Definitely, I'd be happy to. Email fred at heyo.com, or reply @frederickcook.
1,091 karma · joined January 23, 2010
https://github.com/moveline
It was the first year, and we were the first company they invested in, and the only company to do their summer program. The largest benefit by far was access to mentors: the primary guys involved are a group of entrepreneurs who started a company called Webmail.us which is now Rackspace Email and Apps, and they all still work at Rackspace. Another primary group of mentors are some folks at Modea, a quickly-growing digital ad agency in Blacksburg.
We were working on a totally different idea when we initially took investment, and this group helped us pivot to Heyo, and put together a follow-on funding round in the Fall, and has recently made some introductions in the Valley that have prompted us to make the decision to move out there in May of this year. Having access to the Rackspace and Modea folks has been huge, from introductions to experience in growing a company from 2-3 people to 100+ people, to help with fundraising, understanding our market, etc. As the only company who has been with DayOne from inception, I absolutely recommend it.
Good point, according to Metcalfe's Law [1], it should actually only have quadrupled.
Additionally, it seems as though high caps are a separate argument from the "conv. with cap vs. priced round" argument. With either, the market decides what an appropriate valuation, cap, or terms (no cap) a company is able to raise at. Therefore, it is simply the mechanics of the market that lead to no cap notes and sky-high caps, not the fact that the deals are done with convertible notes.
Not trying to be argumentative; I'm really interested in learning why you've taken a strong stance on this.
I didn't think sophisticated investors were doing convertible notes without valuation caps - something this article makes no mention of.
cdixon: "I believe that pretty much every other seed investor who advocates converts also assumes they have a cap. So any discussion of convertibles without caps seems to me a red herring." [1]
Clarification please? (Josh?)
[1] http://cdixon.org/2010/08/31/converts-versus-equity-deals/
EDIT: Congrats on the recent funding and founding!
I'd also argue that there are only a few topics that are so polarizing that people up-vote or down-vote based on the position the author takes, and that the majority of discussions here aren't as opinionated, and that the number of up-votes a post receives is based on how interesting and thought-provoking it is.
However, it appears that how to display karma is one of the more polarizing ones :)
An average does more to encourage the desired behavior than a total does. Even as I am about to press enter here, I can't help but think of whether this post will make that number go up or down.
My co-founder and I recently made a decision regarding a partnering with another company in a somewhat new field. We made our decision pretty quickly, and it wasn't until I was later asked why we made the decision we did that I went back and considered what had really led us down the path we took:
A mentor who works at a big hosting company talked about the way they go about choosing open source technology is not by looking at what the best technology at the time is, but at the quality of the community contributing to that technology, and make a bet that that one will "get better faster" than the others. Without thinking about it, that was the primary criteria that led us to make our decision: the company we chose isn't currently the best at what they do (which is why I had to give this some thought when queried about the decision), but they seem to have set up some systems that (we believe) will let them "get better faster" than their competitors.
It wasn't something we considered at the time of making the decision, but in hindsight, that anecdote was the "vector" that gave us the reasoning that probably contributed the most the decision, without us really being conscious of it.
Edit: Thinking more about this more now, these incredibly well-built-up and well-tested transfer functions that experienced entrepreneurs and investors have built up is what makes YC and other mentor programs so incredible. This is how Ron Conway and Jessica Livingson judge entrepreneurs so well from just a simple conversation.
It's nothing that can be taught, but through books like Founders at Work, or simply sitting and listening to an entrepreneur tell their story, and recall the tough decisions they made early on, one can probably build up pieces of this transfer function. It's what makes Mixergy interviews valuable: there's not a much traditional educational value to them, but just hearing the story of what decisions were made, when, and why, helps build these functions for the viewer.
This isn't just because of the actual time and effort, but because as others observe this time and effort, they take the thing more seriously. For a startup, this is important because it not only means they're more likely to take it seriously, but that others are more likely to contribute their own time and effort.
It's not atypical for every investor at every stage to have to sign something like a 180-day lockup for their stock in the event that an IPO takes place, meaning that no large holder can just go sell everything (which would drive the price way down) for at least 6 months after an IPO occurs. So in the IPO case, which is probably what Fred encourages his companies to shoot for, even the VC's need the company to last a good, long while.
For smaller acquisitions, it's possible that everybody gets instant liquidity, but the founders will always have to hang around at BigCo for a while to make sure the transition is smooth, and most M&A deals probably have vested stock that requires certain growth numbers are met (somebody please correct me if I'm wrong here). In that case, this is good advice for the founders, because 1) life will suck if BigCo doesn't treat you well and 2) you have a financial incentive to make sure things keep going well.
The other case Fred refers to is for a company that is still growing, and doing a financing round, not an acquisition. For a company to ever have a "B" in it's valuation, it probably will have to do multiple large financings along the way, so everybody is in bed with one-another for years.
I studied Engineering Mechanics for 6 and a half years, so I'm not exactly non-technical, but when I finished and was trying to start a company, it had been probably 6 years since I'd taken any serious programming (or taken a programming class), and I knew nothing about web technologies. When I originally met my now co-founder, he had an up-and-running website generating revenue that he had started building at 16, and developed entirely on his own, from scratch. (He stored all user data in a plaintext file until he learned about databases.)
When I first approached him about starting a company, he gave me the same line he still gives many others who ask him to join about being very busy with his own projects. So, I went home and started myself. I remember coming across a page on Wikipedia about "relational databases" and thinking "yes, this is what I'll need." So, I downloaded some MySQL software and put together some database architecture, then made some storyboards in PowerPoint, and came back to him a week later. He was a little impressed, but still said he didn't really have time to work on this.
So, I went home and bought a ROR tutorial book and built the Pragmatic Programmer Bookstore model, then changed some colors and page titles and went back a week later and met with the co-founder again. This time, a little more impressed, he agreed to help me put together a really basic MVP that I could use to pitch investors.
In the meantime, I had met with a local group of angel investors, and was accepted to pitch, at an "angel live-fire" session at an Entrepreneurship Summit in town. So, seeing as this thing was going to be presented to a group of potential investors, we both had a bit more motivation to work kinda hard on it.
Through this time, we became really good friends, and he finally became convinced that I'm not just some random non-technical person trying to start a company, that I'm really willing to do what it takes. So, a month later when we were accepted to a seed program and took investment, my co-founder deferred an internship at MS to the Fall in order to spend the summer on the startup with me, then turned it down completely when Fall came around and things were going really well. I've also learned a ton about development from him, and we've put together an MVP really fast that we're rolling out in a few days.
The point of this story is that if I had accepted his "no" and not tried to do it myself, he wouldn't have joined me, and if he hadn't joined me, we wouldn't have had a demo to show investors, and we probably wouldn't have a startup right now. So, "Learn to Code Yourself" doesn't mean just found a company yourself, it means that you do whatever you have to do to start a company, and if people see that you are that hell-bent on making progress every day, they'll be more likely to want to join you.
Not knowing anything about the market, there might be opportunity in building large custom clusters instead of just single servers, and use Open Stack as a base. Might make it look like a juicy acquisition for someone.
Do you expect to ever have a liquidity event (sell the company), or is there some proportionate profit-sharing plan with the equity?
Good to see several people writing recently (from experience) about how this couldn't be farther from the truth. While it may happen from time to time, it's clear that most founders of successful (technology) startups have built a long-term lifestyle around working really hard, for a really long time, on a bunch of their own ideas and projects. Especially true given what we know about how much of a role luck and timing plays in the success of startups.
Thanks for the post, Gabriel.
Twitter sorted with a ranking algorithm. For people that don't read everything in the stream, the good stuff gets voted up and hangs out at the top, the bad stuff gets voted down and falls faster.
Twitter search actually kind of works this way. If you search a popular term, things with many RT's are always at the top. The whole site could be that way.
You could also use the in_reply_to ids to make a Reddit-style comment tree. (Even #newtwitter doesn't show conversations well.)
Thinking about it now, it's Reddit with a 140 char limit, except you don't have the chicken-and-egg problem, since you're using the firehose to pre-populate with content.
Let me know if you want to do this. It may be our next pivot if our current [shameless plug coming] startup, Heyo (http://heyo.com, coming soon) doesn't work.
"How do you retain startup employees long after an acquisition? Rackspace acquired Webmail.us in 2007, and today an astounding nine out of the ten original employees including the founders are still at the company and going strong. Can you believe that?" - Bill Boebel, Rackspace VP-Strategy
http://panelpicker.sxsw.com/ideas/view/6405?return=/ideas/in...:
It worked. In addition to social skills, I took leadership positions, managed teams of people, managed a budget, learned invaluable presentation skills, and probably most importantly, gained a great deal of self-confidence.
I wouldn't be a startup founder without all those skills, nor would I be a startup founder without my hacker skills.
That said, the fraternity I joined annually won awards as a top fraternity at it's campus and nationally. I know many others who joined fraternities and had very different experiences.
My co-founder and I currently use Google Docs for everything from financial planning to project management (to-do lists, features, planning, spreadsheet feedback forms, etc.), but we also use Dropbox for sharing anything except docs and spreadsheets (stuff like sharing images and assets with our designers, etc.) It'd be great to bring it all under one program.