Lessons Learned

The Office Cat

Anne Medved — 2008-09-04T00:49:08-07:00

Tom the office cat is a huge orange striped cat that was recently put on a serious cat diet (we know his name is Tom because he wears a collar with an engraved i.d. tag bearing his name). Everyone loves the original Tom cat (not Tom Cruise and Katie Holmes --- don't think Tom-the-cat is a Scientologist as far as I can tell) ;). He let out a delighted squeal while running up to us and threw himself at our feet, rolling over and over for pets and playtime. He is such an attention grabbing cat. He would literally walk in to the office and make himself at home parked on the sofa and doing what I call "kitty shiatsu" on my lap. I coined the term "kitty shiatsu", which is when a cat decides to sit down somewhere and get comfortable by kneading with its paws on either a person or inanimate object, until they settle down.

The lesson I learned from Tom the cat is to seize the moment and feel the joy from the sense of play. Never lose the ability to play or else you will lose the momentum to work effectively. All work and no play is not the way to go. A time out used to play will re-energize you and inspire you to be your best.

Management Dynamics

John Markor, from Seattle, WA — 2008-07-08T01:48:26-07:00

I learned that management dynamics, and the quality of management, counts for a lot. Failure of upper management to control the working environment, and the quality of the middle management counts for a lot.

I worked for a well-funded dot-bomb that burned through a massive amount of money (while not privy to the exact amount, the rumor was $20 Million) in just under 9 months. Most of the money was spent on lavish extravagances - like Friday afternoon wine-tastings and industry parties. Managers were hired at will, with no regard to whom or what they were to be managing, and with little regard to whether or not they actually needed a manager in that position. In a dot-bomb that at it's hey-day had about 50 people, there were 30 upper and middle managers and supervisors.

And the quality of management was suspect, also. For example, the VP's credentials amounted to the fact that she was a screen-writer in Hollywood (and writing for "Married with Children" at that). The Marketing Director was a former consultant that put her personal preferences, instead of those of our clients, into everything she did. For example, she didn't drink coffee, so she decided that the organization wasn't going to give coffee cups as marketing tools (which meant that everyone sitting at there desk were now not going to see our branded logo in front of them). But she did authorize cheap little aluminum "beaners" for use as key chains, with a logo that rubbed off the first time you put it in your pocket.

What management there was was ignored most of the time by the underlings who felt passed over for positions that they felt they should have had.

Programmers with master's degrees and PhD's were passed over for promotions in favor of people off the street who happened to be friends with someone and who had little or no education, much less experience with the subject matter.
(John can be reached at john.markor [at] mindless [dot] com)

PLEASE Learn A Lesson

anonymous community member — 2008-07-08T01:48:09-07:00

I'm not one of the entrepreneurs who started and ran the dotcom where for 2 years I rode the wave of excitement, exhaustion and, finally, defeat, so I don't know if this letter will count. But I have been involved in other "old economy" ventures as well -- only some of which succeeded -- so here I go anyway.

Welcome to Humility School. Yes, you are smart and yes, you are hardworking.

But that's not the whole picture. The world is a far more complex place than it appears. Your marketing and/or technical smarts are no substitute for treating your human customers with real respect. Give them value and honesty, not marketing techniques. Give them a handsome website that respects their real interests, ability and bandwidth, not your latest Flash fantasies. And accept that, in the real world, life IS difficult and you don't always get what you worked so hard for.

You wanted the right to take a risk, so deal with it. Who knows, you might even gain a little respect for millions of hard working but non-entitled people who just keep on keepin' on every day. The lessons to be learned are human lessons and are, believe it or not, well worth the tuition you are currently paying.

The Black Pearl

Jack Meltzer — 2008-07-08T01:47:33-07:00

There is a fictional story that is often read by high school students about a fisherman that finds a rare black pearl (hence the title - The Black Pearl. In general, the story is about what happens to a regular man that comes across something that is extremely valuable. In the story, his life is ultimately destroyed as a consequence of the greed and desperation that is triggered by the appearance of the black pearl. It is partially about the effects of success on people that do not fully understand the darker sides of human nature.

As an entrepreneur, I have experienced my own version of the black pearl. It involves a unique software application that essentially satisfies the needs of a very large and underserved market. Over a period of more than ten years, I have seen best friends turn on me because they wanted more equity than I was able to give; I have had developers steal the source code in the night because they wanted more leverage; and last but not least, an angel investor tried to steal the company after putting in more than four million dollars of their own money. While the courts returned the company to us in March, the man successfully convinced the 29 odd employees that we were to blame. After 12 years of fanatical effort and passion, we are once again alone with our vision and our determination. We do have 58% of the company, a beta version of the software and lots of computers. But we currently have no funding.

I have heard that there are honest decent business people out there that are genuinely looking for dedicated people with great ideas. But we haven't met any yet. When we came up with a huge business opportunity, we were so caught up in the excitement, we didn't think about the impact it might have on the people around us. As arrogant as it sounds, killer application may ultimately kill more than market share. As for us, we will keep on plugging. It's too bad there isn't a VC firm that specializes in integrity.

(Jack can be reached at meltzerjack [at] hotmail [dot] com)

COBRA or a mirage?

David Kemp from Dallas, TX — 2008-07-08T01:46:41-07:00

Your failed company offers COBRA healthcare coverage ... but is it really there? Here is my war story.

After (company name removed) of San Jose suddenly failed in December (due mainly to poor management), they sent us all standard COBRA-signup paperwork. I had a simple question for the insurance company Blue Cross, so I called them. They told me that Cyber IQ had stopped paying them and they had terminated coverage a month earlier, and so could not be offering COBRA.

Already furious at the management for stiffing us on salary, commissions, high expenses, etc., I now felt that they had crossed the line from bad management to toying with the lives - literally - of hundreds of employees and family members. I called the Department of Labor to ask if this was illegal. The answer is no: if an employer has healthcare then it must offer COBRA to a exiting employee, but if the employer does not have healthcare then it does not have to offer COBRA. Worst of all, there is no requirement to notify employees of the terminated coverage!

My advice for those leaving a failing company (or still there) is to call your health insurance provider and ask them if you are still covered. If so, make the call again from time to time. If not, notify everyone you can in your company.

Good luck to all of us!

(David can be reached at dkemp [at] att [dot] net)

Keep Family out of the Executive Slots!

anonymous community member — 2008-07-08T01:45:52-07:00

I have worked for THREE different Hong Kong based American eCommerce sites. Each developed different products or provided different services, but all three had the same slip-shod promotion plan.

In each case, DIRECT blood relatives of the CEO and COO filled every important executive position. For example, at one company, the CEO's secret girlfriend was the head of IT, her brothers and sisters were the heads of Web Design, Database, and so on, and His high school buddies, cousins, and direct siblings headed each other office as acting heads (of Japan, Taiwan and so on).

Each company offered low salaries, false raises, and when layoffs came, all but the family members were trashed. Ultimately, the lay-offs were because the company moved back to HK, after realizing the San Francisco area was too expensive...

I guess what I'd like others to be aware of is this: if too many of your execs are family and close friends of the CEO, you end up in an uncomfortable climate of finger-pointing, favoritism, and so on... I found that the family members WOULD not take criticism--and there's no one to run to if your co-worker is being sexually harrassed by the cousin of the CEO if the cousin's dad is head of HR.

Be aware of your company's makeup. If there are too many family members, I'd start looking for another job!

Dumb and Dumber

SK in Vancouver, BC — 2008-07-08T01:45:22-07:00

Every time a startup fails, fingers point instinctively at the founders and CEOs. It is convenient to blame them because they are the most visible culprits. I always dig deeper and try to find out who financed the deal. From my perspective VCs are just as guilty. Having worked in the vc sector for eight years I can safely say that there are proportionally just as many incompetent VCs as there are incompetent founders.

The large number of Nick Riviera type of venture capitalists (if you watch the Simpsons you know what I mean) makes it excruciating difficult for good entrepreneurs to get in front of capable VCs.

Entrepreneurs unconsciously assume that just because an investor has got money and a name he knows what he is doing. This is true in only 50-60% of the cases. Street name VCs are not immune. Most of the time founders have to deal with an associate or ex fund manager who has a limited understanding of the venture investing process. It is like a blind leading another blind.

If you put a dumb founder with a dumber venture capitalist, you have a guaranteed failure.

(SK can be reached at venturegroup [at] infoserve [dot] net)

There's No Need to go IPO

anonymous in California — 2008-07-08T01:44:33-07:00

I'm a veteran of 5 dot coms--most of which failed. In each new situation, amidst wildly different products, services, and climates, I saw similar failure symptoms emerge, months before the actual cataclysm. I got so good at predicting different flavors of demise that co-workers would be utterly surprised.

By watching the failures of well-fed, well-funded CEOs and their plans, I've learned a few things that I'd like to share with other entrepreneurs, especially the observation listed below.

---------There's NO need to go IPO!------------

Plenty of businesses, new and old, never go IPO. They remain privately owned companies that do very well. Every company I have been a part of has thrown the catch-phrase "when we go IPO" around like confetti. There were false IPO dates that always got pushed back and management meetings pumped everyone with "drive us to IPO" ideas. Glossy ads in The Standard and Business 2.0 portrayed companies as starving beasts and IPOs as juicy steaks. The CEOs wanted to cash in and clear out.

Each company was so obsessed with reaching IPO and becoming instant millionaires that they lost sight of the REAL process of business. Had they taken the time to say "IPO MAY be an eventual goal, but let's concentrate on laying down the foundation now," more companies might have stuck around. I honestly believe that all this desire to rush in on "IPO" is what encouraged companies to burn capital at such outrageous rates.

For example, Company A (one of the first I worked for) received $28 million in VC. 28 million is a lot of clams, my friends. A good friend of mine recently opened a restaurant. He started with $5 thousand in capital. He used the $5,000 wisely and now has a profitable business. It's privately owned, of course, and he used every cent carefully. Company A, however, blew through 28 million in 6 months on pizza, cars, tv commercials, and PR--all in the hopes that we would "look good for IPO." And that, truly, is a quote I heard around the office.

Of course, not all companies blast money stupidly, like Company A. When I went to work for Company B--they were penny-pinchers. They gave basement salaries, had few workers, and skimped on office products. They also drove everyone madly, saying that "once we reach IPO--everyone will get bonuses. Everything will be OK!" So everyone worked quickly. No time was taken to plan or consider. And BOOM, it died.

I have learned (well beyond those two examples) that GROWTH is more important than being first. Sure, eBay was the first major auction site, but it doesn't mean another well-planned, carefully grown auction house can't also emerge.

GROW your company, folks. Don't just toss hyper-grow on it and expect to reap massive rewards. Consider keeping it a private company or reach IPO slowly. Don't use IPO as your driving force. Say, "I want to build a business that does XYZ the best it can" not "When we go IPO, you'll get vacation."

Reality bites. Get over it. Get past it. Get on with it.

T in Silicon Valley — 2008-07-08T01:44:03-07:00

In early 1999, I persuaded a friend attending business school to start a company with me. We thought we could do something faster, cheaper and better than another company which was enjoying extraordinary success (by the measures in use at that time). Our original business plan said we'd go IPO for a billion last fall, and be sitting on top of a $500 million dollar a year business by now.

Well, it's early 2001, and since then:
we've changed our business model three or four times, and watched revenues decline almost every month since we started... burning through most of three rounds of funding in the process.

Lesson #1: the only success metric that means anything is how close you are to positive cash flow

Lesson #2: in a collapsing market, no matter how hard you struggle, you'll be swept out with the tide, hired up to a staffing level of 30+, fired everyone, discovered huge amounts of theft, indifference to costs, and that we're doing more faster with 25% of the people

Lesson #3: if people are not working out, don't try and save them, fire their asses, yesterday... good reasons to fire: incompetence, laziness, being an asshole, subversive behaviors, refusal to be managed

Lesson #4: if you aren't watching the books, no one is - our accountants paid bills for other companies, they paid tens of thousands of dollars in unauthorized expenditures

Lesson #5: if you're a young entrepreneur, don't fool yourself into thinking age brings wisdom, or that you can trust experienced management not to do stupid things

Lesson #6: experienced executives delegate. this means they expect people to do what they tell them to do. if they don't, it is quite possible that they will simply tell them what to do again. and again. and again. someone must *RUN* the company on a day to day basis and pay attention to the *DETAILS*

Lesson #7: nothing is more important than making sure you know what money is being spent, where, by who, and that it is all authorized - otherwise, you're handing employees a blank check

A Complete Dodo with Computers

anonymous community member in India — 2008-07-08T01:43:33-07:00

My "good" friend came to me one day with loads of PC magazines and said that if all these companies can be started in the garages or in kitchens by our own people in India, why can't we start something like this? Not knowing anything about startup/dotcom companies, I blindly trusted him and invested about $10,000 US. Six months went by, and all I could see when I entered my living room was my good "friend" "starting up" the company with 4 PC's around him and lots and lots of papers scattered all over the place. He would "work" the whole day and pack up to leave in the evening (after demanding some "taxi fare".

After six months I became exasperated and asked him to leave the place and to return my money.

He asked me to show him a receipt for the money that he had received. This was the end of my money and my "trusted friend".

I got back nothing, not even a scrap of paper for my investment. Needless to say, my "friend" was seen moving around with a couple of other gals and discussing "startup dotcoms" with them.

Like they say, "there's a sucker born every minute", huh?

Take care of wolves in sheep's clothing, my friends, and DON'T YOU EVER PART WITH MONEY until you know what's happening.

Take care.

Recruiting Management Team

Anonymous in Silicon Valley — 2008-07-08T01:42:11-07:00

Startup experience is actually a great learning period. From meeting and assessing people to formulate your strategy, there is so much to learn and absorb. Most ntrepreneurs would love to get a high level exec to be in their team, thinking that this would enhance funding attraction as well as great execution speed. But sometimes, there're more than meeting the eyes.

In our case, we have honed in on one candidate who's a VP of Engineering for a small app vendor. They went thru a merger, and he didn't want to be their combined VP head. So we got him. Things looked great at the start such as engineering plan, number of engineers to hire, IT plan and how he can help get funding from his own connections.

Right when the investors gave us the term sheet, he wants change of CEO, as well as having a COO title. After haggling that COO or CEO are not usually stayed w/ the founding team, things calmed down for a few weeks w/ more VCs.

Then we found out that by himself, he couldn't land any VC that we brought to him. Things started to unravel when one group of investors smell something not right w/ our Engineering head. They declined to even talk to us further when he is still at that spot. Boom, stuffs hit the fan! He claimed that those investors had nothing but just luck in their career (to get to their Billion market cap) and that their products are nothing but junk.

We talked to our advisors. Those who were brought in by him echoed the same rhetorics (i.e. lucky dumb guys w/ lousy products, even if they're past Billion dollar mark). Other advisors were surprised at his reaction. Then w/ 1/3 of the advisors on his side, he requested to be CEO or else. So we cut bait, and lost our round.

Two weeks afterward, we found out from a new recruit that during his past merger, they didn't want him at all. More dirt came to light as well, but all we care is that he is no longer part of us.

Started from ground zero again, but that is entrepreneur life! Moral of story, do your due diligence on exec recruits. Get advisor team from diverse background and origins. And when the core team is in disconcert, assess and make decisions quickly.

We did not act quick enough. Life is too short to put up years w/ egomaniacs. Live w/ a compelled vision & higher calling or don't live at all! One friend told us "I refuse to live an unchallenged life"!!

Avoid unnecessary expenses in the beginning

Sharon Gary-McGuinness in Chester, NY — 2008-07-08T01:39:57-07:00

I started my business in Feb of 99. I own a gift basket company selling to corporations and businesses for B to B gifting. Mistakes? I have a few, much to my dismay!

First don't bother printing a brochure for your business until you have been in business for at least one year. We did and in a very short time, we had changed our image and our baskets making the $5000 expenditure useless. We were learning about the industry as well as our talents and abilities, not to mention what people wanted in a corporate basket. The brochure did do one thing though. It made us look bigger than we were and much more professional appearance which did get us in the door where we wouldn't have otherwise, but not worth the mistake so early on.

Second, buying lists? We got burned twice because of our ignorance to the industry. We bought a business list, not knowing that included Wendy's and Synagogue's who do not buy baskets for business. Another big waste of money! You live! and learn. I have a few more however due to the ones I just mentioned I have work to do! Hope this helps someone, got to be a reason for making them Ah?

(Sharon can be reached at infor [at] giftsingoodtaste [dot] com)

Put Ideas into Action

Daniel Simmons in Sydney — 2008-07-08T01:39:16-07:00

As an independent internet consultant advising start-ups and traditionally offline companies on their online brand and creative strategy, I have been faced with many people with many ideas.

The one key ingredient which I would say distinguishes the people who put their ideas into action compared with those who just talk about it, is simply the capacity to stop prevaricating and cross the line. It seems one can spend, literally a lifetime inventing reasons not to do something, being afraid of 'what if's'. For me, the greatest risk in any venture is always the initial crossing of the line, the taking of that first baby step into the unknown. Without this there can be no journey- no experience, no success, no failure (however you define these things).

(Dan can be reached at dansimmons24 [at] hotmail [dot] com)

Going to work for a startup

anonymous — 2008-07-08T01:37:51-07:00

Hmmmm.... Where to begin?

The startup experience was a mixed one. Learned a lot, met great people, but the way it ended up was less than ideal.

Many lessons were learned including:

Scrutinize management when you interview. Even if you are mid-level (ie manager), let them scrutinize you, but really grade the mgmt (either upper or at least who you will report to). If they don't strike you as bright, then don't think you can come and be a superstar. Startups are inherently political so if your boss is a moron, it means several things:

you will get lots of work dumped on you because they cannot do it
upper management doesn't have a good eye for talent and therefore if they hired one idiot, it's likely that the other groups are littered with folks who are high on credentials/low on common sense aka idiots. Ask them a business question to see what their gut instinct is. If you think it is way off, it prob means that all important commons sense is lacking. And if they ding you cuz you challenged them, then it's prob better that you didn't go work for an insecure person anyways.

There is no such thing as job security even if you feel you did a better than average job.

If you have any doubt when you join, don't take the gig. That doubt will only grow.

Operational experience in building a company is huge. MBAs from top schools are good at putting together decks and analysis, but start up world is all about execution. Identifying partners and building a rosey model showing profitability and 35% market share is easy. Look for folks who could do your job. Applied theory is worth a ton more than theoretical knowledge. The ability to manage costs is huge. When in doubt, I think a general and easy to implement rule is to avoid consultants.

Don't expect to get rich with it. Equity is a bonus if it works out. Make sure the salary is there.

And lastly, ENJOY THE RIDE!!! It can be tons of fun.

Existing in Silicon Valley

anonymous in Silicon Valley — 2008-07-08T01:37:14-07:00

I know this is a coaster ride to build a successful company. Being in the SILICON VALLEY and having every other person, part of some exciting operation leaves you restless and if you do not get thrilled with just a thought of being counted in the list of Doers community, you are not enjoying the Bay Area.

I also had a nice dream to doing something BIG and DIFFERENT. Already had some experience of Start-Up operation and some Paper money in the diluted market gave Oxygen to my inner fire. Explored a lot and selected one idea to pursue... had nice time (though sometime real tough) and learnt a lot. I must admit now, it is kind of purged, I would like to share the invaluable experience I got.

1. Never think, this is the SOoooo great. Competitors can outsmart you (almost, always... somehow).
2. Do not lose faith in your idea but never be blindfolded with greener view.
3. Do sufficient risk analysis and evaluate the partner very thoroughly (good to have a partner... fellow believer).
4. Have the business plan handy with clear distinction of revenue generation stream.
5. Be best at everything. There is no place for side paths.

Tomorrow never dies....

'Twas the Day before the IPO

Bill Flitter — 2008-07-08T01:36:45-07:00

'Twas the day before the IPO, when all through the net,
Not an executive was flying, not even Ellison's jet.
The documents were filed with the SEC with care,
In hopes that the IPO, soon would be there.

Techies were nestled all snug by their screens,
While visions of liquidity danced in their dreams.
The CEO with a reporter and PR at his side,
The press tour just concluded a cross-country ride.

When out on the web there arose such a clatter,
I surfed to the stock ticker to see what was the matter.
To eTrade, my Mac flew like a flash,
The market made a slight correction, it started to crash!!

I gasped at the thought and started to grouse,
"Must I sell my SUV, what about the house?"
When what to my wondering eyes would appear,
An email from the CEO that was quite clear.

I knew in a moment what he had to say,
It had to do with the crash that happened that day.
More rapid then VC money and Napster fame,
Another Dotcom Bomb and he called them by name;

"Now Pets! Now Petopia! It was plain to see,
Garden and Eve!” Oh God, why is this happening to me?
"We spent and we spent, with no revenue in site!
Be sticky, capture eyeballs, VC's shouted all night.
As fast as we filed, the IPO was pulled,
On f***edcompany.com our story will be told.
B2C, B2B, P2P changed with a flicker,
No company was spared on the stock ticker.

And then, in a twinkle, we were off raising a round.
Searching and searching, no money to be found.
Don't count on series E, no money, no loan,
The end was quite near, we started to moan.

No more launch parties, and Super Bowl ads,
Pink slips and revenue became the fads.
The dot com frenzy � how it glimmered! The days were so merry!
The stock options how rosy, the payoff so cherry!

From Yahoo! to Amazon, they started it all,
Who would think, The stock market, fall?
We were chubby and plump, a right jolly ole folk,
We laughed when we heard, Our start-up going broke?

A wink of the eye and a twist of fate,
We realized our start-up entered the market too late.
We spoke not a word, but overcome with grief,
As we watched the market close in disbelief.

The CEO sprang to his team, and gave a whistle,
Away we were, laid-off like the down of a thistle.
But I heard him exclaim, as we drove off that night,
www.laptoplotto.com will be our next site!

(Bill can be reached at bill [at] reology [dot] com)

Not that different in India

Sameer Kulkarni from Mumbai, India — 2008-07-08T01:35:46-07:00

The net mania was at its peak. A bright team with a sound (?) business idea was getting funded at astronomical valuations and this was happening not only in the Silicon Valley but in India. It was tempting to think of running your own business. So three of us; all MBAs from the best business schools in India formed www.cfoindia.com, a portal for CFOs. After all we had substantial experience in finance and banking in India and abroad. We were seasoned professionals; not the typical fresh green naive youth.

After about eight months we are closing our business. Reasons : lack of funding, much lower-than-expected internet usage and acceptance and strong competition from existing, well-entrenched offline players.

The business is lost but not the learning. Given the extent of globalisation, the experience is universally applicable. Here are a few lessons :

Lesson 1
Don't interpolate linearly; look at qualitative factors too.
If funding at seemingly irrational valuations happen in January does not mean it will continue in May. If there are 3 million Internet users today, does not mean 6 million users tomorrow and even if there are, what will be their level of sophistication?

Lesson 2
The sector matters as much as the team
Too much emphasis is placed on a bright, committed team. While it is true that a competent cohesive team can work wonders, the business in which it operates also matters a lot. A good team in a bad sector is probably a losing proposition. Choosing the right sector is important.

Lesson 3
Risk can be mitigated but not eliminated
I can see several ways by which we could have reduced the risk - early funding, more thinking but all this would still never make a new concept work necessarily nor would we know conclusively about the outcome. Many a times one has to take a plunge to test the limits especially for new concepts. And we still have the spirit and zeal for it!

(Sameer can be reached at sameer [at] cfoindia [dot] com)

Give up some control

Craig H. Sloss of Huntington Beach, CA — 2008-07-08T01:34:56-07:00

Why do so many dot-coms waste all of their venture capital building the structure of a traditional company when it's not needed? They're doing something new, so why not do something different too? These are questions that I ask myself , venture capitalists, and dot-com management people everyday. I never seem to get a logical response, other than "because we want to be in CONTROL".

Control of what? Another failed business? Most dot-coms originating in the US have followed the "traditional American business pathway" during their development stages, leading to a very unbalanced capital investment in lots of bricks and mortar, IT infrastructure, and personnel for back-office operations. This reliance on an old model has lead to the failure of most dot-coms, the tech stock market near-collapse, and the e-Commerce industry at large has become suspect. It's too bad. The solution to the problem has been overlooked. It was too simple. Single-point, third-party outsourcing.

If your capital investment is strictly focused on product development/aggregation, channel development, key executive management and marketing communications only, you've begun to head down a more logical path. No big buildings; no massive headcount levels, or warehouses, or multi-million dollar IT systems (and hardware); no complex call centers. Nope, not needed. Outsource it all to one source and you don't spend a dime until your dot-com is ready to launch. When that time comes, an even bigger surprise occurs when you find out that operating costs are not only quantifiable and forecast-able, but much lower than what you would encounter following the traditional old "build-your-own-bricks-and-mortar pathway". Oh, but there is a downside. The entire operation is now 100% scalable for seasonal fluctuations and rapid growth; you're equipped to supply customers domestically and globally; all of your operational data is updated and accessible in real-time via an internet link or merged transparently into your servers, and the orders are being fulfilled accurately on the same day as the order receipt.

Tough, isn't it? Well, it gets even worse. You are now able to accurately map out 100% of your operating expenses for up to five years (with the help of a company like mine), allowing you to easily see whether you'll make it into the black (or not).

I would like some feedback on my nagging question from your readers. Are the incubators the ones that can change or redirect the traditional thinking of an industry like ours?

(Craig Sloss can be reached at c.sloss [at] centraworld [dot] com )

What we learned about startup investing

John Allen of NJ — 2008-07-08T01:33:54-07:00

Two years ago, myself and a partner were 1.5M wealthier than we are today. We had liquid cash at an incredible time period in history and we were determined to get our slice of the technology revolution. If we couldn't build it we were going to invest in it! Two years later here are the lessons we've learned at such a deep level we will never forget them.

1) Unless entrepreneurs have a track record that equals or surpasses the experience level required for the venture they are asking you to invest in, don't invest!

2) Part of the investment is the due diligence and don't be afraid to spend a significant % of the investment amount on proper due diligence, 3rd party ideally, else you seriously risk losing a major portion of your money like we did. Do so whether it's a public or private equity you are investing in.

3) Get to know the character of the people you are investing in great detail and question them. If you are not 100% satisfied in both the answers and representation of their values, beliefs and results in terms of past achievement in their current day lives; it's likely someone who's acting as if.

4) Make sure you know the business very well, else, you'll never be able to decipher all the communiques that will transpire.

5) Make sure you have a great professional team, lawyer and accountant, if it does not get by them, don't invest.

6) Realize that everyone has an agenda. Make sure you are comfortable with the one hopefully shared by the founders. And if you like it, make sure that it's shared.

7) Don't confuse being realistic with pessimism. Being realistic is all that matters. If that realism appears pessimistic or optimistic, then so be it.

8) Acknowledge that entrepreneurs are known to stretch the truth phenomenally well in the name of vision, promotion and keeping everyone looking forward. They often forget reality.

9) Don't invest what you can't afford to loose. Be willing to walk away if you don't get what you know you need for the investment to be a success. Other opportunities exist.

(John Allen can be reached at jamhandle [at] yahoo [dot] com)

Paying customers are the key

Robb Sequin from Cape Cod, MA — 2008-07-08T01:33:09-07:00

Just a quick note I guess. I'm founder and CEO of www.dotcomcardz.com . A start up that would feature printed web site home pages on color 4" x 6" trading cards. We expected the cards to be collectable but also new forms of hard advertising for any company with a web site. We signed up lots of big names (see the customers link at the site) but could never raise the VC money. Many thought it was a good idea and I put a good team together.

My lesson learned is to have PAYING customers before trying to raise first round money. We had lots of big cap names for customers but figured we should give away our advertising service for free first. Wrong.

VC's told us that if we had paying customers we would have been much better off. Thanks, just found your site from an article on startup failures. I'll be hanging around at your site since I am now...between start ups. Hey, that sounds good. Maybe I'll put that on my resume "between start ups". Has a nice ring to it:-0

(Robb Sequin can be reached at president [at] dotcomcardz [dot] com )