, no", he responded, "I helped you guys form your core invention."
So I asked him what he meant and he said that his efforts to push us into the retail space was core. When I showed him that we already had a rudimentary platform and he agreed he did not help with that part. I then got him to agree that we were not going to build out a retail component. "But I still gave you the retail idea", he said. He then agreed that the "retail concept" did not change the actual invention and that it only appeared as vaporware in a couple of presentations.
"But I still pushed you guys down that road". Sure, I said but first we explored that road prior to you and rejected it and, second, you took us down a road no investor agreed was a good idea. Did not matter to him - he felt he deserved at least 5% of the company for his contribution. To put things in perspective, I only have 30% and I have been paying people, writing patents and developing code for 6 months. His "contribution" stems from 2, 30-minute conversations that we ended up not using. He now refuses to talk to me and is still upset about only getting a finder's fee.
Crazy, right?
Monday, September 7, 2009
No Such Thing As a Sure Thing
So back in June I met a great guy who runs a large investment fund as is very well connected in the VC world. I gave him an initial presentation and he was blown away. To the point where he said we were a sure thing to get funded and he gave us a month's worth of money upfront to bridge us until he closed the funding. He further promised half of the overall money himself and he had locked in the rest within days.
OK so Mr. DT's (see prior post) reticence to actually get our message straight hurt...A LOT...but I am here to tell you that NOBODY should EVER lock in to one investment group EVER. I got a lot of advice in June that I should be working with as many groups as possible just in case something went wrong. I, being SO SMART, thought that locking in with Mr. Sure Thing (ST) would be the best for our relationship and the company. Idiot (me, not Mr. ST)
Look, Mr. ST was just doing his proper diligence (although he told me originally that such diligence was not needed...) and these experts ripped us apart (blood pressure rising...grrrr...Mr. DT...). So naturally Mr. ST became Mr. Somewhat Sure Thing and now he is Mr. Good Luck With Your Venture.
That's right folks, Mr. ST has essentially gone from "I will have your money in a month" to "When can I get my original loan back?" in a mere 4 months. Better yet, he actually agrees that our ill-formed original explanation caused our issues, he agrees that the new message overcame those issues and he completely believes in our invention...and none of that matters. In his words "it just took so much to get to this point, I have lost my appetite for the venture"
From his point of view, there are literally thousands of great ideas and he is being constantly bombarded with the Next Big Thing. If he misses out on one here or there, so what? He will not miss us nearly as much as we will miss him.
So now I, having realized yet again my level of ignorance, have started all over again. This time I am going after multiple groups of investors. I have sounded my message off of colleagues to make sure it makes sense and I am ready to start ALL OVER AGAIN.
Sigh.
OK so Mr. DT's (see prior post) reticence to actually get our message straight hurt...A LOT...but I am here to tell you that NOBODY should EVER lock in to one investment group EVER. I got a lot of advice in June that I should be working with as many groups as possible just in case something went wrong. I, being SO SMART, thought that locking in with Mr. Sure Thing (ST) would be the best for our relationship and the company. Idiot (me, not Mr. ST)
Look, Mr. ST was just doing his proper diligence (although he told me originally that such diligence was not needed...) and these experts ripped us apart (blood pressure rising...grrrr...Mr. DT...). So naturally Mr. ST became Mr. Somewhat Sure Thing and now he is Mr. Good Luck With Your Venture.
That's right folks, Mr. ST has essentially gone from "I will have your money in a month" to "When can I get my original loan back?" in a mere 4 months. Better yet, he actually agrees that our ill-formed original explanation caused our issues, he agrees that the new message overcame those issues and he completely believes in our invention...and none of that matters. In his words "it just took so much to get to this point, I have lost my appetite for the venture"
From his point of view, there are literally thousands of great ideas and he is being constantly bombarded with the Next Big Thing. If he misses out on one here or there, so what? He will not miss us nearly as much as we will miss him.
So now I, having realized yet again my level of ignorance, have started all over again. This time I am going after multiple groups of investors. I have sounded my message off of colleagues to make sure it makes sense and I am ready to start ALL OVER AGAIN.
Sigh.
Dealing with Deep Technologists
So the first thing I learned was that deep technologist - even good friends - do NOT like to explain things. It is not some perverse sense of hiding the technology or anything - these guys just get nervous if they have to say too much. In my case that was disastrous.
My Deep Technologist (DT) and I worked on a comprehensive message to present to investors and those investors' sets of experts. Since my DT cannot explain things to me corrected half the time (and I have my own deep set of technical abilities), it was up to me to extract from Mr. DT the actual details at a low level and boil those up into business terms. Along those lines, we spent weeks pouring through all of the intricacies of the invention, how things would be obtained, stored, transported, etc... and all the while Mr. DT kept nodding his head saying "that sounds about right"
If your DT ever says "that sounds about right", hit him/her HARD - SEVERAL TIMES - trust me that will be much less painful in the end.
Instead, I took our agreed upon message to my investment group, all set to get my money are start building, and the experts trashed my invention. IMPOSSIBLE, STUPID, NAIVE (and those were the nice things). What the hell?!? Our invention was sound, we had a proof-of-concept - WHAT WENT WRONG???
After the 3rd such trouncing, I sat down with Mr. DT and asked him to go through things again just to make sure we were not missing anything. His response? "Oh those guys were correct, you were not saying things correctly at a deep level". Seriously, he was lucky we were on the phone or maybe I was lucky as jail sounds even worse than this venture.
After I ram out of breath from providing my enthusiasm over his response, Mr. DT and I laboriously went through everything AGAIN. This time I harbored no "sort of"s or "about right"s. I beat on Mr. DT until I finally had everything correct.
So I took the CORRECT version to a 4th expert and LO AND BEHOLD he was on board (immediately I might add). On top of that, two or the other 3 (one refused to ever talk to us again) also got back on board. Great - right?!?
Hardly. With the negative hits from the stupid initial communications, the valuation of the company was dropped 70% by this investment group and they want yet another proof of concept prior to funding the actual development effort. To say the least we are at an impasse and I am now looking for other funding - essentially starting over again.
My Deep Technologist (DT) and I worked on a comprehensive message to present to investors and those investors' sets of experts. Since my DT cannot explain things to me corrected half the time (and I have my own deep set of technical abilities), it was up to me to extract from Mr. DT the actual details at a low level and boil those up into business terms. Along those lines, we spent weeks pouring through all of the intricacies of the invention, how things would be obtained, stored, transported, etc... and all the while Mr. DT kept nodding his head saying "that sounds about right"
If your DT ever says "that sounds about right", hit him/her HARD - SEVERAL TIMES - trust me that will be much less painful in the end.
Instead, I took our agreed upon message to my investment group, all set to get my money are start building, and the experts trashed my invention. IMPOSSIBLE, STUPID, NAIVE (and those were the nice things). What the hell?!? Our invention was sound, we had a proof-of-concept - WHAT WENT WRONG???
After the 3rd such trouncing, I sat down with Mr. DT and asked him to go through things again just to make sure we were not missing anything. His response? "Oh those guys were correct, you were not saying things correctly at a deep level". Seriously, he was lucky we were on the phone or maybe I was lucky as jail sounds even worse than this venture.
After I ram out of breath from providing my enthusiasm over his response, Mr. DT and I laboriously went through everything AGAIN. This time I harbored no "sort of"s or "about right"s. I beat on Mr. DT until I finally had everything correct.
So I took the CORRECT version to a 4th expert and LO AND BEHOLD he was on board (immediately I might add). On top of that, two or the other 3 (one refused to ever talk to us again) also got back on board. Great - right?!?
Hardly. With the negative hits from the stupid initial communications, the valuation of the company was dropped 70% by this investment group and they want yet another proof of concept prior to funding the actual development effort. To say the least we are at an impasse and I am now looking for other funding - essentially starting over again.
Month 4, Day 7
While this is my first blog entry, it comes in the midst of my adventure is startup land (sorry, I was too busy being pummeled to actually blog). I thought I knew alot about starting up a company going into this but I soon realized how much of a neophyte I really am - despite my numerous years of startup experience working for other people.
I hope people read my blog and learn from my mistakes...so many mistakes...and I hope to continue blogging as that means I have somehow overcome the odds. For this entry, here is an overview:
Back in March of this year, I came up with a brand spanking new method for automatically moving a mobile application from one device to all other devices. Got an iPhone App? I can place that app on Blackberry, Nokia, Palm, Google, etc... devices in an automated manner all without ever needing your source code. Kind of cool, huh?
I started working with a good friend of mine, who is a DEEP technologist, and we soon took my initial idea and turned it into a patent and a proof-of-concept. By June I (thought) was ready to meet investors, get some money to build this thing out in 6 months and chaaaaannnnngggee the wooorrrllldddd
da
da
Yeah, right.
I will write more about my fiascoes in subsequent entries...
I hope people read my blog and learn from my mistakes...so many mistakes...and I hope to continue blogging as that means I have somehow overcome the odds. For this entry, here is an overview:
Back in March of this year, I came up with a brand spanking new method for automatically moving a mobile application from one device to all other devices. Got an iPhone App? I can place that app on Blackberry, Nokia, Palm, Google, etc... devices in an automated manner all without ever needing your source code. Kind of cool, huh?
I started working with a good friend of mine, who is a DEEP technologist, and we soon took my initial idea and turned it into a patent and a proof-of-concept. By June I (thought) was ready to meet investors, get some money to build this thing out in 6 months and chaaaaannnnngggee the wooorrrllldddd
da
da
Yeah, right.
I will write more about my fiascoes in subsequent entries...
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