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.

via techcrunch.com

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.

Make a great product, gain a user. Have great support, earn a fan

Amazon emailed me last week. A product manager for S3 wanted to talk about our use of their services. (Amazon S3 provides the storage for all the images and video on Posterous). It seemed like a great opportunity to talk to someone within Amazon about issues we’ve been having, and features we’d like to see.

Once we got on the phone, it was clear that this person didn’t want to help us at all. He just wanted to pick our brains to get ideas on how to increase sales and keep customers. I have no desire to give my time or my thoughts to Amazon so they can grow their business. And I told this directly to the person on the phone.

Why not? Because they don’t have great support. Amazon doesn’t care about me, so I don’t care about them. They have a good product, so they have me as a user. They don’t have good support, so they don’t have me as a fan.

When we have issues, they don’t want to help us. They force us to pay for support, which costs $500 per month, or 20% of your bill, whichever is greater. As we grow it becomes prohibitive to pay this. Instead of taking care of its largest customers, Amazon penalizes them. We’re incentivized to leave.

I told the person on the phone that what Amazon needs to do to keep Posterous as a customer is offer better support. We need better developer tools to analyze our usage. We need better tools to stop abuse. We need a direct contact within Amazon for when we see issues. The Amazon rep didn’t seem to care, he was too focused on pricing.

The other vendor we use to run Posterous is Rackspace. They take the opposite approach, and offer the best customer support imaginable. They go out of their way to make us happy. Because of their great support, I am a fan of theirs. I intro YC companies to Rackspace all the time. If Rackspace needs my help, I’m there for them. I wish there was more I could do to help them, because they are awesome.

There are plenty of companies that I would fight for. Costco, American Express, Rackspace, and many other companies I recommend endlessly, even though I don’t get a penny from them. I do it because I love these companies, because they take care of me. They offer great customer service. And I am a fan.

To build a successful company, you need more than just a lot of users. You need fans who genuinely want you to succeed. And to do that, you need to give them a great product and great support.

You can follow me on Twitter here.

My best ideas come to me when I’m in the shower

I think most people have one top idea in their mind at any given time. That’s the idea their thoughts will drift toward when they’re allowed to drift freely. And this idea will thus tend to get all the benefit of that type of thinking, while others are starved of it. Which means it’s a disaster to let the wrong idea become the top one in your mind.

I suspect a lot of people aren’t sure what’s the top idea in their mind at any given time. I’m often mistaken about it. I tend to think it’s the idea I’d want to be the top one, rather than the one that is. But it’s easy to figure this out: just take a shower. What topic do your thoughts keep returning to? If it’s not what you want to be thinking about, you may want to change something.

I have found that my best ideas come when I’m taking a shower, when my mind is left to wander. My thoughts will drift to the idea that is at the top of my mind and I will have a moment of clarity.

The shower is when I come up with the most elegant solution to a problem that I’ve been struggling with. In the shower I figure out the best algorithms, the simplest way to store data, the best way to write an email I’ve been avoiding, the best tactic to negotiate something.

The interesting thing about ideas I have in the shower is that they are like dreams: I tend to forget them quickly. Sometimes I jump out of the shower to sketch something. I’ve been using the Voice Memos application on my iPhone a lot. When something comes to mind, I just start dictating into my phone so I don’t forget it.

These days people seem to be addicted to information. We can’t stop reading, watching TV, looking at photos, connecting with friends. But it’s still important to have times when you just clear your mind and let it drift.

This is especially important when starting a company. There is no shortage of things to do or think about. But if you don’t sometimes stop, take deep breaths, and let your mind wander, you might find yourself missing the big picture, over engineering simple problems, or generally hitting walls in your thinking.

Here’s what I’ve found helps to have these moments of clarity:

  1. Great ideas come in the shower. Make sure you bathe often šŸ™‚
  2. Get plenty of sleep. Great ideas might not come while you’re sleeping, but you will wake up refreshed with a clear mind
  3. Walk a lot. I find the slow pace of walking is great for thinking
  4. Go to the gym. Particularly when I’m on the treadmill or elliptical machine for 30 minutes, my mind gets bored and wanders. Great ideas surface when this happens
Things to avoid:
  1. Reading is great, but you won’t come up with your own original ideas while your mind is busy digesting someone else’s
  2. Watching TV is probably the worst thing to do for your mind
  3. Leave your iPod at home. Yes, I’m an Apple fanboy telling you to stop listening to your iPod. When you’re walking to work or at the gym, let your mind think in silence
I’ve always wanted a whiteboard in the shower. Anyone know if that’s possible?
Update: Thanks @wadenick for this link: http://www.myaquanotes.com

Apple is run like a huge startup. The key to great products is small teams

Has Apple Forgotten About Its Remote App?

One of my favorite and most-used iPhone apps is Apple’s Remote app. It lets me remotely control iTunes, which is streaming to my living room stereo via an Airport Express. But why hasn’t it been updated in over 8 months?

Yes, the Remote app is due for an update. But here’s why it hasn’t been updated: the person who wrote it is busy working on other things. Yes, the person, not the team. (He’s a good friend of mine)

Apple doesn’t build large teams to work on every product they make. Instead, they hire very few, but very intelligent people who can work on different projects and move around as needed.

One day you might be working on the Remote app, and the next day you might get pulled on to another project that needs your help.

The engineers on the Mac OS and iOS teams move back and forth between the two projects based on release cycles and what needs to ship next.

Even on Final Cut Pro, team members were sometimes asked to work on the other pro applications if they needed help to ship on time.

An engineer at Apple can’t just assume they will be working on one project forever. And teams at Apple won’t grow to sizes beyond what is absolutely necessary.

Startups also thrive by keeping things lean. Great startups have small teams that can build quickly and pivot when needed. When working at a startup, you don’t own just one part of the application: you have to be able to work on whatever needs your attention that day. 

Maybe that’s the problem at Microsoft: they think they can solve problems by throwing lots of people at them. They put together large teams to build products. And large teams require managers. The last thing we need in software development are more product managers.

You can read about the “8 Management Lessons I Learned Working At Apple” on The Business Insider War Room.

And you should follow me on Twitter here.