This is the first time I have reviewed a book on my blog. I’ve mentioned several that I like, or that I am currently reading, but I’ve never done an actual review of a book. The reason I am writing a review of ‘Rework’ though is pretty simple (like the book itself). It moved me. It caused me to have some deep thought. It created emotion. The book caused me to agree and disagree out loud. Those factors, and the fact that a lot of people I know are talking about this book, caused me to want to write about what I like, what I don’t like and to see what you think of the book. Spoiler alert – if you haven’t read the book, I’m going to highly recommend at the end of this post that you DO. Actually, I’m not going to do that because I just did. I’m going to do a really long review. I’ll lose many of you. That’s okay. Anyhow, here is book review #1, by Alex Lawrence, on Rework by Jason Fried and David Heinemeier Hansson.
Ignore The Real World: As you will hear me often say, this book, and others, use dramatic and often aggressive assertions to create interest, commentary and ultimately, to sell books. Rework is the King of this concept. They aggressively state strong topics as fact. Their first section – Ignore The Real World – is an immediate and prime example. I love the last part of this section, “…the real world isn’t a place, it’s an excuse. It’s a justification for not trying…”.
Failure Is Not A Rite of Passage: Agreed. You don’t have to fail to succeed. I strongly disagree with this statement though, “…What do you really learn from mistakes? You might learn what not to do again, but how valuable is that? You still don’t know what you should do next…”. Wrong. I can think of many times in my career as an entrepreneur where I was faced with a decision that was almost identical to one I’d made before. I chose incorrectly the time before and it hurt. So this time, I chose correctly. Guess what? It was what I should do next – exactly what the authors assert you won’t learn to do. So I choose correctly based on past mistakes, go down the ‘should go’ path, and find success in that scenario rather than the previous failure. There are exceptions to any rule, but I’d say the 80/20 applies here….80% of the time, the different decision I make from a previous incorrect choice points me down the correct path this go-around.
Planning Is Guessing: Agreed. BUT, this is the part where ignoring the real world can be a detriment. Do you think the SBA will give you a loan with a ‘business guess’ as they call it? No. Their advice doesn’t apply to many SMB’s for that one simple fact. I agree not to obsess over it, and it’s totally true that you won’t refer to it very often – but if you are going to work with a VC, they are going to want to see your financial plan, even though as the authors correctly state, everyone knows its wrong.
Why Grow: Because you are always moving in one direction or another. Either forward or backward. You cannot stand still. Inch by inch you will move whether you like it or not. So embrace growth, but as they state, it’s perfectly fine if it’s slow and steady.
Workaholism: Agreed. I sometimes fall victim to portions of this section.
Be A Starter: Whatever you call it, I don’t care.
Scratch Your Own Itch: I totally agree and disagree with this section. I’m conflicted obviously. I can think of a number of examples where entrepreneurs build a shiny new thing that they love, and no one else does. The business goes down in flames. Other times I can think of a number of other examples, such as the ones sited in the book (Dyson, Firth, Bowerman,etc.), wherein the ideas where right on the money and the market embraced the product/service. I wrote a previous post about this topic here that is somewhat contradictory to this section. While I think you need to listen to your own needs and wants, you had better pay attention to some customer ideas as well if you want to get cash in the door. This is a core concept that the authors don’t subscribe to. They don’t add what customers ask for – they keep stuff simple, and the way they want, and have a take-it-or-leave-it mentality. That can work, as they’ve proven. It can be the kiss of death too. This section is a classic example of aggressive assertion. I like that they’ve taken a stance and they don’t deviate from it. It sells books – creates a cult following in fact – but it is an extreme that doesn’t apply to many, but rather, a few.
No Time Is No Excuse: Agreed. Suck it up. However, it’s a total conflict to their ‘Workaholism’ section in my opinion. They say to make the time, sacrifice, etc. – but earlier they tell you to get it done sooner/quicker. The two don’t always coalesce.
Draw A Line In The Sand: I dog-eared this section because I liked it so much. One excerpt, “…great businesses have a point of view, not just a product or service…strong opinions aren’t free…when you don’t know what you believe, everything becomes an argument…”. Hallelujah. This section is actually great stuff for life AND business.
Outside Money Is Plan Z: Disclaimer – my core business is in direct conflict with this section. That being said, they are way too generic in this section. There are too many examples to name of great companies, brilliant companies, that were built with the help of outside money. What the section should really say is “BAD outside money is plan Z”. I’m going to breakdown their sub-sections now:
**You give up control: Not true. If you do a bad deal you will. But if you do a good deal, even a standard deal really, you will maintain control.
**Cashing out trumps building quality: It can be true, but it shouldn’t be. If you want to cash out, build quality! That’s the easiest way.
**Spending others $ is addictive: Indeed it is. Discipline is a key skill that should be employed in a variety of areas, including spending.
**It’s usually a bad deal: Not true. That’s a victim mentality. Take control of the terms you want or don’t do the deal. No one can force you to sign.
**Raising money is distracting: True. It’s a lot of work and effort. It can produce results that allow you to ‘build something great’ though as they assert.
The authors are also assuming investment is the only form of money you can raise. Debt is a perfectly acceptable option for many as well. That option isn’t discussed, but in many cases, it’s a desirable option that should be seriously considered. Again, it takes discipline to manage debt, so that is a universal requirement when using OPM. I recently started, built and sold a successful business with no outside money and no partners. So I’m not saying every business needs outside money. I am saying that many do.
You Need Less Than You Think: Totally agree. Less is more and much can be accomplished with creativity, hard work, the right people and a bootstrap mentality. If you do raise/borrow money (per the previous section) it’s critical you keep this mentality post funding as well.
Building To Flip Is Building To Flop: This section is somewhat redundant to the ‘cashing out trumps building quality’ subsection. Their view is skewed a bit – I bet they plan to never sell 37signals. If they did, it’d be tough to spin that with the strong stance they’ve taken here. They have no investors or partners (I’m guessing), so they are building a ‘lifestyle’ business. Lifestyle businesses are great! But many people are not building them. That’s great too.
Less Mass: Agreed. I sometimes get sucked into this one as well. I’m trying though and I think they are on the money here.
Embrace Constraints: Agreed. It’s that bootstrap mentality that can push a business to all kinds of great discoveries. My friend and partner Levi King refers to ‘Parkinson’s Law’ a lot – Google it. This concept applies directly to this section.
Start at the Epicenter: This is so simple and yet so true. The example of the hot dog stand trying to figure out the condiments, the cart, the name and the decoration are not where one should start. Rather, the epicenter is the hot dog – so start there. What kind, what flavor profile, how big/small, cost to buy, etc. – those should be addressed before anything else. Agreed! ”…a hot dog stand isn’t a hot dog stand without the hot dogs…which part of your equation can’t be removed?”
Making the Call is Making Progress: Agreed! I have a strong bias towards action. I’d rather make decisions and have some be wrong so we can keep momentum moving swiftly (with speed bumps of course).
Throw Less at the Problem: I’ve recently repeated something a few times that I’ve heard from my friend and mentor, Greg Warnock over the years (paraphrased) – “When companies get into trouble, they usually solve the problems by getting back to their core business, by focusing on what made them successful in the first place.” This section embraces this concept in advance.
Launch Now: Really? I wonder if 37signals really does this now that they are larger and more well known. Perhaps the authors will respond (assuming the read this at all – which is a stretch – and assuming they get this far in my post, which is an even larger stretch). My guess is it takes them longer to launch. Smaller and leaner are definitely ones that should launch sooner. When more people are looking and paying, it’s just tougher to launch as fast. As I said earlier, I have a bias towards action. So being bigger doesn’t have to mean slower, but sometimes it does make you think a bit longer before launching because you know more people are paying attention. It’s human nature I suppose…
Interruption is the Enemy of Productivity: Agreed!!! I am so guilty of this though. Impromptu discussions and interruptions for random commentary are commonplace with me. There has to be some room to free associate and chat so as not to become to robotic about our day. Having said that, I’d like to get better at staying in ‘the zone’ for longer periods of time. In addition, I’d like to get better at not interrupting others as they rocket thru something…
Meetings Are Toxic: Not true really – LONG meetings are toxic (most of the time). Wasting time is toxic period. The author’s assert that Outlook doesn’t have a default setting for a 7-minute meeting. That is true, but you don’t have to have a 30 minute meeting because Outlook says you do. I end meetings early all the time. Get stuff done and move on, but still meet. Sometimes (meaning a few times a year) a really long meeting makes sense too. I can think of some great work getting done in offsite, multi-day ‘meetings’. I can think of others that were a waste of time. Like anything else, it takes discipline and a group of dedicated, smart and driven people to make a meeting useful. Having said that, so many meetings are a waste. Like many other parts of the book, they are both right and wrong.
Quick Wins: ”Momentum fules motivation” – Agreed. At FundingUniverse we have a big culture built around ‘wins’. We have daily ‘wins’ that many employees can know each day how they did. Small victories do indeed generate enthusiasm – and, as one of my all time favorite quotes states, “Nothing great was ever achieved without enthusiasm.” (Ralph Waldo Emerson).
Go To Sleep: I’m terrible at this. I don’t get enough sleep. I haven’t for a long, long time. It’s something I’ve struggled with since I was in Jr. High actually, so it was well before I was involved in business. However, it has gotten worse over the years. I go thru stages of doing better/worse, but overall, I need more sleep. I totally agree with this section. I’m going to make an effort to get more sleep after reading this section.
Pick A Fight: “If you think a competitor sucks, say so.” Totally disagree, don’t waste the time or the energy. Focus it on what you are doing instead. There is a little nugget in this section that states “…people get stoked by conflict. They take sides…”. That is exactly the point of this whole book, so at least they are practicing what they preach. While they do practice it, it’s funny to me that the very next section I’ll describe directly contradicts this section.
Who Cares What They’re Doing?: Really, I thought they just said to pick a fight with our competitors? So which is it, pay attention to what they are doing so you can take a stand and say they suck, or focus on yourself (which you’ll note is what I said previous)? I realize they are saying it’s important to differentiate yourself, but how can you pick a fight while not caring at the same time? You can’t.
Let Customers Outgrow You: I’m not sure how I feel about this concept. One section states, “…scaring away new customers is worse than losing old customers…” This goes against all kinds of studies that show the cost to acquire a new customer is X amount more than the cost to keep an existing one. With that metric, you’d say their wrong. But maybe things are changing. I’m not sure here. It was thought provoking for me, one of the many reasons I liked the book.
Nobody Likes Plastic Flowers: ”…don’t be afraid to show your flaws…” Amen! I think I blog like that. I hope I do. I’m pretty sure that my partners wold say that I say what I think, and sometimes should probably filter my thoughts a bit longer before speaking. Professional doesn’t always come across as genuine. I’d rather err on the side of being too real rather than too fake. The authors got this one spot on.
Emulate Drug Dealers: This section is a small snippet of ‘Free, The Future of a Radical Price’ by Chris Anderson (another must read). I totally agree. Figure out a way to give some of your product or service away for free so that customers can try it out and like it. If you do and they do, then the purchases will follow. I’ve seen this concept work in my own companies and others. It’s getting easier and easier to do too. If you are an internet, technology, software or even a consumer product business, you really should read more than just this section, get the book by Anderson.
Do It Yourself First: This is something I have prided myself on in most of my business ventures. I have genuinely tried to do most jobs in companies I have started, owned or partnered in. I’ll be the first to admit that I have not tried all of the jobs in my companies. One of the things a great book does is inspire you to act. This little section has caused me to want to jump in and try a few jobs in our current company. I’m going to change my schedule and sell some of our core products and services so I can get a more current understanding of what we do. This was one of the great takeaways from Rework for me.
Hire When It Hurts: Hallelujah!!! ”…don’t hire for pleasure, hire to kill pain…” Pain is pain. It hurts and you have to do something about it. When I think about many of the hires I/we have made, it’s clear to me we weren’t killing pain. One of my smart partners from business past told me time and again, is this “nice to have” or “needed”. When I sat down and honestly thought thru this question, I would guess that 90% of the time I realized it was “nice to have”. If quality is slipping, if you have too much work for a sustained period of time, then consider a hire. Wait, wait, wait and then wait some more. Make it hurt! The authors are spot on here.
Forget About Formal Education: Wrong. While it is in no way a guaranty of success, it certainly isn’t a disqualifier. The real answer is school helps sometimes, others it does not. I know plenty of idiots that are idiots because they dropped out of high school. I don’t know as many idiots that have MBA’s. Having said that, an MBA or other degree is by no means a free ticket. I would NEVER hire someone simply on the basis of their education. One thing that a formal education shows me though is a willingness to study, work, perhaps pay their way thru school while working (multi-tasking), and make it thru a certain right of passage that I know was tough for me. Again, it’s no free ticket – but it is an interesting qualifier along with many others that shouldn’t be so easily dismisses as the authors assert.
Hire the Better Writer: I had never thought of this approach to hiring. I looked back on many of my/our best hires and thought about their ability to write well. All of them did and do. It was something I had not previously considered, but I think it’s correct. When in doubt, hire the better writer. Good stuff.
Speed Changes Everything: ”Getting back to people quickly is probably the most important thing you can do when it comes to customer service. It’s amazing how much that can defuse a bad situation and turn it into a good one.” SO TRUE! I see this in our current business daily and weekly. It’s true in general business etiquette as well. I always email people back and return phone calls. Always. It may take me a few days or even a week sometimes, but I always get back to you. It’s just common courtesy and it’s a lost art in today’s world, particularly in customer service.
Take A Deep Breath: I am going to quote this entire section as I hope that everyone and anyone in my current company will read it. For the rest of you, it’s worth it as well. If you are in a growing business, you will see this happen a lot. The authors nailed it here:
“When you rock the boat, there will be waves. After you introduce a new feature, change a policy, or remove something, knee-jerk reactions will pour in. Resist the urge to panic or make rapid changes in response. Passions flare in the beginning. That’s normal. But if you ride out that first rocky week, things usually settle down. People are creatures of habit. That’s why they react to change in such a negative way. They’re used to using something in a certain way and any change upsets the natural order of things. So they push back. They complain. They demand that you revert to the way things were. But that doesn’t mean you should act. Sometimes you need to go ahead with a decision you believe in, even if it’s unpopular at first. People often respond before they give a change a fair chance. Sometimes that initial negative reaction is more of a primal response. That’s why you’ll sometimes hear things like, “It’s the worst thing I’ve ever seen.” No, it’s not. It’s a minor change. Come on. Also, remember that negative reactions are almost alwasy louder and more passionate than positive ones. In fact, you may hear only negative voices even when the majority of your customers are happy about a change. Make sure you don’t foolishly backpedal on necessary but controversial decision. So when people complain, let things simmer for a while. Let them know you’re listening. Show them you’re aware of what they’re saying. Let them know you understand their discontent. But explain that you’re going to let it go for a while and see what happens. You’ll probably find that people will adjust eventually. They may even wind up liking the change more than the old way, once they get used to it.”
You Don’t Create A Culture: I agree and disagree. Creating a culture can be a full time job. Many companies have people and departments setup to develop and manage a companies “culture”. Some of the efforts of these people and departments can have an impact, but not a big one. A culture is indeed created naturally as the authors assert. However, it does not mean that you cannot change or improve it if you want to – and you practice. I think most things in life can be improved through proper and consistent practice. The key to proper and consistent practice is time. As the authors correctly state, you can’t force or install a culture. Just like you can’t force or install practice. Both take time. So while your company will have a natural default and direction towards a certain type of culture and environment, with disciplined/consistent time and effort, you can certainly improve and shape a better company culture than you have today.
I went thru all of the sections that had something in them that mattered to me. It’s painfully clear to you by now that there were many. That is why I liked this book so much. It made me think. I disagreed with some of it. I loved some of it. I understood all of it. Rework is one of the better books I have read in recent years. If you haven’t read it yet, you should. If you have read it, what do you think of my review? I don’t expect you to spend the time I did on this, but nonetheless, I’d enjoy hearing from you in the comments. If there are no comments, it was still a great exercise for me to go thru.
Tags: 37signals, jason fried, rework
We are live on Facebook with the first round of IdeaPitch(tm) at FundingUniverse. Use this link, and upload your idea. The idea with the most votes wins $2,000 cash and an intro to our network of investors (over 1,500). It’s fun, no strings attached, and a great chance to get your idea off the ground. For all of you that have emailed me your ideas over the years, now is the time to see how it stands up against the rest. Enter IdeaPitch(tm) and let the voting begin! We will be doing this every two weeks, so enter now and enter often. Put our money where your mouth is!
If you have an idea, or ideas, and you think they are solid and you’d like $2,000 in cash with NO strings attached, then FundingUniverse is launching something on Monday, May 3rd that you will want to be a part of. Become a fan of FundingUniverse on Facebook and watch on May 3rd for the launch of IdeaPitch(tm). We will be giving away $2,000 in cash – EVERY TWO WEEKS – with no strings attached (no equity, no loan payback, no products to buy, no sales calls) to the most popular idea as voted on in our Facebook fan page. So log into your Facebook account, become a fan of FundingUniverse, and start uploading your ideas every two weeks on Monday, May 3rd. The idea with the most votes, wins. So get your friends and family voting for you! Not only will the winner get the cash, but they’ll also be introduced to our network of over 1,500 angel investors.
Pretty sweet, huh? This is a no lose situation for you. Cash, investors, ideas, Facebook = what a combination! Hope to see your ideas uploaded and voted on starting next week.
If you are in Utah, and you want to be an entrepreneur and/or have technical talent, then this is one of the BEST opportunities I have seen in years. Check it out if you haven’t already:
I’ve never let anyone else blog on my site before. It’s not like it’s the Holy Grail of blogs or anything like that, I just haven’t wanted to let anyone else post. Until now. Jeffrey, as you will read, isn’t your everyday author. I subscribe to the Draco newsletter and it is really entertaining, interesting and compelling. So, in an attempt to add more meaningful content to my blog, I asked Jeffrey if he’d be willing to author an entry. He agreed and his custom ‘entrepreneurs blog’ entry is below. In addition to their newsletter, Draco just released a neat iPhone app. Check it out here. Thanks for taking the time to write this Jeffrey, I think its fantastic. To my readers, I’ll do this periodically with people I personally find interesting (and that agree to do it). I hope you enjoy as I do.
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Lessons from the Crisis: an Entrepreneurial Success Story
Alex has been kind enough to allow me to write a post for his blog which I have been a fan of for quite some time. Like many of you, I lack the breadth of Alex’s experience, but also like many of you, I have particularly deep experience in my own little corner of the business world. This is an entrepreneurial blog so I hope you guys don’t mind a brief entrepreneurial story.
I suppose I’ve already spoiled the punch line: it is a success story. Financially, it’s been a nice success for us and our investors and there seems to be no boundaries on where we can go from here. But whatever. You entrepreneurs out there know that financial success is only part of the equation and it isn’t even the most important and rewarding part.
I’ve found that it’s the emotional satisfaction that drives many entrepreneurs, the psychological pleasures that come with building an idea from concept to reality and teaching a fledgling business how to stand and walk on its own two feet. It’s an experience unlike any other. Yes, there are costs and risks, and no, it isn’t for everyone. Most people are more comfortable working inside frameworks erected by others, and there is nothing wrong with this.
But the entrepreneur thirsts for more. Obviously, he has practical issues to juggle, things like startup costs and financing, operational budgets, and, of course, the exit, whatever form that may take. But these are all mere pieces of a greater whole.
It is about the manifestation of ideas.
I won’t bother citing all the data that show zero correlation between income and happiness beyond a certain modest threshold, nor will I bore you with all the research that shows that confidence and self-esteem are much more tightly linked to our ability to overcome challenges, even ones that are simple and routine. I don’t have to do this because every single one of you that has started a business that grew into at least a moderate success will probably agree that “Yeah, the money was nice, but WOW did I feel great about what I accomplished!”
It can be quite thrilling.
Our firm manages a family of hedge funds. This means we can’t legally talk about the most interesting bits of our business – like how we invest our money and our performance track record – unless you’re a qualified high net worth individual. Fortunately that’s not really relevant for this story, which I think is sufficiently broad in nature that you should find parallels with your own business regardless of how different its operations may be.
What I can tell you about hedge funds, and investment management in general, is that a firm’s revenue is driven chiefly by the amount of assets they have under management. Our firm, launched by a pair of entrepreneurial brothers in 1984, grew from a modest $500,000 under management to over $400 million in 2005. But then came the financial crisis, a storm that wrecked far more than just banks and investment houses. It probably did a number on your business too. It certainly did to ours. Our flagship fund dropped to around $70 million in assets.
Allow me to be blunt: an 80% reduction in assets will put nearly any fund manager out of business. I personally witnessed countless others wash up on the rocks with far less severe drops in their revenue base.
How on earth did we survive? Beyond that, how on earth did we emerge an even better business?
As a small firm, we were able to act quickly and flexibly. The importance of this cannot be understated. Without the heavy chains of corporate bureaucracy, we could immediately wrap our arms around the problem and engineer a solution.
We deftly carved out all of the operational fat, leaving only the muscle. We reduced overhead. We eliminated basically every expense that didn’t contribute directly to the bottom line and many expenses that did contribute but only modestly so. We let people go. We made all the tough decisions that you guys did in your own businesses. We cut our salaries way back, which meant adjusting the spending in our personal lives. We did all of that and were surprised to discover we even had room to spare. Not that we’d want to, but if pressed we could still run this business profitably on half again the assets we currently have.
Fortunately, we entered the storm both living our lives and operating our business substantially below their respective means. We never overextended ourselves. Not personally, not professionally. Big bonus in a big year? Instead of blowing it all on hollow status symbols or poorly thought-out avenues of expansion, we saved and reinvested much of it. We rallied around our core values and focused on what we did best, what made us successful in the first place. It took us straight back to our roots, two idealistic brothers in 1984.
I’m sure you’ve all met the entrepreneur who gets drunk on his own success. Don’t be that guy. For starters, nobody likes that guy, and within his arrogance and extravagance the seeds of his eventual undoing are sown. I’m sure you’ve probably even seen it happen to someone you know.
I think the secrets to our survival were humility and caution, and when necessary, a tolerance for metered austerity. As you can see, nothing fancy, but incredibly powerful.
This was only part of our reaction. Survival instinct is one half of running a successful business – an important and necessary condition in any operation. But not sufficient.
Running a business is equally about looking ahead to the future.
And so, in the fourth quarter of 2008, the darkest and most terrifying days of the crisis, when both Wall Street and Main Street were still frantically struggling to assess what kind of damage was being wrought, we launched an entirely new fund and an entirely separate business to house it. This business would complement our existing one and would open up many new diverse lines of operations in the future. Like everybody else, we could have focused all of our energy on damage control or paused to take a breather as things settled down. But the opportunity was too great to pass up.
You see, as panicked investors called day after day, withdrawing their money by the tens of millions, we were given a marvelous gift. Here was a chance to really listen, to get quite possibly the most accurate, honest read on what really mattered to investors. It may even have been a once-in-a-lifetime chance. We were granted a window to deep inside their psyche.
Sure, they wanted to make money on their investment but what they really wanted was not to lose it. We didn’t fare anywhere near as badly as the market, but in times of crisis nobody cares about relative outperformance. Investors still wanted an alternative approach to traditional stocks and real estate. They wanted to be able to access their money quickly should they need to. They liked simplicity and wanted to understand what it was their investment was doing. And most importantly of all, they wanted to do business with people they knew and trusted.
We built everything we heard from our investors and partners into our existing lines of business and used it to launch new ones.
We launched a fund for ourselves to invest in and then simply started talking to others about what it was we were doing. There was no pressured selling, no aggressive marketing – a relief, since none of us were comfortable with that sort of thing anyway. We just talked with our family and friends around town about what we were doing and we were blown away by the demand.
By the first few months of 2009, when the big banks were still sorting through the rubble, our new fund rapidly grew from zero to $30 million. We had to stop talking to people about it!
Was it all just good luck? Possibly. It seems like we’ve had nothing but good luck for 25 years. Can one be lucky for 25 years straight? I don’t know. Like most of you I’d rather rely on good old-fashioned hard work, making sure that we’re prepared for the opportunities should they arise.
One thing I do know for sure is that entrepreneurialism is grand a testament to the joys of being small, nimble, and capable. In this world, things need to happen now and they can happen now. You don’t have to run it by the branch manager who doesn’t need to run it by the district manager who doesn’t need to take it up to the executive approval group. It doesn’t require a two-thirds vote by Congress.
As an entrepreneur, you can make it happen. You have to; you have all the power. And with that weighty responsibility comes the satisfaction you get from bearing witness to the direct, visceral translation of action into result. Nowhere is that more clear than when it comes to launching your own business. You think something, you do something, you see the results. Good or bad.
A mere fraction of the size, our firm isn’t as profitable today as it once was. But it’s a much better business. I look around here and on everyone’s face is a knowing smile that says we came out of this crisis ahead.
I suppose the lesson of this story is twofold. One should maintain fidelity to the core values of an entrepreneur. Even in crisis, never lose the forward-looking, enthusiastic spirit. Build things that you want to buy yourself and share the quality of your ideas with others.
But do so with a sense of caution. In business, the key to long-term success is balance. Ultimately we’re all in it for the long run, whether our goal is to start this business to sell it and start another, or to grow this first business ‘till the very end. You guys know from experience that it requires balance to accomplish either of those long-term goals.
If you can marry that balance of vision and caution at the altar of flexibility, you will have built a long-lasting framework for success. Assuming your ideas are sound, all you need is to populate that framework with the right individuals, ideally ones that round out your deficiencies. If you can do all that, the sky is the limit and there is no crisis you can’t endure.
I am reminded of what Andrew Carnegie said. “Take away my people and leave the factories, and soon there will be grass growing on the factory floors. But take away my factories and leave my people, and soon we will have bigger and better factories”
You can take away 80% of my asset base. You can take my office, my computers, and my websites. But the one thing you absolutely cannot have is my people. We’re small. We have just six core individuals and we hold on to each other tightly. Leave me them and take all the rest and we will do it even better next time.
It is our unavoidable destiny to succeed, fail, and succeed again. This is life. This is business. In the long run, the winners are those of us who learn the most from our failures and use those lessons to manufacture new success.
As an entrepreneur, you already knew that.
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Jeffrey Jones is a managing director at Jones & Company and is co-founder of Draco Capital Management. He jointly oversees the management of roughly $100 million in assets and he publishes a free weekly investment newsletter at TheDraconian.com.
FundingUniverse is definitely a for profit business. We don’t shy away from the fact that we charge a fair price for a number of products and services that are incredibly useful and helpful to entrepreneurs in various stages of business. We also believe in providing a number of FREE services to entrepreneurs in our attempt to help in every possible way. Many people ask me what we do. It’s quite simple really:
FundingUniverse is the best in the world at matching qualified entrepreneurs with banks, investors and other funding sources.
How do we do that? Well, here are some links to various articles you can read about some of the ways. If you have more specific questions, email me anytime. I love hearing from entrepreneurs. Your my friend! My email address is alex AT funding universe DOT COM. In the meantime, have a read:
We are really rocking over here. We need your help. It’s a great place to work with nearly zero turnover. We are stable, profitable, growing, and building products and technology that will change the world of small business and entrepreneurship. Here are the details for our latest job opening. Apply if you want to rock. All others need not apply 
Some of our friends here in Utah are doing something great for entrepreneurship called BoomStartup. I’m excited to see where this goes. BoomStartup has the makings of something that could really add to the great entrepreneurial culture we have here in Utah. While it isn’t a new idea (our friends Brad and David pioneered this type of concept in Boulder with TechStars), it is great to see things happening in Utah. I’m also a fan of what Jeremy, Brock and others are doing with LaunchUp – it’s another approach to supporting Utah entrepreneurship. I’m always a fan of MORE entrepreneurship. Some people argue about this model or that model being better then another. I choose to think that the rising tide lifts all boats and BoomStartup (as well as LaunchUp and others) are certainly adding water to the tub.
Check out the official information for BoomStartup below:
BoomStartup Now Accepting Applications for Inaugural Mentor and Seed Capital Program
– BoomStartup takes companies from ideation to execution during four-month period; provides selected companies with seed capital and mentoring –
Orem, Utah – March 10, 2010 – BoomStartup, a seed capital and mentor-focused investment program for web and software start-ups, today announced it is accepting applications for its summer 2010 program. The organization will choose up to eight companies to participate in its inaugural program. Startups interested in participating in the program should apply by April 12, 2010 at www.boomstartup.com/apply.
Based in Orem, Utah at the Canyon Park Technology Center (the original site of WordPerfect Corporation), BoomStartup is a full-time program that runs from May 17, 2010 to August 20, 2010, and provides each selected company with seed capital (up to $15,000), mentoring from successful entrepreneurs and technologists, free office space and resources, and education that takes them through the various steps of getting a tech startup off the ground. Key to the program is the involvement of “investor-mentors” who give of their financial resources and their time as mentors.
BoomStartup was founded by John Richards, Managing Partner; an entrepreneur and angel investor of multiple successful technology startups. Richards was part of the founding of InfoSpace, Inc., which went public on the NASDAQ, and later invested in Utah startups including Omniture, which was acquired by Adobe in 2009 for $1.8 billion, and EnticeLabs, a third-generation online human resources solution company, whose customers include Fortune 500 companies.
“Modeled after similar programs around the country, BoomStartup is overdue in Utah,” said John Richards, BoomStartup’s Founder and Managing Partner/Mentor. “It will provide current and aspiring tech entrepreneurs an ideal opportunity to get their businesses up and running by presenting each company with seed capital, mentoring and networking from successful entrepreneurs and technologists.
Applicants for BoomStartup must meet the following criteria:
- A founding team (two or more – no solists) and an idea.
- Companies with a focus on web, mobile, software, and non‐hardware tech.
- Highly-scalable businesses.
- Full‐time commitment to the Utah-based program (From May to August).
- Must have a CTO/master coder with at least 20 percent equity.
- Work from BoomStartup’s Orem, Utah-based offices.
This year’s investor-mentors are headlined by Omniture co-founders Josh James and John Pestana. Other mentors include Ralph Yarro, an entrepreneur and investor with a background at Novell, Canopy Ventures, and is currently founder and CEO of ThinkAtomic; Nobu Mutaguchi, a major real estate developer in Japan and one of Utah’s most prolific angel investors; Martin Frey, former Cisco executive and partner of Utah Angels and Olympus Angels; and Rod Watson, a former executive with HP and current angel investor; and Warren Osborn, an active venture and private equity investor, and founder of the Pebble Foundation (formerly Seastone Foundation).
Continued Richards: “This group of investor-mentors has a track record of growing successful businesses and creating innovative technologies. Their expertise and vision will be invaluable to the selected companies, and give them the know how to overcome the obstacles they might confront, whether that be on the business or technological side.”
BoomStartup will host a series of “Meet the Investor-Mentor Days” through the April 12, 2010 deadline; the first will be held Friday, March 12, 2010 at 4 p.m. at the Canyon Park Technology Center, Building J (1401 N. Research Way, Orem, Utah). Investors-Mentors will be on hand to talk with prospective applicants about business, technology and discuss strategies for their businesses.
For more information about BoomStartup or to apply, visit www.boomstartup.com.
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About BoomStartup
Based in Orem, Utah, BoomStartup is a mentorship-focused investor program focusing its efforts on providing seed capital, mentors, and markets for its energetic tech entrepreneur participants. BoomStartup is a four-month, summer program (May-August) that mentors tech startups from ideation through execution. For more information, visit www.boomstartup.com.
One Saturday afternoon while my wife and daughter were grocery shopping I was sitting in my home office thinking about Twitter. I had begun to find some business related utility in it and feeling as though the Twitter platform had some cool possibilities for business owners. I had been trying all sorts of products and services while I was toying with how to make Twitter work for me. I downloaded or signed up for pretty much every Twitter service/application you can think of. I hired some dudes in India to do some boring manual labor on my Twitter account. It was all a big experiment and I wasn’t sure what I was doing or where I was headed. My gut just told me that there was a need going unmet and as an entrepreneur, that is the kind of stuff that literally keeps me up at night.
So, back to that Saturday afternoon – I’d finally tried pretty much everything I could find to help my businesses use Twitter in various ways. I found some cool stuff I liked, but I found a bunch more stuff that I thought was a waste. The problem was that a lot of the good stuff was tangled up with the wasteful stuff too. I wanted something that put all of the tools I needed in one place. Since I couldn’t find it, I decided to build it myself. When I say ‘myself’ I don’t mean I started writing code. TwitJump would have been a non-functioning disaster had that been the case. Instead, I started emailing people I knew that had related expertise and asked them for recommendations. Who did they know that was a Twitter API expert? Who did they know that was a PHP ninja? What other types of contractors would I need to build my project? I got a lot of great suggestions and began to narrow it down to a few key players – a twitter API expert, a team of experienced PHP developers, a creative designer, and some all-around smart web entrepreneurs. Take note – this might be the most important contributor to TwitJump’s success:
I knew what I didn’t know. I went to those that either did know, or knew someone that did, and then I went about interviewing them. How much did this cost me? Zero. How much did it help me? Immensely.
How do you interview someone who is an expert in something you are not? Read! While I had/have no ability to code, I read enough to be able to talk the talk. I spent a lot of time learning about Twitter and how it worked. As I mentioned, I paid for (where necessary, some stuff was free) all the apps and sites I could find in order to find out how they did things. I took the good stuff and noted it and I also took the bad stuff and noted it too. I also was having regular discussions with my good friend Greg Warnock. He’s a mentor, has invested in other businesses I’m involved in, and he knows a lot of people. He liked what I was doing and put together a late night brainstorm session with a bunch of smart people. We talked about all kinds of things – Twitter, TwitJump and a variety of related tangents. It was a very intellectually stimulating meeting. I made a few friends in that meeting that I continue to talk to regularly and hope to further in the future. After this meeting, continued discussions with Greg and others, I developed a good road map of what I wanted done and after some work, had a good team of experts to make it happen and TwitJump was officially moving ahead, we had a logo and everything
TwitJump Is 'Born'
So what’s next? Well, we really got rolling. No investors, no banks, no friends or family, no offices, no employees, no advertising, no meetings. I was determined to make TwitJump a virtual company with the highest margins possible. The costs to develop were not inexpensive, but those costs can decrease dramatically over time for a single use, web based product like TwitJump. I was focused on the recurring expenses. As mentioned, TwitJump used the latest technology to not only create an incredibly scalable business (TwitJump can handle millions of users with a few hours of work if need be) but also to keep costs down. There has never been a better time to affordably start a business – there are so many things that used to cost a lot that now cost a lot less due to the improvements in various technologies. We were able to get emails, mock ups, a website, logos – simple stuff – all quickly and very inexpensively or even free in some cases. My focus was to get a working product and then go and talk to people about it. This is a concept that I think a lot of entrepreneurs need to zone in on. I wrote a post called ‘Build, Sell, Sell, Sell – Build, Sell, Sell, Sell – Repeat‘ that talks a lot about building a business this way. As the great Alan Hall, founder of MarketStar/Mercato describes it (paraphrased); “Entrepreneurs build this shiny object, and say look, buy my shiny object! But they don’t talk to their customers enough to learn what shape, size, color and price they are willing to pay for it. Without that, all you are holding is an expensive, personal, shiny object.”
After we had something to show, we started to give away the service. No advertising, no SEO, no SEM, no PPC, nothing. We had a single landing page and that was it. Why? Because although we wanted to run fast, we wanted customer feedback to continue to build a beta that we hoped they would eventually pay for. As a result, many of the features you see today were not thought of by TwitJump, they were thought of by TwitJump customers. In fact, I’d guess that over 50% of the features were ideas that had something to do with a customer comment, email or meeting. As we continued to build and develop, customers continued to give us feedback. As we got to the point where we felt we had something that met some of their needs, we started to ask them to pay for TwitJump. Amazingly, many wanted to pay. Many more inquired about paying without being asked to pay. TwitJump was profitable and cash flowing nicely within 90 days of it’s launch as a result.
As the next few months progressed, I increased my bet. More money, more developers, more customers and thankfully, more revenue and profit. The model was working, the ideas and comments kept coming in, and the customer count increased more and more each day. We now had thousands of users from all over the world – still no advertising of any kind – customers nonetheless. The trends were certainly encouraging. TwitJump also has a built-in viral nature in that every time someone ‘tweets’ from TJ, it says it came from TJ and it is linked to our site. We get hundreds of new customers every week from this simple link at the bottom of our customer tweets. The combination of a customer built product, with low operating costs and high growth made for a business that was becoming more and more attractive to industry insiders who were watching what we were doing.
I was anxious to take TwitJump to the next level. While I had/have some good ideas for it, I didn’t want to lead it to the next level. While I love Twitter and find great utility in it, I didn’t want to work on TwitJump full time. I often joked it was an expensive and profitable hobby that was quickly becoming a serious business. I started meeting with a lot of talented people about buying and/or running TwitJump. The list of people I was talking to was very flattering – TJ had some good momentum and it was being noticed. Things were progressing nicely, and then the ‘TechCrunch” effect happened. I’ll not soon forget being in a meeting and getting an email from a friend saying “hey, nice article on TechCrunch, that’s awesome!”. I had no idea what he was talking about as I knew no one at TechCrunch and I had not been contacted by them. I should note also that earlier that day I received a term sheet out of the blue from a group I had been working with. I thought it was a bit odd to suddenly receive it, but after reading the article, it became clear to me why. TwitJump was now a publicly known ‘hot commodity’. Here is a link to the article (we are listed in #4):
TechCrunch Top Ten M & A Deals for 2010
Within a few days I received emails and phone calls from some BIG companies outside of Utah. I also sped up talks with the current ones I was already talking to. Things were a bit crazy, but really fun. I felt (and feel) very fortunate to have had such quality companies and people expressing real interest in acquiring TwitJump. Some of the offers included more cash then others. Some included more stock. Some included me moving. Some included me continuing to help with TwitJump, some did not. As it came time to act on this great momentum that TwitJump was receiving (thanks again Kelly – you definitely helped spark an early exit for me. I look forward to meeting you in person soon), I had immense clarity on what was the right fit for TwitJump and for me. Since TwitJump had no employees and no office, it really was all about what was best for TwitJump and me – I didn’t have employees, partners, leases or other things to factor in. I’ve never had that before when selling a business, so it was a different angle to view selling from.
As the title of my blog states, I am an entrepreneur. I love other entrepreneurs. I like to be around them. I like to talk to them. I like to work with them. I like to help them. It’s in my DNA. It’s my one true passion (business – family is my real true passion), plain and simple. So when FundingUniverse put together an offer that included me becoming a full partner in the company and a member of the Board of Directors, as well as leadership of the TwitJump product and other fun entrepreneurial initiatives, it was the absolutely perfect fit. It didn’t hurt that FundingUniverse was doubling revenues and profits every quarter and that they were quickly becoming a national business that was on it’s way to being “..the best in the world at matching qualified entrepreneurs with banks, investors and other funding sources”. The partnership there I had known for many years. I liked and respected them and knew that I’d fit in well to the partnership. I’m an entrepreneur so I wasn’t looking for a job and that’s what some of the offers post-acquisition were. FundingUniverse offered me the opportunity to be a full partner/owner in the entire business, to take a leadership role in some key initiatives – I got to stay in Utah, which I wanted to do – and I would be working with really smart people who had complimentary skill sets. The timing and fit were perfect, so to the surprise of many, I chose FundingUniverse over the other more ‘well known’ suitors. One important note – I’m not a philanthropist, FundingUniverse’s offer was competitive economically as well as otherwise. They had a MONSTER year in 2009 (note – 2010 is blowing away 2009 which helps me confirm that I made the right decision) and they were in a good position to make an acquisition. Here is the press release about the deal, as well as a nice follow up article from TechCrunch:
Social Media Acquisition Next Growth Step for FundingUniverse
FundingUniverse Buys TwitJump To Help Startups Leverage Twitter
So TwitJump went from an idea to sold in about 6 months. I have had businesses fail in that period of time, but never succeed in that short amount of time. I learned a lot from this experience, and I hope that the account above is useful to some/any of you. Now that FundingUniverseis my full time business, I plan to blog about it and all of the exciting things we are doing to get that company to $100MM in revenue. It won’t be long before that happens. It will be longer then 6 months – but we are well on our way to building a global business that solves an enormous problem. That’s the key isn’t it? Building a business that solves a lot of problems for people. For me, the ‘people’ in that sentence are entrepreneurs, and I am overly excited about the opportunity to build a business and a technology that will help millions of them all around the world.
So that’s the story and that’s what is next. No rest for the weary, lets GO!
I’ve been thinking a lot lately (perhaps too much?) about business, strategy, growth and other big picture decisions that can help push a company forward towards lofty goals ($100MM+ in annual revenue). I’ll be the first to admit, my mind gets a little mushy sometimes when I think about all of the moving pieces it takes to get to that level of annual revenue. There are a few revenue related milestones that are significant in an entrepreneurs career. The first is the almighty $1 million dollars (in Dr. Evil style voice). Some readers are starting companies or own a business and have high hopes to generate $1M in annual revenue in 2010. It’s not an easy thing to do. I realize that revenue can eventually mean little without profit, but for the purposes of this blog post, I’m focusing on revenue goals. We’ll assume we all know how to control expenses enough to stay in business (or can raise enough money to afford losses until we hit profitability), and as such, the discussion will stay focused on the top line number.
So what kinds of things do you do when building a company from $o to $1M in sales? All of the really scrappy, dirty, I-wanna-hire-someone-else-to-do-this kind of stuff. This stage is the scariest in my experience because it feels the most risky. You don’t have revenue to fall back on if you screw up bad, and you are likely taking financial risks that you aren’t getting a return on (i.e. putting money in, not taking any out). Also, its a time when you are certainly more lonely then at other stages of revenue growth. There are some really cool parts. You make lots of fast decisions, your team is really close (because it is small!), and you get to really celebrate critical ‘wins’ that propel the business forward. Also, energy is perhaps at an all time high here as you are so completely consumed by your new shiny idea that you cannot sleep. Every extra minute is spent thinking about new features, benefits, revenue models and ways to sell more, add more, and find more users and customers.
The next step up in revenue seems to be around $10M in annual sales. Surely between $1M and $10M some incredible things have to happen. I have been fortunate enough to experience this stage a few times in my career. There are a lot of things that happen during this stage of growth that are entirely different then the previous stage ($0 – $1M). A lot. The company undergoes drastic change in almost every area. The team gets a lot larger. So do the offices. So do the bills. Hopefully so do the profits! But not always. A lot of what happens depends upon how fast you go from $1M to $10M. The longer it takes, the more the companies are likely to feel and act totally different. Case in point; if you go from $1M to $10M in sales in a year, is it likely you are a technology/internet/viral consumer business? Yes. If it takes you seven years to do it, are you more likely to be a ‘traditional’ type of business that acquires customers in ‘old school’ formats? Yes.
Let’s assume you are trying to build a business that will go from $1M to $10M in less than seven years. Heaven knows, every business I have been involved with certainly fits into this assumption – although only a few have actually been successful in doing it. If you want to grow your business at a brisk pace, and get into the double-digit millions, you have to take some pretty decent risks. There is no way to sludge your way to $10M in sales in under three years, it just doesn’t happen. You have to go at a bit of a break-neck speed. There are always exceptions, but I’m talking about the rule, since 9 times out of 10 that is what I seem to relate to most. Anyhow, I digress.
So your sprinting towards $10M by adding employees, customers, financing, products, services and square footage. You are also likely adding partners, debt, complaints, stress, turnover, and hours. There is a lot of trade off as you can see. It’s worth it though if you manage it right. What does ‘manage it right’ mean you say? I don’t know. I’m not so sure I’ve figured that out yet. I can say this though – it’s different for everyone. I’ve done a pretty good job at making it ‘worth it’ for me and my family – with emphasis on the phrase ‘pretty good’. I can do better and it seems that over time, for the most part, I improve. Be prepared for the biggest challenges you will ever face though in terms of tough decisions. You will likely have to fire some friends, put some stress on your personal life and go thru some frustrating choices all in the name of revenue. Does that mean it isn’t worth it? Of course not. It’s totally worth it. Why? Because you are going to have a bunch of crappy stuff happen to you whether you hit $10M in revenue or not, so you might as well just do it.
This is the part in the post where I have zero experience to call upon. Going from $10M to $100M in sales is something I have never been a part of. I have been a ways north of $10M before, but not even close to $100M. Everything that happens from here on out is based on several things in my opinion (in no particular order):
- Quality of people that we hire – they know their stuff and are a great fit within our company culture
- Expanding direct sales and adding channel sales
- Potential VC’s on board to accelerate growth, help with key hires and strategic decisions
- Maintaining momentum, culture and energy amidst great change
- Not getting lost in too many new ideas – find that balance of focusing on core competencies while still being innovative
I know there are a lot more things that should be on this list. Care to add any? I welcome them in the comments.
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