Even though Paul Graham and I had some “fun” in my Kiko synopsis, I obviously still respect his opinions. His latest entry, The 18 Mistakes That Kill Startups is definitely worth a read, and in this entry I wanted to go over some of it.
Bad Location — Startups prosper in some places and not others. Silicon Valley dominates, then Boston, then Seattle, Austin, Denver, and New York. After that there’s not much.
Yup, very true, but I’d rather be exactly where I am then holed up in some garage with 10 other people sleeping on blankets and cots. I live in Raleigh, NC where the tech industry is booming, the housing costs are nice and low, the people are very friendly, and the weather is beautiful. I’m an east coast guy and although I’ve been to the Valley a few times it always freaks me out how completely different the people are over there. My first time in San Francisco, Paul and I were at a bar around 1am and instead of the normal things that go on in a bar (dancing, lots of drinking, laughing, etc.) we saw Apple girl Eris Free, CSS bad boy Tantek Celik, and about 4 other people all huddled around their laptops writing code. Nobody was talking, nobody was drinking, just people nose-down in their work (or play?) at a bar. When I’m out at night, my primary goals are these: escape from work, escape from technology. It seems that if you’re an entrepreneur in SF you’re expected to go to barcamps, tech meetups, tech dinners, VC-funded parties, etc., where people undoubtedly chat about their work, their technology. To me that’s just not appealing.
Now San Francisco might be the place to be if you’re starting a tech company, but do I want the rest of my life to be odd? Gigantic costs of living, crazy weather, people with the unmistakable west coast mentality? I personally wouldn’t want to live there, but you have to make that decision yourself :)
Marginal Niche — Most of the groups that apply to Y Combinator suffer from a common problem: choosing a small, obscure niche in the hope of avoiding competition.
What Paul is saying is that tackling small problems does not a company make, nor does it prove very challenging or fulfilling. I’ve hacked together multiple “widgets” or code prototypes in my day that solve interesting but small problems, and not once did I ever think that I should turn that feature into a full-blown app or company. However on the flip-side Paul Graham has warned against being too broad or directly going up against something that Google could put together, or Microsoft. It seems that picking the problem to solve for your new company can’t be merely “a feature” that should be on some software package somewhere, nor should it be too generic that it loses its usefulness. The fine line between generic and niche is where your solution should lie.
9rules only showcases high quality blogs because we thought it was a more valuable proposition then showcasing all blogs in all topics since that’s been done a hundred times over. Anybody can create a blog, anybody can write for one, and anybody can create a great or shitty blog, but creating a great blog takes the cumulative efforts of various skills — entrepreneurship, talent, passion, charisma — and that’s what we like most about the blog world. Although the generic litmus test for your blog’s popularity could be your Technorati rank or your number of linkbacks, that doesn’t really test the quality of your blog — merely the popularity — and we all know that popularity != quality if you’ve listened to some of the songs on Billboard’s Top 20 recently. Popularity can be bought (marketing, word of mouth, author fame, notoriety, etc.) but quality speaks for itself.
Derivative Idea — Many of the applications we get are imitations of some existing company. That’s one source of ideas, but not the best. If you look at the origins of successful startups, few were started in imitation of some other startup. Where did they get their ideas? Usually from some specific, unsolved problem the founders identified.
I think the main problem with our industry now is that everyone is intent on over-solving the simple problems. How do I find out what cool events/shows/etc. are near me? How do I connect with old friends, or make new ones? How do I publish on the web, can I start a blog? How do I find directions to where I want to go? How do I keep track of my schedule? I’d say that these simple questions represent nearly the majority of the “problems” that startups are now trying to solve, but how many times do they need to be solved? Are the additional 20 solutions that much better than the first 2 or 3? Is the marginal value they provide worth it to me to stop using one and start using another? Paul’s idea of derivative startups not being a good idea is true, but only if you solve the same problem the same way as everybody else, but tack on Feature X or Feature Y. The concept behind 9rules is nothing new, human-edited directories of websites have been around since the mid-90s, but now we’re doing it with blogs and added some cool community benefits. Google Maps isn’t much different than the original MapQuest (remember when MapQuest was a verb?) but they added real-time map manipulation and *poof* it’s a gigantic hit. They went back to the original problem (get me here from there) and added something that made a dramatic difference in how people used it.
Hiring Bad Programmers — I forgot to include this in the early versions of the list, because nearly all the founders I know are programmers. This is not a serious problem for them. They might accidentally hire someone bad, but it’s not going to kill the company. In a pinch they can do whatever’s required themselves. [...] But when I think about what killed most of the startups in the e-commerce business back in the 90s, it was bad programmers. A lot of those companies were started by business guys who thought the way startups worked was that you had some clever idea and then hired programmers to implement it. That’s actually much harder than it sounds—almost impossibly hard in fact—because business guys can’t tell which are the good programmers.
This is a gigantic problem for many entrepreneurs because kickass technical skills are not something you randomly pickup, they have to be inside you initially, you have to love code, love pixels. A team of entrepreneurs with business backgrounds hiring designers and developers to make their dream into reality seems to make sense from the onset, but when you get into the nitty gritty parts of the project it’s a nightmare. The constraints that guide an application’s development (requirements, scope, user personas, etc.) don’t really mesh with pie in the sky ideas, changing concepts, changing business plans, etc. A startup’s goals may remain consistent but goals don’t drive software development, and when the direction to achieve those goals changes so does the software. We tweak things all the time on the 9rules website — layout, wording, icons, list length, etc. — and if we had to hire people to change those things at the same frequency we wanted them to change, it would cost us an arm and a leg.
Matching up business-minded entrepreneurs with haX0rs to develop the software is a gigantic nightmare for all those involved. Unfortunately if you’re in that situation there isn’t really a way out of it that doesn’t involve lots of money or lots of time, and those are two luxuries startups cannot afford.
Raising Too Much Money —It’s obvious how too little money could kill you, but is there such a thing as having too much? [...] Yes and no. The problem is not so much the money itself as what comes with it. As one VC who spoke at Y Combinator said, “Once you take several million dollars of my money, the clock is ticking.”
When we started 9rules early on, it wasn’t our main source of income, so we bootstrapped. After awhile we thought that having some money around would help us achieve our goals faster (which it may have, who knows) so we talked to some friends and some terms were laid out in front of us that we didn’t like, so we turned them down and decided to go back to kicking ass like we had been doing before. Now a few months later 9rules is bigger, stronger, making us some more money, and now that we were considered “more successful” some new investors came to us wanting to give us money. I think that’s the funny thing about VC money — when you need some money to get started they say you need to prove yourself more, but once you’ve proved yourself and are making money people now want to give you money you don’t need, or don’t want.
As Paul notes, when you take VC money your direction is locked down, at least for a few months. You asked for money for specific things and now you have money for specific things, so you’re expected to spend it on those things. What if Big Idea X in your business plan doesn’t really work so well, and you need to switch gears? Well if you hired somebody to manage Big Idea X, what happens to them? What about the marketing budget for Big Idea X, where’s that go?
Jason Fried has a great quote about how failing in obscurity is a luxury that small teams without big investments still have:
“So embrace obscurity. It’s your friend. Launch small, make mistakes in the shadows, get better, and then seek out the spotlight when you’re ready.”
When you’re spending your own hard-earned money you spend it more wisely, you spend it on what matters and not on what doesn’t. Ideas you have that may stray from your original plan are now just experiments, not “initiatives” with budgets. Experimenting, trying and failing or trying and succeeding are all things that you can do relatively cheaply, but if you’re throwing someone else’s money at your experiments then they’re not just experiments anymore, they’re projects, or they’re feature releases, or redesigns. There’s really no such thing as tweaking anymore, and I think that’s the hallmark to a great startup — the ability to tweak and make tiny adjustments until your initial goal is dead in your sights.