Blue Bootstrap

Cluster----

Will Price , a partner at Hummer Winblad Venture Partners, asked the question "Does Geography Matter?" in reference to Silicon Valley's gravitational pull for technology start-ups. He references Michael Porter's article  "Clusters and the new economics of competition" (Harvard Business Review Nov/Dec 1998) and says

"The most important insight for me is that the modern economy competes on innovation and that operating within a cluster shortens the cycle time to identifying, resourcing, and realizing areas of need and opportunity.

The genesis for this post was a conversation I had with two founders, currently based in Atlanta, about the merits of moving to the Bay Area to start their company. Michael Porter's thoughtful analysis helps me better understand why the Bay Area 'cost premium' is well worth it. Market cap is a function of innovation and growth, and innovation is a function of access to ideas, talent, and supporting resources that eliminate frictions and catalyze connections and progress."

What I found curious is that he mentions two founders from Atlanta that about the merits of moving to the Bay Area to start a company. Atlanta needs those 2 founders to stay here and build their business. I don't have any idea what the company does but I do know that in order for Atlanta's technology community to hit critical mass we need to retain homegrown talent. Those 2 founders staying here helps me, you, and the start-up that is 6 months away from being founded. Atlanta has the ideas and talent. Supporting resources? Maybe not so much.

As Alan Taetle, General Partner at Noro-Moseley,   wrote in a post titled "What is world-class in the Southeast?" on Jeff Haynie's blog:

"Many of you know that we at Noro-Moseley have spent the past year raising our sixth fund. We have had met with at least 70 groups in the U.S. and in Europe. What you’re looking at above was one of the questions most posed to us. After all, we are a regional early-stage and early-growth venture fund focused on the region - who better than us to know?...

...What I wrote above sounds like its a great world class story save for three things. First none of the companies remain public. ISS will not be Cisco. It’s now part of IBM. Ciphertrust is part of Secure Computing. All of the major public Internet security companies are based in the Valley. Second, why is RSA, far and away the largest trade show for Internet Security, in San Francisco? Why isn’t RSA located in Atlanta, the home of Internet Security? Third, what has our region done to market itself as a center of excellence for Internet security? Nothing that I’m aware of.

If we want to really move to the next stage of venture evolution with more capital invested, more start-ups and most importantly, more black swans, we are going to have to market our region more systematically on what we are world-class in. Excellent quality of life alone will not do it."

If Alan really wants to help move to the next level, I'd like to see him and Noro-Moseley get involved with true early-stage companies; the best part - it doesn't even have to cost him or his fund a dime. Show up to the regular YnR gatherings to help mentor entrepreneurs and offer to be on the board of advisors for very early stage companies. Open your network and help "catalyze connections". Start blogging regularly so you're part of the discussion. Market to the start-ups in Atlanta and the Southeast and tell them "Stay here, don't go to the Valley - you have the ideas and talent and we have your back." 

Is the Southeast world-class? You're damn right - we just need to help each other so that everybody else sees it as well.

Big Advice

Business plans are like resumes. A resume will never ever get you a job. Most resumes are only looked at for only 10-12 seconds before a hiring manager or recruiter makes a decision to trash it or save it. At best, a resume gets you the first interview; after that, it's all up to you.

Paul Freet has a good piece of advice over at Big Thinkr: quit writing your business plan and focus on your product. I couldn't agree more. Writing a business plan is a long, arduous process that's never done. It sucks up the most valuable resource you have - time. It's much more impressive to actually build something than to waste a lot of paper describing what you want to do.

I'm not saying you should never write a business plan. A potential investor may want one. It's a good thought exercise that makes you think through all aspects of your business. Just make sure you're doing it for the right reasons and not because you think it's a gold ticket to the world of angel and venture capital.

StartupLounge puts on a party

Props to Scott and Mike at StartupLounge for putting on a fantastic event last night. Capital Connections was a huge success and showed how much activity is buzzing around Atlanta. I had a good time meeting new people, learning more about some fascinating technologies, and talking to some people I haven't seen in a while. Below are some observations:

• Entrepreneurs show up at these events to chase the money and that's important. I like talking to other entrepreneurs about what they're doing. Maybe I can learn something from them, maybe I might be able to help them, you never know. Enjoy the journey.
• Michael Blake has a very wry sense of humor, more so when he has a couple of Newcastles.
• One investor told me some of his criteria for choosing investments and technology wasn't one of them - wow. Important to remember.

Thanks guys.

I'll immediately get that to you tomorrow

At my day job, I suggested we use a wiki to manage our project documentation because using source control and Word documents just doesn't work. After some gnashing of teeth, everybody agreed and I went over to SocialText to sign-up for their application since it's supposed to be one of the best wiki apps out there and it's offered as a service, which is great because I don't want to deal with setting up MediaWiki or twiki. I signed up for a free 30-day trial and was told it would be ready in 1 business day. Whoa - really bad move - I wanted to start using it now. They probably haven't lost a sale and I'm looking forward to seeing what it can do but taking 1 business day to get our trial account leaves a bad taste in my mouth.

If you're in the business of offering software as a service (SaaS), you want a perspective customer to start using your application immediately. Immediacy is one of the greatest strengths of the SaaS model and if you can't offer that you're screwed; you may not get them to come back or they'll go to one of your competitors. When I designed Blue Violin, one of the goals was to get a virtuoso (that's what we call Blue Violin customers here at world headquarters) using Blue Violin within 60 seconds of hitting our website. (As I type this, I realize that you have to install Ascertia's root CA certificate into your browser and I'm sure that's a real turn-off for most people and I'm probably being a bit hypocritical but such is life.)

Business Plan isn't quite a four-letter word

Business plans - at best, a necessary evil. I can't remember how long it took to write my business plan but I find myself making changes to it all the time. Your significant other may start referring to it as "your other girlfriend", "a cruel mistress", or "midnight booty call". At least you can console yourself that should you ever find yourself alone, you'll have your business plan to keep you warm at night because it's still not done.

I'd also like to make it perfectly clear that I am not an expert on writing a business plan. These are just my thoughts on writing one so read this with a grain of salt.

Executive Summary - Probably the single most important section of your business plan because very few people get past the first few pages. Make sure to tell a story and give a succint description of the business. Tell a story - your product or service is a solution to a problem. What better way to define the problem than tell a story? I wouldn't advise you take creative license with facts but you want the audience to feel the pain the problem presents. A good, broad overview of the solution and accompanying pieces of information (financial summary, offer) gives your audience an idea of what you want to do. Simply engage your audience, important whether writing a business plan or the Great American novel.

Marketing - I'm by no means an expert in this area but I defined the problem and solution (a bit more detailed than the executive summary) and included objectives, pricing, and promotion. A colleague advised me to put the marketing section immediately following the executive summary because investors want to know your target market and how you plan on attacking the market. Define your target market with the focus of a laser and you only need a small attack. Define a huge, vague  market and you'll need Eisenhower to plan your attack, which you probably don't have the resources to do anyways.

Products - In my case, this is a high level view of the software with a description of the software architecture, current development status, and product extensibility (i.e. make sure your product isn't a one-trick pony.) Don't kill the audience with details. As a gearhead, you'll want to spend pages and pages describing your paradigm-shifting, market-defining, whiz-bang AJAX online pinecone catalog but in discussions I've had people really don't care. This section is here to give your audience a warm fuzzy feeling that you really do know what you're talking about and aren't throwing around buzzwords like Steve Ballmer throws chairs on a bad day.

Competition - Yes, your audience knows how to use Google and will be able to pull up a list of competitors in about 5 seconds. You need to know your competitors and pertinent information about them or you'll look like a schmo. Spend some time looking at annual reports, quarterly SEC filings, and tracking down product price information. Be honest about the functionality of competing products. Define the risks your product faces going forward. I think this is actually a very good process to go through because it helps you position your product and define your target market. Can't find any competitors on Google? Maybe it's just me but there might be a reason the world doesn't have any online pinecone catalogs.

Financial Plan - What can you say? Your financial pro formas, a highfalutin term that means your financial plan is a complete wild-ass guess, are tricky to put together. You have no doubt that your online pinecone catalog will overtake Oracle in market capitalization after year 5; however, your audience will think differently so you'd better have good assumptions that back up your reasoning. I took Guy Kawasaki's advice and performed a bottom-up analysis. In my case, my numbers are based on the number of customers I projected and the infrastructure needed to support those customers. I included detailed quarterly projections for the first 3 years and yearly projections for years 4 & 5. Advice I've heard over and over again is that it'll take twice as long and require twice the money as you think so plan accordingly.

Misc - At a MIT Enterprise Forum of Atlanta event, a venture capitalist advised putting your name, your company's name, email address, and phone number at the bottom of every page; it takes all of 5 minutes to do, so in it goes.

Of course, as I finish up this post, I realize I have to make changes to my business plan. Aye, she's a cruel mistress.

Raise the Funds

I'm stuck. As the effort to bring Blue Violin to fruition continues, I find myself befuddled at certain points. I was recently talking to one of my advisors and the topic of funding came up. As Jim Lejeal wrote about in a recent post, raising money is a full-time job. I'd only add that it's a frustrating full-time job; already having a full-time job makes it that much more difficult.

In exploring the avenues to get funding, my advisor suggested that I look for a company that I can partner with or would license my technology. He recommended I create a list of:

• Attributes in a partner I'm looking for and
• What Blue Violin expects from the partner.

My list is really short.
Attributes I'm looking for:

• I'm looking for a company where Blue Violin would complement its product offering i.e. web development tools, web application security software, or web testing software.
• A company that would either pay for development or give me an advance.

What I'm expecting from a partner:

• Don't screw me.

Full-time job indeed.

In the ether

Ideas, they say, are a dime a dozen. I'm not really sure they're worth that much. Ideas are ethereal, floating in space, easy for one person to spot but difficult, if not impossible, for another person to see.

Upon deciding to start a company, I focused on the wrong thing: funding. Instinct tells a person that without money the idea is dead and thus the company; too many people fall into this trap. Sure, money is good and necessary but at such an early stage, the idea needed some lovin'.

So I forgot about funding and instead, dusted off my compilers and started working on it. You may be wondering why I didn't fire up a word processor and start writing a business plan. That really has to do with my background. I've been writing software since I got out of college 10 years ago. I know how to get software out the door but, at that time, I didn't know anything about business plans. Besides, there were a lot of technical questions I didn't have the answers to and I wanted to make sure the product was feasible. Guy Kawasaki recommends this approach in his book, The Art of the Start and since I figured he knows more about this than me, I'd try it his way.

The biggest hurdle at that stage was inertia. In this context I paraphrase it as an object at rest tends to stay at rest unless acted upon by an outside force.  Inertia is that voice in the back of your head saying "To hell with it - your job really isn't that bad, it's steady money, blah blah blah". You have to beat that voice with an ugly stick until it's on life support and get going. The hardest part of anything is getting started.