startup tips

Email First Startups

Last month, Ryan Hoover had a great post about building email into your startup first, before moving on to other platforms. His awesome points:

  • Email lets you validate ideas quickly
  • Since email is async, you can fake functionality with manual processes
  • Forces focus
  • Email is a part of users daily habits
  • Email is ubiquitous
  • You can use email to upsell users to other platforms when you’re ready

Posterous was the ultimate email first product. I started the project because I wanted to email photos from my iPhone to my blog. I wrote thousands of lines of email code, which posted to my Blogger blog, before I ever wrote a line of web code.

There are a few other reasons why I think email an amazing platform to build on top of:

  • Email has identity built in. Email is identity. Whether you’re sending or receiving email from users, you don’t need a login system. Posterous was able to completely eliminate signup from our flow.
  • Email is mobile. It’s on every device, including super low end feature phones. Even people in developing countries on slow internet connections can use email.
  • Email isn’t blocked in China. You open your service up to another billlion users.
  • Email is integrated in all the apps you use. You can email photos from iPhoto, or a link from Safari, or a Tweet from Twitter.
  • Email supports rich content. You can send photos, documents, video, audio, and any arbitrary attachment. There’s nothing email won’t transfer.
  • iPhones will send email in the background. If you’re sending a video and your internet is slow, the iPhone will keep uploading while Mail is in the background.
  • Users get notifications instantly, on all devices, without managing extra notification permissions or settings.
  • So easy, your mom can do it.

Email is a powerful and flexible platform used by billions of people around the world. Start your company with email first in mind, and integrate it deeply in everything you do.

Raising money from the best investors is more important than getting the highest valuation

In the summer of 2008, Posterous was a part of Y Combinator Demo Day in Boston and Mountain View. After one of our demos, an investor pulled me aside:

“I love what you are doing. How much do you want? $3M? $5M?”

This was the Silicon Valley dream. An investor was throwing money at us.

But he wasn’t one of the top VCs, and this was my first company. I wanted strong advisors. So I politely declined, and instead raised an angel round from some of the best investors in the valley.

Vinod Khosla said it well:

Khosla explained that the key role of early investors is not funding, but personal attention and guidance. But generating buzz too early can inflate a startup’s market cap and make them a less lucrative investment of time and money for the top-tier advisors they need. That leads to critical missteps like poor hiring decisions that can doom a startup.


Raising from the VC would have put more money in our bank account, and our valuation would have been astronomical. But it would have been worse for the company.

My advice: go into fundraising with a clear idea of how much money you want to raise. What is the next major milestone for the company and how much money do you need to hit that? Don’t over raise.

Then, optimize for the best investors in the valley. Find investors with a track record of success, check references, pick the one that’s the most passionate about what you’re doing.

The past couple years, I’ve seen many companies raise huge rounds at huge valuations. They got the money, but couldn’t scale their team or product effectively. Ultimately it became hard or impossible for them to raise another round, or find an exit.

Raising money isn’t success in and of itself. You have to be able to use that money to build real value within the company. Great investors and advisors will help you get there.

Dave McClure on why seed-stage startup valuations have been increasing

price-insensitivity by 2 types of investors:

newly-minted / n00b angel investors, who have more money than experience, and/or are in it primary for fame more than fortune… in my first few years after leaving PayPal, I was in this category. while I did have tech expertise, I had limited knowledge of startup pricing, legal structure, or terms, and limited ability to change or negotiate much anyway. many current and ex- Facebook, Google, Twitter, LinkedIn, & Zynga folks fall in this category. they are eager to get in the game, and are probably not doing it as much for returns as for cool / fun factor. same applies to non-valley investors who want to get in on big-name valley deals. (or angels from less-active regions looking at more-active regions).

I completely agree.

I definitely qualify as a n00b investor. But I’m not doing it for fame. I’m doing it to help other startups and give back to the community. And to make money.

My rules for investing:

  1. I only invest in products I use myself. Heavily biased towards consumer and mobile.
  2. I only invest when the deal makes sense. I won’t over pay for an investment.
  3. I won’t ask for advisor shares. A company can offer them if they see value in my help.

I’ve passed on many companies that I love and I think have a good shot at being successful. The deals just didn’t make sense for me. Investing in early stage startups is very risky.

Early stage startups raising rounds at high valuations are losing investments from super helpful, super active angels/super angels like Dave McClure. That’s unfortunate.

Sometimes companies are giving angels advisor shares in order to offset the high price of the round. That’s one way to get around the price issue.

But another way is to stop raising rounds at crazy valuations. The price of your round matters much less than who is in it and what value they add outside of the money. Experience counts for a lot.

Design for users

I had a really great experience in the bathroom at Jardiniere restaurant.

The sink in the men’s room has a two handle faucet, meaning you have to turn on the hot and cold water separately to get your desired temperature.

Except I only turned on the hot water. With no cold water running, I washed my hands in water that was about as hot as I could stand, but not too hot. It was perfect.

So why is it that most bathrooms have the hot water turned up hotter than any human can bear? Because they can.

Whether you’re building a bathroom or building a software product, it’s easy to get caught designing based on the capabilties of your infrastructure, rather than designing for what the user actually wants.

Who cares what your database schema looks like. Who cares that you can add a million checkboxes and options to let users customize everything. Stop thinking about what your product can do, and start thinking about what your users wants.

A new way to hire: skip the interview. Check code samples and references

Earlier this year we had to let someone go. This person had been working for us for less than a month. When someone isn’t a fit at a startup, you need to part ways and move on. In a small team, a single bad egg can have a huge impact.

That led us to the logical question: what did we do wrong? What could we change in our hiring process to make sure this doesn’t happen again? We run every candidate through a rigorous interview process where they meet everyone in the company. We test their technical abilities, communication skills, and we take all candidates out for dinner and drinks to make sure they are a cultural fit.

But at the end of the day, you simply can’t get to know someone after just a few hours. Especially in an interview, when they are “on” and trying to impress you.

There are two ways we have found to get deeper insight into a candidate. Code samples and reference checks are harder to bullshit, and show what you actually do.

1. Code samples. Usually through a Github repository

Being able to look at someone’s code is an incredible way to see if they are a good engineer. You can also see if this person enjoys coding. Are they forking and committing back to interesting projects? Are they on the cutting edge? Are they contributing back to the community?

2. References. Often through a Linkedin connection

It’s tough to bring yourself to check references. Usually this is the last step before making an offer. You, the hiring manager, are sold on this person and reference checks seem like a waste of your time.

But don’t let that stop you from checking references. No matter how experienced this person seems to be, or how senior the role you are hiring for. Even if they were referred to you through a friend, or they are a friend…you have no idea what it will be like to work with them every day.

3. You might still be wrong

Hiring is hard. And you might still make a mistake. In that case, fire fast.

Hiring is a gamble. So when interviewing, don’t be shy. Gather as much information as you can about this person who you will be working so closely with. If there’s anything you can do to learn more about them, do it.

I previously wrote about how one of our investors, Gus Tai, when asked for references, said, “Feel free to contact any person I have ever worked with through my entire career.”

You want to work with people who don’t have skeletons in their closet. If anyone were to ever need a reference on me, I invite them to talk to anyone from my past. And if you need a reference check on anyone I’ve worked with, don’t hesitate to ask.

People are by far the most important ingredient in a startup’s success.

Update: Another great take on hiring.

A CEO needs a strong board

Boards create an atmosphere of accountability for an organization, which drives performance (and many other positive qualities) from the top down in a business. Budgeting and planning, reporting on performance, organizing and articulating thoughts and strategy – all these things are crisper when there’s someone to whom a CEO is answering.

As a startup founder and CEO, you might get trapped into thinking you want a board that’s very hands off. You want to keep full control over everything.

Actually, having a strong board is a huge advantage. Being challenged every day, getting an outside view that might be a little clearer than your own, just being accountable to someone else… all lead to being a better CEO and running a better company.

I love the debates we have in our board meetings. Sometimes they stress me out, but at the end, Posterous always comes out ahead.

The CEO should not be the CFO. Delegate that work as soon as you can afford to

I just ran payroll for the last time.

Last month I hired a part time CFO who will be handling payroll and about a hundred other legal and finance related tasks that I’ve been taking care of since I started the company almost three years ago.

It was tough giving up this responsibility. Until now, I was the only one signing checks, dealing with employment and stock paperwork, going through the stacks of paper mail that’s delivered to my house every week.

But I got to point that I had to offload this work to someone else. It was getting in my way. I had a bookkeeper, but that wasn’t enough.

Being a founding CEO puts you on a slippery slope that takes you away from doing what you love most, working on the product that led you to start the company. I even wrote about this last year, but I didn’t take my own advice. 

How did I end up spending so much time on operations work? It sneaks up on you. There was no single day when I had a giant stack of work on my desk and thought, “Hey, I should hire a CFO to take care of this for me!”

Instead, every day or every week, there was something new to take care of. New employees, new benefits, additional vendors, more bills to pay, more expense reports to review, more paperwork to sign. It just kept building up over time.

As these items come up, the CEO has to take care of them, there is no one else. And I enjoy doing this stuff. I grew up doing the books at my dad’s restaurant. But that’s a mistake. Even though you could do it all, it’s not the best use of your time.

Last month our new CFO came into the office and I transferred all the finance knowledge that was in my head over to her. It was an incredible relief. Not only did I gain a ton of time that I could now spend on product, hiring, and other more important tasks…I also gained peace of mind. I finally had someone else looking at our finances and helping me with the operations side of the company.

It’s hard to bring yourself to give up this responsibility, trust someone else, spend money on another expense. But believe me, it’s worth it. I should have hired a CFO a year ago.

Update: Got a couple good questions. When should you hire a CFO? Right after your raise a series A. Even if you are just 2 or 3 people, it’s worth it. You pay per hour so it doesn’t matter if it’s 5 hours per month or 50, it’s just great to have someone else dealing with that stuff.

What’s the difference between a bookkeeper and a CFO? We had a bookkeeper for a while and she did a great job paying invoices and keeping expenses in quickbooks. A CFO goes beyond that. Think of a CFO as a member of your team with a legal background. They can interface with your lawyers, handle all contracts, prepare an operating plan, and go beyond a bookkeeper.