Entrepreneur 2 be

My mom’s favorite joke goes somewhat like that:

Poor man prays to God, “Please God, let me win the lottery, let me become rich, please…”
Next day he goes on praying, “Please God, let me win only once the lottery, I only one 1 single million, not more…”
Next day again, “Let me win, I will be nice to people, I will do good …” It goes on for weeks and weeks. One day God’s mighty voice falls from the sky, “Bro, you have to fill in at least one ticket …”

Today also, I had the following situation. I found out that one of my $20’s had a ripped corner. The missing piece was not small enough so that it can go unnoticed, but it also wasn’t big enough to be completely unacceptable. So I was getting food at Chipotle (the best fast food you can get) and I faced the following dilemma — should I try to get away with my ripped 20 or should I gave them a regular one. I gave them 2 tens but before the cashier put them away, I pulled my ripped banknote and asked naively, “Would you ever take those ripped 20’s under some circumstances or should I not even try?”, the guy smiled at me, gave me back my tens, took the scarred 20 and joked, “I will get extra 15c for that missing part” I was left in amazement, I got away with it so easy!

So then I thought, why on Earth would people have that completely irrational fear to avoid chances that come with barely any risk? Why did I not give the banknote at first place? Was I afraid of being denied? [so what?] Was I afraid they are going to laugh at me? [so what, I am never going to see them] Was I just shy? [how does that make me a better person if I am shy?] There is nothing significant that I could possibly lose if I try. But I didn’t in the beginning, and a lot of people don’t at all.

Those of you that have read any of my previous posts know that I preach that ‘the only person you should be working is yourself’, so here it comes:

I said last time how luck and risk are almost irrelevant, but Illian and I calculated chance of not succeeding in any of the ten startups you began under the assumption that on average 1/10 startups succeed: (1-1/10)^10 = 34.9% That pretty much means that from pure statistical calculations in 2/3’s of the scenarios you will make at least 1 startup successful, and as Marc Cuban wrote long time ago - “you only need to be right once”. It is very important to note that this simple statistical measure does not include any of the most important characteristics of startups which include but are not limited to: 1) you gain a lot of experience after each failure, which considerably increases your chances of success 2) you make connections on the way 3) you learn to be critical and firm minded, able to analyze and process information very efficiently [these are things about UNSUCCESSFUL startups, imagine about even half-successful ones] After considering all of those qualities of entrepreneurial thinking, I think chances of not getting where you are going are almost invisible. Assuming that, and the high rewards of success, I wonder again, why would people not start startups? No risk, huge rewards. Nobody wants it!?

Illian tried to explain it through an interesting psychological observation of fear and happiness. People seem to be happy when they win something, but if they lose this same object, their happiness decreases twice as much. Naturally, a fear evolves from this, that drives our lives and makes us extremely risk averse. So risk averse that we probably won’t take a free ticket to the lottery simply because chances of winning are too small, in which risk of losing is practically zero, therefore the fear is completely irrational!

Same goes on for funding. Paul Graham says its a good idea to calculate your pluses and minuses before you do a major move. Why would you not ask your connections to invest in you if all you lose is a rejection, which is equivalent to not asking at all anyway, and what you win (in our case) is to keep the project on track? Just 2 days ago we managed to overcome the fear of asking people to invest in us. The result? Noah pitched to one person and he agreed to spit 5, 10g on the basis of friendship with no official paperwork. A whole new discussion follows on now: ’should we take that offer and how should we present the official request’

Fear is powerful…

I recently read an article about a study that some professor did, but unfortunately I don’t remember his name. The basic idea is the following:

About 1500 people are split in 2 groups, group A (we will call it so) has very simple task - listen to a bunch of indie songs and rate them accordingly. The more curious and exciting group we will call B, which has a similarly simple task - listen to a bunch of songs and rate them, the one difference is that B has access to B’s ratings and people see the top list of best rated songs before they choose what to listen and how to rate.

The obvious result is that ratings among A of songs are not much different from each other. That means that rating of the first song is just a little bit higher than the second top rated song, which is just a little bit higher than the third rated song and etc. Group B’s rating however looked different. Song number 1 was far far better rated than song number two and song number three was significantly worse than two etc. From this we can conclude that the exponential results are due to what Alek calls “herd behavior”.

So far, so good.

Now comes the real deal. Group B was divided in 8 sections. All of them listened to the same songs, but each group had their own individual rating lists. The result was very very curious - each had a different top 15 list. In each section, different songs became the most listened. The article reasoned that small differences of luck, or unaccounted factors in the beginning can mean a lot for the success of a song. This way a song that got lucky to be played in the beginning becomes big hit for example, although there are plenty of other songs that technically are not worse in musical terms. If you try to give an analogue of real life, the star Madonna is now, could have been someone completely else due to random small occurrences of luck.

Now that sounds horrible, unfair, and nasty for the people that do believe they have qualities but didn’t make it only because of this luck part of the deal.

I think we can put a different spin on failure however. If there is about 10 songs, and you think you have the skills to make in in top 3, but you were unlucky up to know, I can tell you one thing: doing it over and over again will statistically force the bad luck to ‘run out’ and you will marry success. Same for startups.

I have never thought of it like that, but this is a big part of what people call perseverance.

UPDATE: [ Here is what Marc Andreessen wrote about luck ]

Few days ago I was discussing with my partner Noah how the website is coming. I mentioned in a previous post that he is not what you can call a hacker or a very computer savvy person. So while talking about our idea again, he surprised me with a very good question: “So what prevents other people from doing what we are doing, and why should WE be the ones to succeed?” I totally did not expect such a good question from him so it took me a few seconds to run scenarios through my head. Eventually I mumbled something very reasonable that sounded like that: “Well, to our knowledge, we are the first to be doing such a weird and useful idea, so we have the advantage of time. The other thing that plays only after we launch this product is that sometimes some site become very popular and its difficult to take them over because they have solid amount of dedicated users (or maybe not). It’s a little bit like being youtube - nothing technologically very challenging that can’t be done, and also they weren’t the first ones to come up with this either. But they had a lot of users, and even Google couldn’t compete, so they bought them”Once I said that, something very interesting formed in my mind. I saw the online business from a totally different perspective. There are two reasons for acquisitions usually: great technology that takes time to be developed and a great user base. What I never realized is that they bought have the same purpose and it is to own people, pieces of their attention. Internet is like a second world, that has no rules yet and is free for grabs. This is the beauty of it. NO RULES. So the game is the following - you hook up people on your service and you are their owner. You can now be considered landlord. What you can do is use those people (their attention) to make money or capture more free users that have no roots to anything yet. Who is really damn good at this game? Yes, the googles. They hooked up people on their search, made billions, hooked up people on the maps, will make more billions, and what do they do with this money? They buy people that they use to make more money and buy more people… I am saying this because most of the websites can be replicated by Google for a maximum of few weeks. So essentially what happens when there is an acquisition is that G doesn’t really buy a company or technology, they buy YOU, they buy ME and my mom (well, my mom got bought by Ebay when they acquired Skype). But who gets the money? It’s not the end users.

The bright side: there’s still plenty for everyone. There are plenty of freely roaming browsing users that either don’t know about G or are interested in things that G doesn’t provide yet. So do go and capture land. After all its free - all you have to do is go and claim it.

It’s been a constant discussion between me and my partner whether we should look for funding have a beta version first for a pitch. At times we decided that we need but didn’t really do anything about it. Maybe we didn’t know what to do. Emailing random investors doesn’t work. It is pointless, I’ve tried it. At other times, we decided that I need to make version 1.0 first, befoe we ask anyone for $1.

So I am sure that everybody in the startup universe had those thoughts, “Should I get money, what should I do, do I really need them? Maybe I can work for a little bit and use that money…But where am I going to find it…I will read online and see if I can get some insights from news.yc….” in the end, nothing done. You go and read forever blogs and opinions and they are all the same. And they don’t help. How your project’s problem will get solved will probably have nothing to do with any of those advices, they are often too generic.

I settled on the solution - I will do v1.0, because I can make it by the end of the summer and then we’ll go and search for money. Nice plan. Worked hard for a month, made 1/2 of what I had planned. Now however, I had emergency and I had to fly home. That means money spent and now I can’t pay my school. What does it mean in regards to our project? Halt. I have to make money to survive. I hate that feeling. So little money - 6 grand per semester. Last 2 semesters, I am so close to completing this project and I have to deal with this crap. 12 thousand dollars not much but enough to make your life miserable, when everything was going well.

I am currently in Bulgaria, working on it coding when I have time. But once I get back, I have to work for school. I have always believed that I can fool investors and get some money to work on a project that would be fun. Maybe not ‘fool’ but rather convince them that my idea is good (I obviously like it myself). Somewhat I feel that funding was the end goal. This has changed. It’s about me and the project now. If I get money I get to work on it, else I have to stop. That simple but profoundly different from what ‘funding’ has been previously.

I am always into trying to come up with something entrepreneurial rather than settling down with a 9 to 5 job. An interesting side effect is that people around me feel like they have to share their own inventions and ideas. It’s all good with me. I have trained myself over time to breakdown an idea into components, analyze them and figure out if its doable. The problem is that once I do that, the results I spit back so quickly are usually bad, and people hate it. They like to think they came up with something incredible. Usually I am right for one of the following reason:

1. These are most often either my brothers, my friends from neighborhood, or college friends. What they all have in common is that they are new to entrepreneurial thinking. I mean, I am new myself, and it’s already been 4 years now solid brainstorming. They don’t know that they are walking in my first steps: they are naive and their ideas are unrealistic.

2. The second big problem is that their attention span is too short. They share, get encouragement and/or criticism and that’s where it ends. They don’t do anything about it, they just move to another, ‘better idea’…

3 . Most of them tend to think that getting a product out on the market is easy and can be done on the side of jobs, partying, traveling, and oh yeah, lots of drinking. You can’t start a business and expect to lift it off the ground if you have a full time job. You learn those things when you get to the “doing it” part… which brings us to the most import point:

4. The difference between IDEA and BUSINESS. One thing is to get idea. Everybody has them. Everybody gets brilliant ideas. However, no one does anything about them. Brainstorming is easy. It’s fun but it also tricks you into thinking that once you make a couple steps, you are close to finishing a 30-mile marathon. Big big difference. Marathon is not something you achieve with 1,2, or 3 tries. You have to run hundreds of times distances much shorter. You have to fail many times before you reach your goal. Only it so happens that sometimes you are in the middle of it and you have  to change direction for something else…

It really is funny. People come, share their ideas and when I tell them why they will not work, they get mad at me. They often call me Mr Critical or say I am pessimist and nothing will work out for me. Its great - I love hearing that. Call me whatever you want but until someone makes even a super small business out of their idea I am always going to be right…

I am one of those people that can starve for a long time if no food that I am in the mood for is around. However, for the last 6 months probably I have been starving for another reason - I am too busy or too tired to get food. The result is that I have long term problems with stomach and need serious treatment. Unfortunately, stomach pains are not the only problems. All kinds of health issues are emerging now (a lot of them probably caused by lack of good nutrition).

So now I am sitting all in pain and worn out, “Health can definitely be a measure of your ambition and obsession!” Yup. I figured that out. But then if you really want to be successful, you have to take care of yourself too, which means that to maintain GOOD health is an even higher level of ambition and dedication. This doesn’t meant you have to get through the ’sick’ phase so you can reach the top. On the contrary - you can easily avoid it, which is why I am writing that post: spend extra energy and money to eat good quality food and to eat it regularly. Believe me it’s worth it in the long term.

Everybody knows that if you really, really want something you will find a way to get it. Sure, I believe you. As a matter of fact, I am experiencing it now: I want my project to be done so I am more concentrated on it, leaving out other time-consuming tasks I don’t need. I feel like a shuttle that is exiting the Earth orbit and loses the burden of the empty tanks because it has one purpose - to get where its supposed to. Over the last 3,4 years I have observed this phenomenon. In the beginning things can take months to change, but as you grow more obsessed with your ambitions, habits can change overnight. I haven’t missed a bedtime in weeks and breakfast, like never before, is now a firm rule. So yes, if you really want something you will find ways to squeeze more time or get more efficient.

But now let me ask something, How exactly do we get into that vortex that pulls us to our dreams and feeds us with energy for more? Why are some people just not interested in doing anything? Why do people just never even start pursuing something they will like? There seems to be a threshold that needs to be crossed, and unless you do it, career can have a totally different shape. I’ve heard in US a lot of preaching on the topic: “You have to study what you enjoy” and just now I see what they mean. I live the true meaning of words because I teach myself what I want and then I apply it to my work. The problem here is that this piece of advice won’t get in your brain unless you have crossed that threshold and have had a taste of your dreamjob that fills you up with desire and ambition to continue.

So lets say Mr X likes architecture. His parents support him in studying what he likes. So Mr X majors in it, and works as an architect for 10 years. But he, just like most people, never really got in the vortex. He sits in an office, drafts buildings, then goes out and finds something he likes doing to make up for the annoying time he had in the office. He is now wondering, “What happened to my passion for architecture, why did it get dulled over time? Maybe I should have become a photographer since I like taking pictures so much these days…” What happened is that there was no force to draw him more into it so that he gets excitement and fun out of it that will empower him to think of forming a company, hire drafters, and take on bigger, more exciting and cool projects.

I crossed that threshold, but I still don’t get how I did it. So what I am looking for is, “How do you find that exact thing you will enjoy, cross the border and get pulled like gravity in it?”

…all I have for now is ‘try it’…

Just yesterday I wrote about what I call “Amusement Park Theory”. Now I want to elaborate on the DOWNS.

Today is one of the big big downs. I am sick, worried, aggravated. I am so snappy that people around me are afraid to talk to me. I have been coding and reading about application design now for 3 straight days straight. I know now about MVC (Model-View-Controller) but I still can’t understand it truly. More specifically, I don’t know how to structure my own application on the MVC framework. I don’t know which functions should belong to View, which to Controller. I have also been looking at custom events, dispatchers, class extends and class implementations. My head is literally AS3 class soup.

Well if it takes time and energy that’s alright. But what worries me is “Can I ever learn that stuff in a decent, acceptable timeframe? What if there are other things that I really don’t have the resources to learn?” I don’t have eternity for this project, I have to move fast. I have been through so many web ideas and I have created none. I really, really want this one to pop-up online. The idea is amazing, its doable, its just awesome. But yet, I am not programming geek - I only got introduced to class-based programming this January. I work hard when I feel like it but I am new to this material. I get all those doubts now, “Maybe I shouldn’t be the one to write the code? Maybe It is more efficient to have it outsourced.”But then this is a whole different story on building up a startup:

- I have to worry about idea being stolen. If person X writes my application, at any point he can pick his shit up and finish off the idea on his own. And if he doesn’t steal it, he can blackmail for % of the company. Yeah, I know, NDA’s but who knows how well they work. Even if he is not interested in stealing and just wants to leave, I am left with his crap that is probably undocumented and has to be basically rewritten. And this can repeat again and again…
- I have to find money to pay this person X. And I can’t just get someone to do the job, it has to be done well. Plus, how do I find a good person? AS3 is new itself. Some people have been doing Flex for 6 months, but Flash is not Flex. Well yeah, I have a list of angel investors that I could approach, but asking for money before you have anything done is never a good strategy. Otherwise I would be wasting the few chances I have. This all doesn’t feel right.

This whole situation sucks big time. If I don’t figure out how to build that soon, this would be another project on the pile of scraps. And my partner this time is not a programming guru like Alek. This time Alek is away, busy with some other projects of his. I pitched my current idea to a more distant/recent friend of mine that got very excited and was eager to do work. I liked him, seemed like an honest guy, and besides sometimes all you need of someone is energy and dedication to figure the problems. But Noah is more of a firm thinker who gets me back to ground when my dreams make me fly. He is double majored in English and Philosophy which quite honestly helps zero at programming stage. I know we’ll have both a lot of work later, but for now I am on my own and this shit is not moving!!!

its 1,29am. Bed time.

Trigger: We had iPods, but we wanted immediate access to any song at any point, we didn’t want to look for downloads, put them on computer and only then transfer to iPod. We wanted a piece that streams music to a cellphone, caching only the recent songs and the most probable to be listened next.

How: Flextronics would build our music phone by our specifications and design, music.net would provide us with huge content of songs for which we would pay per stream, and then we would partner with one of the cell phone carriers to provide the wireless service for a flat fee of $5 or $10.

Mistakes: We wrote too much that in the end no one would want to read, and at the same time did nothing. We also overestimated ourselves and were overly optimistic about “killing the iPod”.

The story: We knew what we wanted, so we set off to make it. As we have studied in Junior Achievement class, every business starts with a well written business plan. Ah, yes, Business Plan! We had just won the national competition for business plan so now we were confident and wanted to create a real business. Oh boy was it writing. We ended up writing a plan close to 50 pages describing everything you could imagine - market, future competition, financial information, technical details… Anything you can possibly brainstorm.

It looked great (to us). As a matter of fact, we were high on our own project. We valued the company to 100million and were planning to quit college. It was all set up, we didn’t need crappy classes anymore, we were rich. But were we far from truth! Long time we kept thinking, rethinking, and tweaking it. Every so often we would decide to send it to an investor and worked for another week of improvements before that. But there was another problem that we didn’t realize at the time: no one that had money to invest had time to read anything more than 2,3 page executive summary. We had close to 50(with financials and other stuff)! It was an endless writing of a story, that would never become true.

We also didn’t really quite get the scale of our venture. There was just no way we could get such big players in our game. We were just two college (freshmen) students that wanted to create something better than iPod. I laugh now at myself and my foolishness.

Also, a major issue was that we ourselves didn’t do anything really. Everybody on the line of ‘killing the iPod’ had a practical purpose- Verizon provides the wireless midium, Flextronics builds the phones, Music.net dumps terabytes of music on our server and what are we doing? We are connecting them. Making phone calls. That mean that even after incredible and impossible amount of work to make this happen, we were easily cutable out of the deal. We didn’t put any real value in providing the service.

One more problem that didn’t really become very clear from that project alone, but you can definitely mark it out: its not always about creating the best and newest. Sometimes the technology is not ready. We wanted to use 3G back in 2005, but there was barely any implementation. We thought of WiMax, which is still not out for consumer products even today! And what’s more subtle: sometimes just the market is not ready. You can introduce a brilliant product, but if its not the right time for the right price, you will lose because people will not be able to understand how good the product is. Its also not about efficiency but about money. Why would Apple provide flat fee for all their music, if they are milking you $.99 per single song! Of course this will be the model until people are ready to stop paying for it.

The Moral:
- Don’t write huge business plans, 2 pages is more than enough for investor. Actually don’t write business plan at all. Thinking is easy but it probably has 2% significance, the rest is DOING IT. Also, things change as you go along, so wasting 2 months of brainstorming, for an idea that will change later is pointless.
- Make sure you pick up a REALISTIC idea. Don’t fly in the sky, because you will fall sooner or later.
- Don’t talk too much before you do anything. People can mock you for a long time how instead of being a millionaire that took over Apple you are still a college student, writing some anthropology homeworks or some crap..

PS. Alek wrote about his KillPod experience on his Bulgarian blog.

[UPDATE]
Here is a link to our bplan…if anyone is interested.
Financials.

This is not really a theory but its an analogy I like to make between the life of an entrepreneur and an amusement park. I will explain it in the framework of my first successfully completed project - the Planner Project.The so called “Planner Project” was simple - I wanted everybody in my high school to have daily planners for homeworks and to-do lists. ACS did not have that, so Svilen and I had to raise a couple thousand dollars, make the design, create the press files, print it and distribute it. Hardest part was raising money. We had to cold call various companies, meet with people, pitch the idea and hope that they will want to pay money to advertise in our planner for high school students.

I don’t know how many days I have spent with Svilen running around the city with my legendary Fiat Panda to random companies to “beg” for money. It was tiring, annoying, sometimes humiliating. We would get “No! Not interested” and it would seem that the world is collapsing. If they didn’t want it, no one would want to advertise with us. No money, no planners, and days and days of work lost. Also, it got pretty tought at some point, because we had decent money from the second national TV and GlaxoSmithKline and couldn’t make it. How do we go back to those big guys, “Sorry we couldn’t do it, we apologize for all the husstle, here is your money back…” But other times a random person would come up and give us a great idea, “Hey your mom told me about the planner, why don’t you check Rossignol, they might want to do it, and you’e kind’a friends with them too” and then we would picture again the project successfully completed.

It was ups and downs. So many and so extreme. But I look back, it was all worth it. It was definitely amazing to complete such a cool project. It was also very rewarding to feel and taste (i have to be honest, you can’t understand what I am talking until you try it) what it is to create your own projects, and nurture them for months until they are done. From total despair to full hope and ecstatic joy in 5 minutes. Some of those moods lasted for days, some for minutes. So if you ever get a chance to do projects on your own - go for it. Don’t get scared, just do it.

Now the theory. So you already see what I wanted to say - life is like an amusement park. Every project is a ride. Crazy big important projects that might bring a lot of rewards are the crazy big scary rides. You go up, you go up big time in the air. Make millions. You go down, you go down big time. Your dreams of millions just shattered. If you are just working for a company for hour by hour, you are probably riding a Marry-Go-Round.

Moral: Choose your rides wisely. If you go big, expect more than just bumper-car experience.