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Entrepreneurship

Getting the Unknowable Right… Fast!

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unknown It’ s late July, 2008 and we are looking at the January release of a product that served a business model that we would ultimately abandon; go figure.   Venkat, who would become our CTO, had joined as a consultant to help steer product development.  I had found a former PayPal lawyer thinking that she’d help us through the regulatory hurdles we expected to face in the soon to be abandoned business model.  And I was rushing around talking to banks, again – trying to find operations support for a business model that depended on interest rates being substantially above zero.  I see that my venture capital selection was also congruent with the doomed business model.      

Lessons Learned

  1. The business model will drive all your actions so, it needs to be right at the earliest possible moment.
  2. The business model at time zero is probably unknown and unknowable, it will be found on the other side of a series of thought and market experiments.
  3. Pick your consultants with care, they may well be your future partners.     

Written by Devon

December 27, 2008 at 9:41 am

Posted in Uncategorized

Coffee in Breakfast Cereal – A Bad Mix

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Ah yes, the sweet smell of summer on the Charles River… July 13th.  I see that I was starting to develop product specifications and put together a plan to start development.   In fact, I’d already started talking to outsourcing firms to do the development (this would later turn into a mistake ).  Moreover, I was actually starting to draft patent claims around a product may that may well never see the light of day, at least in the form envisioned at that time. 

Moreover, envisioning the regulatory hurdles that we would likely face, I had hired some lawyers to help define this new business in regulatory terms.  They did so but, I felt that they were groping in the dark almost as much as we were.  I then tried repeatedly to contact a former lawyer for PayPal, thinking that she’d have a better idea of the legal landscape; despite numerous tries, that relationship didn’t work. 

We were also spending a lot of our own time, Alison and I, trying to understand the regulatory landscape for this business.   

Then, off we went to visit a number of big banks asking if they’d help us with back-office operations; nice people, really nice buildings and great pastries but, no takers…

Lastly, I was starting to look into raising equity capital from a firm founded by PayPal founders; no luck there either…

Lessons Learned

  1. Start-ups and 3rd party offshore developers are probably a bad mix, kind of like replacing milk with coffee in your breakfast cereal. Start-up products and business models change too fast for a remote site to keep track (it’s hard enough when they are in the same building!) so, by the time something is built, it’s 4 business models behind.
  2. It’s never too soon to start specifying your product. If you can’t find a customer, go find a great sales guy and ask him/her if she thinks she can sell it – then pay careful attention to the answer.
  3. Apply the same rules to hiring lawyers as you would in hiring a key staff member. First, hire someone you know and trust, failing that, hire a lawyer recommended by someone that you know and trust.
  4. Apply rule 3 above to venture capital firms.
  5. Don’t assume that just because you are a potential buyers of services that large institutions will want to help you.
  6. Beware of spending a lot of money on patenting too soon.  While I admit that the strangest claims can seemingly come out of nowhere to be central in litigation, be careful to limit spending on dependent claims – which are claims that depend on the main claims.  Dependent claims are typically refinements and it’s hard to refine when you are still in coarse-tuning mode.           

Written by Devon

December 17, 2008 at 3:27 am

Posted in Uncategorized

Paying Attention to Your Sensitivities

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Now looking back at ww26, 2008 I see that I was looking to meet with Larry Fish of Citizens Bank – a friend of Alex d’Arbeloff.  Alex was the founder of Teradyne, Chairman of the MIT corporation, and an investor in my first firm.  Alex’s health was iffy at the time so I decided not to push for this meeting; regretably Alex has since died.  I was successful in contacting some executives at State Street Bank in the hopes that they might offer us their back-end solutions but, they declined; they have have already been reducing risk exposure back in July 2008!

I see that I was also recruiting Mahesh and John at that time, Mahesh joined State Street Global Advisors and John chose to come on to our advisory board rather than to make a career at Micronotes. 

I did meet with an angel investor that week who had suggested that I talk to some of her existing companies.  I now see that I didn’t take her up on that offer but did see one of her companies at yesterday’s MIT venture capital conference.

I was also setting up meetings with lawyers at that time to understand which regulations we would be subjected to in our proposed Cambridge field trial. 

I also see that I had started to draw-up to system performance specifications for the website, complete with screen shots, at this early stage.   Little did I know that a single sensitivity, identified in the business plan, was going to change the whole business model in a few months.  

I was focused on 5 things:

  1. Marketing to women-owned small businesses and their respective vendors; this would later change to focusing on women. 
  2. User-interface development, an appropriate focus for an internet company but, the business model would change significantly. 
  3. Regulatory compliance, though this remains a potentially open issue.
  4. Finding a partner to help execute back-end transactions which continues to this day. 
  5. Raising capital, which also continues to this day.  

Lesson’s Learned:

Relish the time you’ve got with great mentors, they are typically older, have seen a lot, and don’t last forever.

Done be afraid to push people on the fence, it’s good for them and good for you to reach a decision point as quickly as possible; you need to get your team together and move!

Don’t let up pressure on getting into the market, you need the feedback!  Trees that grow in forests tend to grow straight, strong, and tall – trees that grow alone on hillsides are misshapen and haphazard – you need the feedback and competition to grow strong. 

Pay attention to the sensitivities in your sensitivity analysis (did you do a sensitivity analysis?!)!  If your business can’t operate in certain envirnoments, re-engineer it so it can!  

Complex legal issues and partnerships take a long time to sort out, make sure you leave enough time!

Stay focused, it’s your main advantage. 

Written by Devon

December 8, 2008 at 2:44 am

Posted in Uncategorized

Start-up Lessons

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Hi, I’m Devon Kinkead from the U.S. and I am about 5 months into my second start-up business. I sold my first company, a high-tech manufacturing company, and I thought I’d share my reflections on this second start-up in the hopes that some other entrepreneurs or investors might benefit or help me refine my thinking.

I have started an online discount bill-pay service called Micronotes.  Here are a few reflections on my notes from work week 25, 2008 — the week after I started the company. 

I started the company on 16 June 2008 with one intern , a brilliant student and friend of the family, in a one-room office on the 13thfloor of One Broadway in Cambridge, Massachusetts.  Though the office is small, it is a palace compared to the $100/month laboratory I rented in an old soap factory where I started my first company. My father and I used to joke about who started in the most humble surroundings but after he visited my filthy laboratory and found that his shoes stuck, almost permanently, to the floor which was covered with about a century of unvented soap lubricant condensate, he conceded victory.   

I see from my report that I was researching credit scores my first week because I was trying to understand the impact of credit scores on small businesses, our target market at that time.   In fact, I built math models to estimate the cost of a 100-point drop (one late payment) in credit scores which I estimated to be $38-$3600 per year; that’s a pretty big number! 

I see that I spent some time working with a friend and former marketing and PR colleague on building a company name and brand.  We thought naming the product would take 4-6 weeks; it actually took 4-5 months! 

I wrote my first 2-page summary of the business and sent it to a couple of potential investors.  At that time, we were very much focused on finding a banking partner to help us execute the transactions needed to discount customer bills.  As it turns out, none of the large banks were interested in partnering with a start_up. 

I also see that I drafted a user-interface specification to share with the growing list of people that I was inviting to participate in the business. 

Lessons Learned:

  1. Don’t work alone!  Find an intelligent person to work with, experienced or not, you’ll need the help and someone to talk to, nurture, and bounce ideas off of – 
  2. Do Understand that your goal is to fail fast – not succeed quickly!  Standing here, looking back 5 months, I see that I didn’t know what I didn’t know and you won’t either so just move, explore, and stay focused on the value proposition and celebrate fast intelligent explorations down tubes with no cheese.
  3. Do “Plan, Do, Check” – the whole process of publicly committing to a measurable list of goals, every week, and holding yourself accountable to report results to those goals ensures that you execute your plan and check your results before taking next steps.
  4. Do Court the customers, not the existing market players!  This is the second start-up where I have struggled to actually do business with the bigger existing market players right off the bat.  Having run a business unit in a multinational company for a couple of years, I know that these guys are typically just too busy to deal with risky start-ups.
  5. Do invite people to come learn about the company – they may well be your future partners!
  6. Everything will take much longer than expected – be prepared!

Written by Devon

November 17, 2008 at 12:19 am

Posted in Uncategorized