Migration is all done

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Thank you for your patience!

Migrating this blog

Quick note: I am migrating this blog from wordpress.com to a self-hosted domain this weekend.  I will post again when the migration is complete. Thank you for your patience.

Dear Amazon: this is lame.

Apparently Amazon lacks the coding expertise to check if points==0. #UXFAIL!

Startup Administrivia: Part 1 – getting started

Note: This multi-part post is for first time founders.  Anyone who has done it before will already know all this.

If you are a first time founder, what should you obsess about? Hopefully, you are all over the market opportunity.  You are doing customer development to understand buyer and user personas, building knowledge about the problems they face, and evolving hypotheses for how to solve these problems.  You are working on building a great product.  You are focusing on the build-measure-learn loop and iterating and pivoting fast to incorporate market learnings. You are working on putting together an A team to get the job done. And you are managing your time so you are able to focus on these value generating activities.

Instead, I find that a lot of first time founders spend a disproportionate amount of time sweating the details on administrivia.  Hiring professional service providers.  Company formation.  Making sense of Cap Tables.  Setting up a bank account and doing the accounting.  Keeping track of business contacts.  Company positioning and messaging.  Company naming.  Corporate identity.  Web site. Social media.  Filing patents.  You get the picture.

This stuff is not rocket science. It has to be done, but it doesn’t add value.  Figuring out the core premise of your startup – that  needs to be the main thing. Everything else is a distraction.

To help young founders spend the least possible time on this stuff, I am putting together a few posts that helps summarize some of the key tasks as well as pointing out some possible resources to execute those tasks.  Hopefully this will also arm you with the vocabulary to learn more.

• Hiring professional service providers

  • What is this? Professional service providers can help you with the mechanics of starting and running a company.

  • Why do it? A small cash outlay can save you a lot of time and the trouble of learning things outside your area of expertise (such as how to file corporate taxes) that adds no value to your startup or your professional trajectory.

  • Who do I need? A corporate attorney, a contract accountant, a creative web / graphics service provider, an IP attorney.

• Company formation, a.k.a. “incorporation”

  • What is this? The process by which the startup becomes a separate entity from the people who own or operate the business.

  • Why do it? To protect your personal assets in case your company gets sued / owes money, or some such.

  • What kinds of entities are relevant? Choice of C-Corp, S-Corp, or LLC.  This is a critical choice as it has significant tax implications.  Forbes has a great article on C-Corp versus S-Corp, and the Small Business Administration has an article on LLC that you should read. Work with a corporate attorney who can help you pick what works for you.

  • How do I file for incorporation? You can file your own incorporation papers with the SEC of your state. The easiest thing to do is to hire a corporate attorney to do it for you.

  • Who can help me with this? A corporate attorney.  e.g. Morse, Barnes Brown and Pendleton or Foley Hoag are example law firms that specifically service startups.

• Cap Table construction:

  • What is this? A cap (capitalization) table lists who owns what stock in the company.

  • Why do it? To define ownership of the company. You need it immediately if you are incorporating with more than 1 founder, and you definitely need it when you raise your first round, or when you need to define an option pool for new employees.

  • Where can I find examples of cap tables to learn more? S3 ventures provides a fantastic excel template for free – you can download it here. Google any words that you don’t know in there and relax, you don’t need to understand all of that all at once.  Venturehacks has a blog post with a video link depicting the process, as well as an excel template you can buy for $9.

  • Who can help me with this?  Your corporate attorney.

• Setting up a business bank account and business credit card

  • What is this? Opening a bank account and obtaining a business credit card for your startup, that is separate from your personal bank account and credit card.

  • Why do it? Keeps things clean and separate and saves you many hours of busywork writing expense reports from yourself to yourself. Keeps the credit histories separate.

  • Who can help me with this? You don’t need help on this one – just pick a local bank with a no-minimum-balance checking account product. Amazon business card is a great product for the corporate credit card.

• Doing the accounting, and the software to do it with

  • What is this? Keep track of money in and money out for your business, separate from your personal finances.

  • Why do it? Some day you will get audited and you will be glad your books are squeaky clean from the start.

  • What do I need to do? Hire a contract accountant who can set you up with Quickbooks. You can do the Quickbooks management yourself until it gets unwieldy, then you can contract it out or hire a staff accountant. I have seen people use Quickbooks through Series B – I would suggest going with a professional ERP (enterprise resource planning system) before you get that far, especially if you are selling product and need to manage inventory.

  • Who can help me with this? A contract accountant.

• Keeping track of business contacts via a CRM (Customer Resource Management) system

  • What is this? A CRM system helps you keep every detail of every conversation with every prospective customer / vendor / contact in one place via a database.

  • Why do it? Conversations can be long range and have a long half life – important to keep track of people, companies and tracks so nothing falls the cracks. Spreadsheets or documents or email trails are not scalable beyond a few conversations.

  • Who can help me get this done? You will have to set it up yourself.  Then everyone who interacts with outside contacts should get in the habit of logging their notes and conversations in the system.  There are free tools like the Zoho CRM, with limited functionality, or you can always spring for salesforce.com when you are big enough.

That’s enough for starters.  I’ll cover basic marketing presence in the next post.

Complete list of posts in this series:

• Startup Administrivia: Part 1 – getting started
• Startup Administrivia: Part 2 – basic marketing presence

 

“What is your leadership style?”

Recently someone asked me: “Elaine, what is your leadership style?”  My response: “which one of the 100 frameworks out there are you referring to?”

People studying leadership appear to be irresistibly drawn to classifying humanity into categories.  Following are a few leadership style frameworks that I have seen in recent years.

• Here is a list of 4 leadership styles from Inc back in 2012. The four styles are: directive, participative, laissez-faire, adaptive.
• Here is a list of 5 leadership styles from USA Today in 2013. The styles include: the sports coach, the driver-director, the mentor, the country clubber, the eclectic.
• Here is a list of 6 leadership styles from Wall Street Journal, originally put forward by Daniel Goleman in his book “Primal Leadership“.  Also cross referenced by Fast Company. The styles include: pacesetting, authoritative, affiliative, coaching, coercive, democratic.
• Here is a list of 8 archetypes from Inc., by Manfred F.R. Kets de Vries, the author of “The Hedgehog Effect: The Secrets of Building High Performance Teams”.  The archetypes include: The strategist, the change-catalyst, the transactor, the builder, the innovator, the processor, the coach, the communicator.
• Here is a list of 9 leadership styles from an executive coaching consultancy, based on the enneagram personality typing system.
• Here is a list of 10 leadership styles from the Under30ceos.com website. I am not sure what it is based on.

While these frameworks can help people better understand themselves, they can also end up confusing people.  First of all, they oversimplify.  People are complex, and few people fit perfectly into any one style.  Secondly, there are so many frameworks and they don’t all agree with each other. Which one should one read?  Lastly, how many people read one of these articles, see themselves in one of the styles, start justifying their actions, and stop growing as a leader?

To be fair, many of the articles referenced above do mention that good leaders need to adapt to different situations.  But I wonder how many people come away with that insight, after being drawn to an article with a title like this:  “Leadership: 8 Archetypes Explained”.

Leadership is holistic and multifaceted.   No one can stick to any one style and expect to succeed.  Of course we all have our preferred styles of interaction, but different situations will warrant different styles.  For instance, if you find yourself heading up a team with a clearly defined set of objectives and a very aggressive deadline, and you have experience and insight that the team lacks, a directive style would be most effective.  If you have a strong vision about a problem you want to solve, but don’t quite know how to bring it to fruition, you would need to refrain from micromanagement, and learn to give your team the time and space to come up with ways to implement your vision.  If you are implementing a cross functional initiative that needs buy in from many constituencies, then a collaborative and inclusive style would be appropriate.  If you are trying to build bench strength and develop a scalable organization in a time of rapid growth, a coaching style would make sense.

To be an effective leader, you need to be able to do all of these things and more, whether or not you are innately comfortable with adopting these leadership styles.  It’s not easy at all for someone who is a natural at a command-control style to adopt a nurturing or coaching style.  It is equally jarring for a naturally collaborative leader to have to adopt a directive style.  Pushing yourself beyond your boundaries is uncomfortable.  However, challenging yourself to grow and mature will benefit yourself, your team and your organization as a whole.

If you come across one of these frameworks, by all means use it to help gain insights into how you think and work.  At the same time, do consider using the entire list as a learning curriculum.  A leader with a broad range of styles can achieve far more than someone who can only exercise a small range of leadership styles.

Holiday gifts that encourage STEM education

From FORTUNE

The gender imbalance in STEM fields is extreme. According to a 2010 AAUW report, boys and girls take math and science courses in roughly equal numbers in elementary, middle, and high school, however far fewer women than men pursue these fields in college. According to the National Science Foundation, 29% of all male freshmen planned to major in a STEM field in 2006 compared to 15% of all female freshmen.

Further, while 57% of undergraduate degrees are earned by women, only 12% of computer science degrees are earned by women. By college graduation, men outnumber women in nearly every science and engineering field.

This divide grows worse at the graduate level and is even wider in the workplace. GirlsWhoCode.com states that women make up half the U.S. workforce, yet hold only 25% of the jobs in the technical or computing fields. To quote from the site: “In a room full of 25 engineers, only three will be women.”

Society is leaving a huge talent pool on the table. Women can bring diversity and a different viewpoint to STEM fields, and this resource is extremely underutilized today. As girls are as equipped as boys to enjoy and excel in STEM careers, how can we turn the tide and help undo some of this early conditioning?

One way is to interest them with toys that fit their frames of reference, while bringing in some element of technology for a soft landing. The Goldie Blox book and toy series is an example where a character is portrayed as a “princess turned engineer.” The toys teach spatial skills and engineering principles.

Roominate presents a dollhouse (a holiday favorite) that can be customized from an architecture standpoint, and includes technical elements such as lights and motor powered ceiling fans that the girls hook up themselves. Roominate was started by two women engineers from MIT, Stanford, and CalTech, who believe that “early exposure through toys will inspire the next generation of female technology innovators.”

For older girls, Romotive offers a mobile toy robot powered by an iPhone that girls can program graphically, without writing a line of code. It takes a little bit of work, but it is possible to find fabulous technical toys that appeal to girls.

Of course, gift-giving is seasonal and episodic, and can only be a tiny part of the solution. To reach girls effectively, advocates of STEM need to work with girls where they spend the most time. At school, teachers should make sure they set high expectations for girls as well as boys, stretching them beyond their comfort zones and inspiring them to excel. After-school activities should pay particular attention to recruiting and retaining girls in STEM-related activities, perhaps creating all-girl STEM experiences to help build a community around female students who are interested in this area. At home, parents should make sure they encourage boys and girls equally in the pursuit of STEM interests.

The use of female role models is a particularly potent tool. The Science Club for Girls is a great example: It connects K-12 girls with female scientists or engineers who serve as role models. It also has a leadership program where teenage girls become role models for younger girls. STEM is cool — girls can and should embrace this at a young age.

Women in STEM careers should also be very open to putting themselves forward as role models. For example, a parent in our elementary school is a tenured professor in geology. Every year she brings her rocks and crystals and shares her work with children at the school. Her child has long graduated, yet she cheerfully returns every year to share her excitement and enthusiasm about her branch of science. This is probably the most fantastic way to expose girls to STEM.

As we encourage more girls to focus on STEM areas, look for communities that can serve as central connectors. MIT serves this function with its K-12 programs, like the Edgerton Center’s intensive summer programs and outreach to local schools. Many other schools around the country offer STEM programs for K-12 students. Once you find them, share the information with other parents and encourage your daughters and their friends to participate together.

We need to sow the seeds of interest in young girls now, and nurture that interest as they grow. There are many ways to do this. It starts with you, and it starts today. Take a look at your gift list. Will you help this cause by changing your gift list for your daughters, granddaughters, nieces, and young female friends?

Read the original post by Elaine at Fortune / CNN Money

What is innovation?

A few months ago, I was interviewed by a group of entrepreneurs from Mexico about my thoughts on innovation.  Here are some key discussion points that came up in our conversation.

What is innovation?

When people use the word “innovation”, most of the time they are thinking about scientific or technological innovation.  To me, however, innovation simply means coming up with new ideas on how to solve problems, and then successfully implementing these ideas into viable solutions, and it applies to every discipline.

Coming up with a non-invasive way to test a diabetic patient’s blood glucose level is innovation. Coming up with novel ways to incentivize a sales channel to double their product sell through rate is innovation.  Coming up with visualization tools for budget-versus-actual analyses to help a cost center manage its expenses is innovation.

Why is innovation key in a startup?

Innovation is critical for any organization that needs to maintain a competitive edge, but for a startup, it is a matter of survival.  Startups are always pressed for time and resources.  They are constantly looking for  new and non-obvious ways to solve problems and meet objectives quickly.  They are constantly solving new problems never solved before.  Being creative and flexible is key.

How do we come up with a process for innovation?

In my mind, the very nature of innovation is non-linear, whereas processes and frameworks tend to be rigid and structured. In my opinion, innovation and set processes don’t go well together. Rather than creating a documented process, we should focus on creating an environment that encourages risk taking and spontaneous, out-of-the-box thinking, which in turn encourages and nurtures innovation.  We should make it ok for team members to try things that aren’t guaranteed to work.  Also consider building in some intentional slack, so people have the space and breathing room to come up with great ideas during their down time.

How can you tell if your organization is innovating successfully?

It’s one of those “you know it when you see it” things.  An innovative organization simply exudes creative problem solving vibes.  There are also objective signs: more patents being applied for; faster turnaround in responding to market needs and customer requests; loyal and happy customers who trust an organization to solve their problems effectively; these all help to show that the organization is innovating where it matters.

Are there best practices for encouraging innovation in a startup?

One thing I advocate is the “tiger team approach”.  I like to pull a cross functional team together from different departments.  This project team gets  together and works on a well defined problem with great focus until it is resolved.  The diversity within the team ensures that the problem is looked at from multiple perspectives.  Effective collaboration results in effective innovation.

Entrepreneurs needed – the younger the better

How young is too young to start a startup?

The answer is that there’s no such thing as being too young to start a company. Just look at Tony Hsieh, the CEO of Zappos, who started his first company, LinkExchange, at 23 and sold it to Microsoft for $265 million less than two years later. Drew Houston, co-founder and CEO of Dropbox, started his first company, Accolade, at 21. Mark Zuckerberg was 19 when he first launched Facebook. And we all know the stories of Steve Jobs and Bill Gates.

I work with entrepreneurs of all ages, and I see a huge advantage to being a young founder: They don’t know what cannot be done. They are unfazed by problems that other people have not been able to solve. They believe that things will be different for them. They will not be discouraged by seemingly insurmountable obstacles – they will find a way forward. They will not shoot down ideas before they are properly explored, believing that there can be a gem in there somewhere. They also have an unbounded and irrepressible amount of energy, enthusiasm and drive. This is a huge asset when it comes to recruiting top talent, and motivating a team to push the frontiers beyond what seems possible. The healthy stamina that youth brings is very helpful too, considering the long hours they are taking on.

However, that confidence can sometimes be a double-edged sword. A friend of mine who was working on his first startup once said to me: “Elaine, I can read a book on anything, and then do it better than anyone who has done it a million times before.” I was struck speechless by his statement. In the final analysis, he lost a lot of time and energy learning entire new disciplines from scratch and reinventing the wheel, when a short phone call to someone relevant could have saved him some money and reduced his time to market.

There is a lot that one can leverage with youth, but if a young entrepreneur does not temper it with a readiness to listen well and take advice, then he or she might end up on a long and winding road to success. The good news is that it is easy to get help. Entrepreneurial hubs like Boston, the Bay Area, Austin, Boulder and so forth have healthy startup ecosystems full of highly qualified people who are willing and available to help while asking nothing in return. If you are a young entrepreneur doing something for the first time: Don’t be shy – lean on this support system. You will be surprised at how much free consulting you can get if you only asked.

Another easy way to get this support is to develop a team that fills gaps in your experience and perspective. A team comprised entirely of mini-me clones can only lead to group-think, which is the worst thing you can do to your team and business. If you are a young technical founder, find team members who have proven industry experience in business development or marketing, and vise versa. This holds true for all teams, including startups led by older founders. A little diversity goes a long way, especially in a startup.

As for financial concerns, youth can work for or against you. On the one hand, young founders are less likely to have a spouse, kids or mortgage. Working for stock and living on frozen dinners may be OK for a while. It can also be easier for them to relocate to a different city or even another country. On the other hand, younger founders are less likely to have successful startups already under their belt. Raising seed capital could be tough with an inexperienced team, and with little savings and no earnings, bootstrapping – much less paying for groceries — can be challenging.

While youth brings many benefits, I personally believe it is important for aspiring entrepreneurs to finish college, as young adults continue to develop and mature both personally and professionally through their college years. Focusing all of one’s energy on starting a company can make it hard for a young person to develop the skills that will bring one to full potential. Also, entrepreneurship is a learned skill, and college is a great place to gain that knowledge through classes, internships, and labs. The networking and resources available to aspiring entrepreneurs should be fully taken advantage of during those college years.

The bottom line is that there are many more “pros” than “cons” for being a young entrepreneur. If you are 20 and passionate about starting a company, then go for it! Your startup ecosystem stands behind you and we are ready to help you succeed.

Book Review: “Disciplined Entrepreneurship” by Bill Aulet of MIT

My friend and colleague Bill Aulet (currently Managing Director of the Martin Trust Center for MIT Entrepreneurship and Senior Lecturer at the MIT Sloan School of Management) has just launched his new book, “Disciplined Entrepreneurship – 24 steps to a successful startup“.

There are a million books out there teaching various aspects of entrepreneurship, many of them I consider required reading for any aspiring entrepreneurs in today’s startup ecosystem. But I agree with Bill when he says that all these books and materials teach only a part of the whole. First timers need a comprehensive introduction to the whole tamale. Which Bill does fantastically in a nice dose of MIT style firehose.

Bill hammers home the importance of testing your assumptions in the field. Other books do this too, but Bill makes it practical.  The single most fatal mistake an entrepreneur can make is to get so attached to their starting idea that they push forward despite warning signs along the way. A rigorous approach to testing assumptions is a powerful weapon against getting caught up in the focus group of one.

What I particularly like about this book is the approachable way Bill demystified the sales process, explained sales models, and outlined how to quantify and track key metrics like LTV (Life Time Value for a customer) and COCA (Cost of Customer Acquisition) beyond the blunt instrument of a financial statement. The chapters on sales and marketing are particularly valuable to technical founders who haven’t personally seen marketing and sales in action.

Another wonderful thing about the book? It doesn’t discuss product roadmap until Step 24 of 24 – which is exactly apropos. First, you establish your right to exist. Then, you can worry about product roadmap. A product no one buys is not a business. Fixating on future products before the value proposition has been proved on the first offeringis a fool’s errand.

Here are some quotable (tweetable?) quotes that I particularly like:

• “The single necessary and sufficient condition for a business is a paying customer.” (On why having a product no one buys doesn’t make it a business.)
• “Focus is the most important skill for an entrepreneur.” (On not boiling the ocean)
• “If there is already a market research report that contains all the information you need, it is probably too late for your venture.” (On why one must do primary research instead of relying on Google search to learn about the market and customers)
• “Get started doing, rather than getting stuck in analysis paralysis.” (On not agonizing over whether you have picked the right beachhead. You have incomplete data – just make a call and get going.)
• “(Entrepreneurs) overestimate the enthusiasm their customers has on their product.” (Touché.)
• “If the only feedback you get is ‘everything is okay’, then it is likely the customer doesn’t care much about your product and its value to them.” (On anticipating and embracing negative feedback)
• “You cannot will a market to exist any more than you can change the laws of thermodynamics.” (On the need to be willig to change fundamental assumptions, including the choice of a target market, based on new data)
• “Free is not a business model.” (Enough said.)
• “Costs shouldn’t be a factor in deciding price.” (On how cost based pricing almost always leaves money on the table.)
• “It is always easier to drop the price than to raise the price.” (Duh!)
• “A sound ratio for the LTV to COCA is 3:1.” (Via David Skok – a good guideline for unit dynamics once a startup has reached product market fit.)
• “The COCA will almost always start at a very high point because you need to first create the market.” (Something a lot of first timers don’t realize, causing panic, when it is part of the process to develop the business model.)

I very much enjoyed reading this book and the many examples.  If you are a first time entrepreneur who wants to learn what questions to ask, definitely add this book to your collection. It is a dense read, but it will arm you with the vocabulary and concepts to probe deeper in each area. Highly recommended.

“Girls suck at math”

I generally don’t talk much about gender stereotypes in STEM (science, technology, engineering and math). I try not to add to the noise – until I saw this on xkcd.com (courtesy of a TechCrunch article about… well… gender stereotypes.)

This touched a nerve. It caused a flashback of the Teen Talk Barbie “Math class is tough” incident in 1992 and the aftermath.

What has changed in 21 years? There has been some progress…

• Mattel came out with a Pediatrician Barbie.
• A few women rose to global prominence in the high tech world: Carly Fiorina, Meg Whitmann, Sheryl Sandberg, Marissa Mayer, many more.
• Many successful companies are co-founded and/or led by women. A random East Coast sampling includes CyPhy Works (Helen Greiner, ex iRobot), Data Gravity (Paula Long, ex EqualLogic), Communispace (Diane Hessan), care.com (Sheila Marcelo), OneForty – sold to Hubspot (Laura Fitton), and so on.

…But much work remains.

• While the aggregate gender ratio has more or less evened out at MIT, historically male dominated disciplines remain male dominated. According to this slightly stale Quora answer, in 2011 Mechanical Engineering (Course 2) was 36.8% female and EECS (Course 6) was 31.7% female.
• In recruiting ME/EE/CS engineers to join our team over the past two years, we noticed the incoming funnel was nowhere near 30-40% female.
• When asked to write an essay debunking a stereotype of her choice, my 11 year old immediately chose “Girls can’t do math” as her topic.
• Oh, of course, there are always moments like this to highlight the “different availability of aptitude” issue (also known as the Larry Summers foot-in-mouth issue).

21 years and not much to show for it. Our school systems are not effective in nipping stereotypes in the bud. Most STEM fields remain male dominated.

What are YOU willing to do to help?

Some practical mitigations are already being done in the startup space. For example, prominent people like Brad Feld have been using their platform to raise awareness. Angel investors like Golden Seeds specialize in investing in women entrepreneurs. There have been versions of the startup weekend catering to women entrepreneurs as well.

Another mitigation is to work on prevention, starting with the younger grades in the school system. Adults (male or female) can proactively mentor young girls who trust them to pursue their interest in things like math clubs, science clubs and robotics leagues. I recently moderated a panel discussion on STEM careers for MIT female undergraduates. I asked each young woman to recount how they ended up at MIT. Everyone had a personal story involving a mentor in a STEM field, who actively coached them to explore these interests. Things like the LEGO league cater to children in Grades 4 through 8, and is a great first experience for girls to try systems level engineering. There are plenty of resources for teaching girls (and boys) to program as well.

A third mitigation is a call to action for female scientists, engineers and technologists to embrace opportunities to speak to school groups about their work. My children’s school invites a geologist to come talk to them about rocks and crystals once a year. That brings interest to an area of expertise few children have access to. Even better, the expert is a female role model. If you are a female in STEM, consider what you can do to share your enthusiasm about your work with school groups. Seeing is believing.

The last word of wisdom comes from this Boston Globe article about shattering the glass ceiling. Between this, and Sheryl Sandberg’s much anticipated book about leaning in, women should take note: believe in yourself and achieve great things, and you will help inspire the next generation.

I hope that with these and other measures, in another 21 years, no one will be writing yet another blog article lamenting the fact that nothing much has changed.