Navigating the Jungle: A Survival Guide for Student Entrepreneurs

So you’ve got a business idea, you want to get your first company off the ground and you need to balance this with getting the degree you want. It’s a tough position to be in – particularly if you don’t have much business experience. The good news is that there are a wealth of easily accessible people, resources and organisations which can help you out!

I was in exactly this position a few years ago. I had a business idea during my second year at university and started with the student society for entrepreneurship (Oxford Entrepreneurs). I also found great value in the resources below and these helped me develop my company GroupSpaces to where it is today.

Entrepreneurship Societies

I strongly advocate these – the entrepreneurship society at your university is a fantastic resource. The speaker events it holds can inspire you, the other members of the society can be your co-founders and the more experienced entrepreneurs in the society can offer you guidance and direction. If you’re not already a member, you can find out how to join the entrepreneurship society at your university at www.groupspaces.com.

Online Resources and Books

There are a plethora of online resources that will help you with ‘starting a business’ ranging from the embarrassing to the enlightening. Here are my top three that will provide you with genuine value:

1. Paul Graham’s essays at www.paulgraham.com – over 100 thought-provoking essays with a focus on entrepreneurship and technology by one of the global thought leaders on entrepreneurship. If you haven’t come across these before I’d recommend starting with “A Student’s Guide to Startups” and “Why to Not Not Start a Startup”. Paul sold his own startup Viaweb to Yahoo! in 1999 for $49.6M.
2. Stanford University’s Entrepreneurship Corner at ecorner.stanford.edu – over 1,200 educational speaker videos about all aspects of entrepreneurship, featuring the world’s top venture capitalists and the entrepreneurs behind Facebook, Google and dozens of other extremely successful companies.
3. Business Link at www.businesslink.gov.uk – guides to the majority of paperwork-related issues you will face starting a business, ranging from incorporating your company to payroll, taxation and selling your business (hopefully you’ll get that far!).

There are also a huge number of books about starting a business. Here are my top three:

1. Founders at Work by Jessica Livingston – a collection of short, candid interviews with founders of over 30 of the most successful technology companies from the last few decades such as Apple, PayPal and Dell. This brings the notion of starting a great company down to earth – you’ll be surprised by how clueless some of these entrepreneurs were at the beginning!
2. The Art of the Start by Guy Kawasaki – a how-to guide to making ideas happen by the venture capitalist and former Chief Evangelist at Apple.
3. The Four Steps to the Epiphany by Steve Blank – a guide to launching a company using the “Customer Development” methodology, something which I believe will become the de facto approach to starting a business in years to come. Steve founded or worked in 8 startup companies in California’s Silicon Valley.

Support Organisations and Schemes

There are several national and international supporting services, campaigns and initiatives which offer mentoring, advice, guidance and funding to students wishing to start companies. Here are 5 which you might find useful:

NCGE (National Council of Graduate Entrepreneurship) works to reshape and improve the environment for enterprise and entrepreneurship in higher education. It also works directly with students and recent graduates to support those who want to start a business through its FlyingStart initiative which provides training, mentoring and expert advice. You can build an online support team, find out about FlyingStart events and read success stories of entrepreneurs who have benefited from working with NCGE at www.flyingstartonline.com.

Shell LiveWIRE combines an online support service and awards programme for young entrepreneurs in the UK. It is one of the longest running youth enterprise schemes in the UK, promoting enterprise as a real career option since 1982. You can ask questions and receive expert video answers, discuss business issues with other young entrepreneurs and access an online business library at www.shell-livewire.org.

NACUE (National Advisory Consortium of University Entrepreneurs) is new to the scene. It is a national organisation that supports and represents university enterprise societies across the UK. NACUE provides budding entrepreneurs with a national, diverse and dynamic network to support them in their start up process. From providing students with the latest news on training, business support services, enterprise conferences, competitions and funding and incubation opportunities to enabling them to connect locally, regionally and nationally with like-minded young entrepreneurs across the country, over the next few months NACUE will become a central reference point for student entrepreneurs across the UK. For more information on NACUE and to sign up for its weekly e-newsletter, visit www.nacue.com

Seedcamp is Europe’s leading micro-seed fund and each year it provides 20 select, very early-stage software companies with a week of workshops and networking in London with Europe’s top investors, product experts and marketing gurus. At the end of this week, all 20 teams will have developed a network that would otherwise have taken years to build and 5-7 teams receive a small investment of up to €50k. Recent student success stories include Kyko and Zoombu, both of whom received Seedcamp investment in September 2008 and were founded by Oxford University students. To find out more and apply for Seedcamp Week 2009, visit www.seedcamp.com.

Y Combinator is a Silicon Valley-based micro-seed fund (founded in part by Paul Graham and Jessica Livingston – both mentioned above) which runs a bi-annual 3-month scheme for 10-20 teams at a time and offers investments of $5k + $5k per founder. The 3-month period runs from January to March and July to September each year and leads up to an “Investor Day” where each team gets to pitch their idea to a room full of Silicon Valley’s top angel investors and venture capitalists. Y Combinator has made in excess of 100 investments to date, 10 of which have been in British teams. The most notable being Songkick which was founded by Cambridge graduates and has raised in excess of $5M venture capital investment to date; and Auctomatic which was founded by Oxford graduates and sold to publicly-traded Canadian company Live Current for $5M in March last year. To find out more and apply for the next batch, visit www.ycombinator.com.

The last resource I’ll leave you with is myself – if you have any questions, feel free to email me on david [@] davidlanger.co.uk or tweet me on @langer

You can read the print version of this article in Issue #19 of The Gateway newspaper

Focus on Core

Every entrepreneur kind of knows they should focus on core. But what does ‘core’ mean? Over the last 3 months I’ve had a break from blogging, have also spent a lot less time reading blogs and have been paying particular attention to whether what I’ve been doing has been ‘core’. Other big distractions from core that I’ve been trying to minimise have been:

• Events
• Meetings
• Emails

that aren’t with users or advertisers. I found one of Venture Hacks co-founder Nivi’s recent tweets particularly thought-provoking:

“Email is a to-do list that other people get to write on.”

Perhaps you should ask yourself whose to-do list is more important next time you’re stuck answering emails in your inbox and sacrificing your own to-do list. I don’t think it’s any coincidence that many of the most successful entrepreneurs aren’t the best at answering their emails on time.

Marc Andreesen’s blog post The only thing that matters does a particularly good job of explaining what ‘core’ is and why it is core – the post concludes:

“The only thing that matters is getting to product/market fit.“

where product/market fit is defined as “being in a good market with a product that can satisfy that market”. Andreesen contends that the reason a lot of startups fail is because they never get to product/market fit. He divides the life of any startup into two parts: before product/market fit (call this “BPMF”) and after product/market fit (call this “APMF”). And his advice is therefore:

“When you are BMPF, focus obsessively on getting to product/market fit. Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital – whatever is required.
When you get right down to it, you can ignore almost everything else.
I’m not suggesting that you do ignore everything else – just that judging from what I’ve seen in successful startups, you can.“

Other thought-leading entrepreneurs express this in their own way:

“This is different than when another startup raises $5 million. We won’t rush out there and start hiring like mad. We just wanted to have the funding issue taken care of so we could focus on the product and users.”

— Paul Buchheit on closing FriendFeed’s Series A funding round

“Do whatever would make users love you so much that they spontaneously recommend you to their friends.”

— Paul Graham in response to a “How to prioritize” question on Hacker News

“Figure out what the important things are, and spend lots time on those and little on the rest. Lots of startups work very hard, but on the wrong things. They still die an untimely death.”

— Sam Altman as part of his Hacker News post More advice for new Y Combinator founders

In the discussion Sam went on to elaborate on what those important things were:

“Good:
-Things that will get you more revenue
-Things that will get you more users (and thus hopefully revenue)
-Things that will make your product better (and thus hopefully more users)
-Things that will get you great hires (and thus hopefully better products)
-Focusing on the right market
Bad:
-Going to events at business schools or ‘networking’ with the people that do”

Unfortunately following all this advice is much harder than it first appears in my experience. ‘Walking the path’ is different to ‘knowing the path’. Mahatma Gandhi said:

“Happiness is when what you think, what you say, and what you do are in harmony.”

and I think you can apply this to startups. A startup is happiest (read: being optimally executed) when what the team members think, what the team members say to each other (and write in their operational/short-term [not necessarily the business] plan¹), and what the team members do are in harmony.

I believe the key reason startup founders struggle to walk the path is that they’re not good enough at saying “no”². Whether it’s “no” to features, “no” to events, “no” to meetings or “no” to checking and answering their emails, you have to be able to say “no” ruthlessly. Otherwise you get distracted from core. The most difficult and unnatural thing about this for a lot of entrepreneurs is that we’re optimists by nature. We’re open-minded and like having new and diverse experiences. We like saying “yes” to people and opportunities.

Now I’m certainly not saying you should work 24/7 — in fact the workaholism debate Jason Calcanis recently sparked deserves a whole post to itself. What I’m saying here applies whether you work 9-5 5 days/week or are an aspiring Uberman.

So, if your startup is BPMF, next time you’re wondering whether to say “yes” to something, ask yourself the question: “Will this get us closer to product/market fit?” and if the answer is no, focus on core.

Notes

¹ I’m making the assumption here that startups rarely include non-core activities in their operational plans.

² I also discussed the importance of being able to say “no” in Tricky Business back in February.

Startup School 2008

On 19th April 2008 at the Kresge Auditorium, Stanford University, 11 of the key players in tech entrepreneurship shared their wisdom on startups at the 4th annual Startup School conference. Andy and I had the pleasure of attending along with 500 other aspiring hackers and entrepreneurs from around the world.

We arrived on the Friday afternoon and after a party at Y Combinator in Mountain View where we met many of the YC alumni, including Trevor Blackwell’s robots, we stayed at Snaptalent HQ along with Kev Edwards and Jon Markwell from the Brighton entrepreneur scene.

There’s already been some good coverage of Startup School 2008 by TechCrunch, Wired and Kontsevoy so rather than go into too much detail, I’m going to share the key messages that have stuck most firmly in my mind since the day:

1. David Lawee – VP, Corporate Development, Google

My 2 Cents on Entrepreneurship

“Hurry up! Speed is the greatest source of competitive advantage of a startup.”

2. Sam Altman – Founder & CEO, Loopt

How to raise money

“Taking VC does not leave the sell-for-£20M-in-a-year option open.”

3. Jack Sheridan – Chairman, Business Law, Wilson, Sonsini, Goodrich & Rosati

SO, YOU WANT TO START A COMPANY?…

“The average time from a company founding to a liquidity event (i.e. merger, acquisition, public listing) is 7 years.”

4. Paul Graham – Founder, Viaweb; Partner, Y Combinator

Make something people want

“Being good works. If a startup is benevolent, they keep working even when they feel doomed. Being benevolent:

1. Improves morale
2. Makes other people want to help you
3. Makes decisions easier”

Paul Graham at Startup School 2008 on Omnisio

5. Greg McAdoo – Partner, Sequoia Capital

MAVS

“Disruptive opportunities are ones where there are structural reasons big companies can’t compete with you.”

6. David Heinemeier Hansson – Founder, 37 Signals

The secret to making money online

“This isn’t the movie industry – you don’t need to dominate the box office!
e.g. with 2000 customers paying $40/month, you’re nearly making ~$1M/year.
Why not go for the 1:10 chance of a million dollar company instead of a 1:10,000 chance of a billion dollar company?”

7. Paul Buchheit – Creator, Gmail; Founder, FriendFeed

Listening

Limited life experience + overgeneralisation = advice

=> Listen -> Decode -> Interpret -> Understand

8. Jeff Bezos – Founder, Amazon

Amazon Web Services

On AWS: “Amazon will be like a book store which sells cocaine out of the back door.”
The point being that mature businesses need to keep innovating in order to remain competitive.

Jeff Bezos at Startup School 2008 on Omnisio

9. Michael Arrington – Founder, TechCrunch

How to get press for your startup

“We only want to write the stories you don’t want written.”

10. Mark Andreesen – Founder, Netscape, Opsware & Ning

Q & A with Jessica Livingston

“To minimise the risk of timing, keep burn low to give as much runway as possible to maximise the chance of the market maturing sufficiently.”

11. Peter Norvig – Director of Research, Google

SUMMARY OF ADVICE

“Running a startup is like guiding a missile: move fast, build in positive feedback, iterate and repeat.”

Jessica Livingston did a fantastic job of organising the day, and echoing the words of many other attendees:

“That’s the best conference I’ve ever been to and it didn’t even cost a cent!”

[The Gateway I — extended version] EUREKA!

Archimedes

So you’re studying for a demanding degree, bombarded with a plethora of fantastic career opportunities but you’re also tempted to try out starting something of your own on the side.

How do I come up with an idea?

At the Silicon Valley Comes to Oxford conference on 19^th November 2007 at the Said Business School, Paul Graham (Co-Founder, Viaweb – acquired in 1999 for $49.6M to become Yahoo! Store) put it well:

“Look for things that are evil, broken or stupid. These are usually great opportunities.”

Essentially, there are 3 ways to come up with an idea:

1. Solve real problems.
   Many of the best ideas are inspired by the personal experiences of their creators. Have you ever observed a large number of people sharing a common pain? Perhaps at a previous job or among students at your university? This is how Andy Young (my co-founder) and I came up with our idea. We initially thought of creating a website for all the sports clubs’ results at our university. We then realised that there were hundreds of clubs and societies at most universities – many of which were holding other exciting events. However, in our experience, it was very difficult to find out about them after the Freshers’ Fair at the beginning of each academic year. Therefore, we decided to create a website which would centralise all the news and events from these clubs and societies.
2. Make something better.
   Facebook certainly wasn’t the first social network –MySpace (founded in 1999), Friendster (founded in 2002) and various other sites were already up-and-running before Facebook launched. However, they took an existing concept (a social network) and improved upon it. By initially restricting access to students at a particular university, allowing ‘poking’ and later on introducing the ‘News Feed‘, Facebook has had great success.
3. Copy someone else.
   You are treading a fine line if you take this option. Nevertheless, the technological advancement of countries like the USA and Japan compared with much of Europe and the developing world provides many opportunities. A good example of this is German social network StudiVZ. Launched in October 2005 by students Ehssan Dariani from the University of St. Gallen, near Zurich and Dennis Bemmann from Humboldt University, Berlin. Effectively, they cloned Facebook, dyed it red and translated it into German. Then in January 2007, the company was acquired for $112M by German media company Holtzbrinck.

The final point to make with idea generation is that it’s always easier if it’s something you’ll personally use. Who better to know what people want than a genuine customer?

I’ve got an idea, what next?

The first thing to point out is that having an idea doesn’t mean you could write out a 30-page business plan covering your prospective company’s first four years of activity. Initially, it could be as simple as

“We’re going to create something that makes it easier for students to get a graduate job.”

Next, you need to work out what product or service you’re going to provide. Having thought of some possibilities, you need to do your homework:

• Check with potential customers.
  Find five people or companies who could actually be potential customers for your product/service. Tell them a bit about it and ask for their opinions. Would they buy it? If so, why? If not, is there something that you could do that would make it more appealing? Make clear to them that you want complete honesty.

• Perform some market research.
  Start by typing your idea, or variations thereof, into Google. Your goal here is to determine if someone else is already providing the product or service that you envisage. Make a list of each company that you would consider a competitor and compile a spreadsheet of each of their details – web address, location, product/service offerings and pricing. Then ask yourself a few questions. How many competitors are in the marketplace? What is the size of the market you are targeting? What percentage of that is addressable with your product/service? What percentage market share does each competitor have? Does it look like the companies in this market are making money?

• Do the maths.
  First, accurately cost out how much it will cost to create your product/service – include design, production and labour costs, overheads and any other expenses you may incur along the way. Next, figure out how much you can charge for it. Again, this can probably be done by asking potential customers how much they would be willing to pay. Finally, add up everything (on a per-unit basis) and work out if you can undercut your competitors. If you can’t, do you have something else that differentiates you from the competition?

Now that you have the numbers and have performed a thorough assessment of the competitive marketplace, you should be ready to make a decision as to whether or not it is worth moving forward with your idea. The above research shouldn’t take more than a couple of days.

With web-based ideas, the third point above is not necessarily about monetary cost – the currency would be better described in terms of time and ease of use. It’s almost free to set up a website, but the important thing here is that the idea is something people will adopt so you don’t end up building a graveyard. Gordon Buxton (MD, Oxinet and Board Advisor to GroupSpaces) has a good theory on this – he calls it Gordon’s Law:

1. Does it allow people to be lazier?
2. Does it allow people to be more disorganised?

If you can answer yes to at least one of these questions, you could be onto a winner.

Lastly, don’t get caught up with the intricacies of your initial idea. Many successful businesses don’t end up doing what they originally envisaged – it’s important to let your idea evolve.

For example, we launched the first version of our site at Oxford University’s Freshers’ Fair in October 2006 and we wanted students to set it as their homepage. In addition to news and events from clubs and societies, lots of students were asking for other information – e-mail, BBC News, Facebook feeds and various other things. We then observed that most students log onto the Internet and perform the following tasks: check e-mail, check Facebook, check BBC News, run some Google searches and then do what they had originally logged on for! The process could happen several times each day, and it gave us the idea for ClickUni – create a webpage with e-mail, Facebook, BBC News, Google search and anything else a student wanted all on one page – then suggest students set this as their homepage.

During the Easter holidays last year, we were staying up all night working to develop this idea as quickly as possible and in April launched “The Homepage for Students” at www.ClickUni.com. Within a few days, it had hundreds of users. The main other feedback we received was from the presidents and committee members from societies. It was becoming clear that there were many pains inherent in running a university society – typically, this was the status quo:

• “We use a Yahoo! Group, Google Group or the university servers to run our mailing list.”
• “We use Facebook to organise our events.”
• “We use Microsoft Excel to keep track of our member information.”
• “We have a website built by this guy who graduated last year; no-one knows how to update it anymore.”

It gave us some more ideas, and we realised that there wasn’t just a problem obtaining news and events from societies; societies suffered a lot of pain in managing themselves online. So we started off building a news and events portal; then, having got some users and listened to their feedback, our idea was evolving into a group management tool. Since the group management problems have emerged as the biggest pain-point for our users, these are now what we are focused on solving at http://www.GroupSpaces.com

So we’ve taken quite a journey, but what’s reassuring is that these changes happen to the big boys too! For example, Paypal is one business that ended up with something very different to their original idea. In 1998, founders Peter Thiel and Max Levchin originally intended to build a wallet application for the Palm Pilot that would allow its users to securely beam money back and forth. What they found though was that people were actually trying to use the website to send money instead of downloading the Palm application. Hundreds of people were flocking from eBay mistakenly thinking that this was a web-based method of making a financial transaction with a stranger. With only a handful of people actually using the Palm application they had an epiphany that they were building the wrong thing. So they got their heads down to build what the eBay customers were asking for and a year later essentially had the service that is available now. After they were acquired by eBay on 3^rd October 2002 for $1.5bn I doubt they were regretting their change in direction.

In summary:

1. Look for something evil, broken or stupid.
2. Do your homework and decide whether you want to proceed.
3. Once running with an idea, listen to what your customers/users are asking for and let the idea evolve.

You can view the original version of this article on page 8 of this week’s edition of The Gateway.

A Week of Conferences (Part 3)

Paul Graham and Jessica Livingston’s Masterclass

From left to right: Joe DiNucci, Bob Goodson, Paul Graham, Reid Hoffman, Jessica Livingston

After the morning Garage session, masterclasses and tutorial sessions filled up the rest of the day. Paul and Jessica gave a masterclass focusing on the trends surrounding the current growth in Web start-ups.

Paul started off by naming 7 key drivers:

1. Moore’s Law ( => hardware is becoming cheaper and cheaper)
2. The Internet itself ( => easy distribution – Facebook, TechCrunch etc.)
3. Open source – software is free
4. Programming languages – quicker and easier to build Web applications e.g. Ruby on Rails
5. Attitudes – start-ups are accepted as something people can do successfully (more on US West Coast than elsewhere)
6. Funding – easier to get both seed and venture capital
7. Tax law – income tax rates are lower, so there is more financial incentive for founders

(Un)surprisingly, since we were at Said Business School, the trend of more people doing MBAs was raised. One MBA student actually asked Paul what value an MBA was in a (Web) start-up. Despite a valiant attempt to say positive things, Paul eventually said that he thought they had no value.

On a related note, I recently watched Guy Kawasaki’s Art of the Start video – a 10-point, 40 minute speech. At one point he said:

“There are no two worse types of entrepreneur than MBAs and consultants.”

He was mainly referring to the pre-defined way in which they are susceptible to analyse problems. My observation here is that ‘raw’ entrepreneurs tend to analyse problems from first principles – which often results in more appropriate solutions. It could be argued that having too many frameworks and textbook methods at one’s disposal can actually cloud one’s instinct and logical judgment.

Anyway, after a few questions in the masterclass, Paul proposed the current and future consequences of the above trends:

1. Founders have more power – they’re less dependent on investors and large programming teams
2. Founders are more hackerly – understanding products and users is what matters now on the Web; business skills can be easily picked up along the way
3. More start-ups – an order of magnitude more than there were a few years ago
4. Big companies will develop far fewer products in-house – they’ll just buy start-ups. The process-oriented nature of product development in large corporations is seriously struggling to compete with the speed and agility of small start-ups.
5. More rich people who have retired under 35 – what are they going to do with their time and money?

There’s also an interesting corollary to 4: big companies will be under pressure to acquire start-ups earlier. Obviously there’s a trade-off between:

• Stunting innovation by stepping in too early, and
• Paying $500M when $50M would have satisfied the founders 6 or 12 months earlier.

Would Chad Hurley and Steve Chen have sold YouTube for $100M in late-2005? Similarly would the founders of Club Penguin have sold for $70M in late-2006? I’m intrigued about how the M&A market will evolve over the next decade.
After some other masterclasses and a Valley-celeb-filled dinner, Andy and I spoke with Paul and Jessica at The Living Room bar. Firstly, great news for us is that we were invited out to a Y Combinator dinner in March! An invitation which will be hard to refuse.

Secondly Paul said something that paints a very different picture to the headline published in The Daily Telegraph on 20th November. I had asked Paul the question:

“So you’ve had quite a few British founders on the Y Combinator scheme now – what are the main differences between them and their US counterparts?”

Paul replied:

“Well, the British guys are usually better. They’re more determined. They’ve already shown they’re committed enough to fly across the Atlantic for an interview.”

Including the winter 2008 batch, 10% (8 out of 80) of Y Combinator’s investments have been in British teams. This reminds me of what Jessica wrote in the last paragraph of her book Founders at Work – determination is the most significant factor driving success in start-ups. There’s certainly not a problem with British determination, with British talent. The problem is actually how and where many British people apply it.

A Week of Conferences (Part 1)

Last week, I had the pleasure of attending Silicon Valley Comes to Oxford on Monday, Essential Mediatech at the BFI IMAX Theatre, London on Tuesday and the Oxford Private Equity Conference on Friday. The week contained too much free coffee and not enough sleep, but I’ve listened to and met some pretty inspirational people. In the next couple of posts, I’ll share my experiences and thoughts from the more tech- & entrepreneurship-oriented conferences of Monday and Tuesday.

So on Monday I attended Silicon Valley Comes to Oxford for the second year running. Last year’s conference was held on 20^th November 2006 – just after we launched the first version of ClickUni. I found the event particularly enlightening. The masterclass from Matt Cohler, VP Strategy & Operations, Facebook stands out. He gave a talk entitled “What is Silicon Valley?” which was my first proper insight into the place and culture that has spawned so many of the successful technology companies in recent years.

It was also the first time I met Bob Goodson (former President, Oxford Entrepreneurs) Chris Sacca (Head of Special Initiatives, Google) and Reid Hoffman, the world’s most successful investor in consumer Internet. Reid’s LinkedIn profile alone names some 44 companies in which he’s angel invested including Facebook, Digg, Friendster, Ning, Flickr, Last FM and Six Apart. He claims to have help finance over 60 companies in total.

This year, the 7^th year of the event had an exceptional list of speakers as always – Reid Hoffman, Chris Sacca, Bob Goodson, Kirill Makharinsky and also Auctomatic boys Kulveer and Harjeet Taggar were back again. New appearances were made by Biz Stone (Co-Founder, Twitter), Kim Polese (CEO, SpikeSource) and Bill Byun (MD, Samsung Ventures) but the highlight for me was Paul Graham and Jessica Livingston from Y Combinator. Having keenly watched their scheme develop over the last couple of years, and written about it in a recent post, it was great to see the people behind it face-to-face.

More on what happened when I met them coming soon…