Best & Worst Decisions Starting Companies

markfletcher writes "Today I launched a new site, Startupping, dedicated to helping Internet entrepreneurs. For the launch I asked several successful entrepreneurs about lessons they learned starting and running Internet companies. The first set of replies includes responses from Paul Graham, John Battelle, Chris Pirillo, Ross Mayfield, and Dick Costolo."

What are the rates for a slashvertisement?

[Harmonious Botch]

I wanna buy space too.

Sorry but...

[js92647]

this isn't even news. This is blatant advertising.

Customers!

[seanadams.com]

The number one thing that people screw up is to start a business around an idea because it's interesting to work on, it can get funded, it's been done successfully before, the sector is hot, exit valuations are good, etc.

The ONLY successful ideas I have ever seen start with a _customer_. The first thing you say when somebody asks you what your idea is should be to describe who will buy it and why. Not what it is. I can't tell you how many entrepreneurs I've heard touting their latest venture with a pitch such as: "Think of it as a cross between grid computing and a web of trust, and it uses these applets that run on your back-end server... etc etc". This drivel often comes from seemingly smart people who have had impressive successes in the past. But who the fsck is the customer?

What is really astonishing is that it's the worst of these ideas, which happen to have just the right buzzwords du jour, which get funded by VCs. And it just gets more out of control from there. Even today, 7 years after the dot bomb, I know of several companies which have grown to 100+ employees and are on their fifth round of venture money without a profit in sight.

If your customer is not the #1 thing on your mind at all times, don't even bother! ...trite, I know.

(BTW dot coms DID have customers - it's just that the customer was not the guy buying you non-existent product, but rather the "bigger fool" who would buy your company. They eventually failed for the EXACT same reason - people kept starting companies even after they could no longer identify that customer.)

And i-bullshit too!

[EmbeddedJanitor]

There is nothing really magic about internet start ups vs any other start ups. Ultimately all businesses share some common traits. If you don't have a solid business plan, then you only have a dream. This is the same if you're in i-business, selling hardware or if you're a hooker.

To have a business, you need to understand cash flow (current & projected), customers, your product and how the hell you're going to get the product in front of the customer.

Observation

[necro351]

Notice that almost all of the posts highlighted the "best decision" as hiring the right people, or finding co-founders that stuck with them. From what I've seen in the past, picking the right people is vital, its one of those things that is expected of you, and so we almost take it for granted, but if you don't do it right, you will mess the whole thing up.

Re:Sorry but...

[bogjobber]

The difference is that this is presented as legitimate news. The Intel page and banner ads are obviously advertisements. Guerilla marketing sucks.

Re:Customers!

[c0d3h4x0r]

The first thing you say when somebody asks you what your idea is should be to describe who will buy it and why.

Note the phrase "who will buy it", because it's important.

A business can make a perfect product that people love because it overwhelmingly satisfies their needs, but if those people aren't willing to pay for it (or pay *enough* for it that the business can make some profit), then it doesn't matter and the business is screwed. Therefore it is not always in a business's best interest to bend over backward to please consumers at the expense of other factors. A product's quality will reach a "good enough" point, beyond which additional improvement just increases costs without making people willing to pay more for it.

You see great examples everywhere of major businesses consistently making this mistake. Look at Apple -- great PCs with strong user satisfaction, great image relative to Microsoft -- yet very few people are willing to pay the price Apple needs to ask to turn a profit per unit, so in the end it's not a very smart business strategy. Steve Jobs keeps making the stupid mistake of maximizing product quality over all else, when a smart business person understands that product quality is just one of many factors that must be balanced to maximize profits.

Re:And i-bullshit too!

[frisket]

A business plan is only any good if you have a saleable product, unless you're just aiming to milk some VCs [silmaril.ie]. I've seen (and done DD on) startups with good business plans, people who understood cash flow and customers and marketing -- but the product was crap, or already obsolete, or simply a non-starter (didn't stop some of them getting the cash, of course, but it sure as hell stopped the business dead in its tracks when the funding ran out).

Re:Product quality.

[JavaRob]

I don't buy Macs because of their superior quality. I buy them becasue Apple computers tend to be comparatively well designed (at least the laptops are), the Apple desktop environment has better ergonomics than Windows (in my opinion, your milage may vary), personally I value the fact that OS.X is Unix based and Apple hardware tends to age better than many (but by no means all) PC computer brands, there are PC brands that do just as well as Apple.

...i.e., you do buy Macs because of their superior quality.

Re:And i-bullshit too!

[mgblst]

but the product was crap, or already obsolete, or simply a non-starter
 
Yes, but this is more an opinion of your, than anything else. Somebody who has a business head, that can be told by asking a few questions. But the value of the product, that can me debated endlessly. I am sure you expert vision of the future would have turned down such products as google (we already have search engines), myspace (we already have geocities), 8086 (nobody will want a computer of their own).

Re:Other Startup Sites

[Swanktastic]

The responses you'll get to this question are well intentioned, but I can tell you definitively the answer to this question. The internet should not be your primary source for answers to these questions. Human beings will.

I've got a successful startup under my belt- almost 100 employees, throws off a lot of cash, happy customers, etc. Get in the habit of talking to people to find answers to questions rather than running to the internet. Need legal help? Contact the bar association. Talk to a couple lawyers. See if you can develop a friendship with them. Same goes for accounting issues. Need entrepreneurship help? Join your local e'ship club and have lunch with 10 of them. Ask them for advice. People love to talk about their businesses. Milk them for info. See if you can share costs on something or other. Potential customer ideas, whatever.

Entrepreneurship (not a product design) is about talking with contacts to do whatever it takes to get the business off the ground.