Fund My Startup

“Worrying is destructive. Worrying slows you down. Worrying makes it harder for you to achieve any attainable goals.” -an unnamed fellow entrepreneur

Recently, an enthusiastic entrepreneur approached me at a networking event to mention that’s he’s working on a “tremendous” new start-up.  He was hoping that I might have a few relevant connections to offer.

Awesome.

Excited to hear about his deal, I pushed for the details.   Unfortunately, he informed me that he cannot disclose anything in too much detail because his start-up is still in stealth mode.  In fact, if I really would like to know more, he notified me that he’d be open to grabbing coffee the following week, at which time I could sign a non-disclosure agreement.

I smiled politely, wished him the best of luck, and moved on to a different conversation.

Pulling simply from the nature of our discussion that day, it’s possible I will never know just how tremendous his idea is.  Mr. Stealth Mode’s unwillingness to establish an open dialogue is just one more reason why his idea may never turn into anything of real value.

It seems like nearly every first-time entrepreneur is obsessed with the concept of stealth mode.  This turns out be a stage that most entrepreneurs would rather forget; one defined by too much theory, too much wasted time, and not enough tangible progress.

So, ditch your stealth mode. Here’s why.

Top 5 reasons why stealth mode is worthless:

1. Your initial idea probably sucks.  You’re assuming a lot by believing others will actually steal it. As entrepreneurs we like to think that we can solve almost any problem in the world.  Well, it turns out most others don’t think quite as highly of our brain diarrhea as we do; and that’s for good reason: most ideas suck.  The only way to figure out whether or not an idea has any real merit is to actually start getting feedback from someone besides your mom.
2. You have more problems to worry about than whether or not someone will steal your idea. The chances of failure from something other than a stolen idea are high.  There are countless reasons why you’re going to fail: your timing is going to be off; you’re going to build the wrong product; you’re not going to raise enough capital or generate adequate revenue to keep the lights on; you’re not going to assemble the right core team; you’re going to lose motivation; etc. (see Eric Karjaluoto’s post on “Why your web startup with fail”).
3. You’re going to turn people off and therefore miss out on great networking and investment opportunities. Investors won’t sign NDAs (VC, Brad Feld explains why here).  Most experienced entrepreneurs won’t either. Building a strong network is critical to your success and being in stealth mode only inhibits your ability to build out your network.  Bottom line, don’t give influencers in your market a reason to avoid learning and talking about your startup.
4. You’ll miss out on valuable feedback. Feedback from customers, entrepreneurs, investors, etc. will make your product and company exponentially better.  Similar to point #3, putting up barriers to constructive feedback only worsens your odds of success.
5. You’ll waste valuable resources simply protecting an idea. Time is money.  If you’re worrying about protecting your idea, then you’re not 1oo% focused on actually proving out your idea.  Ideas alone don’t result in liquidity events.  The quicker you validate your concept, the better.

Whoa, we’re actually building value!
When we finally began an open dialogue about efforts, we realized we were forced to focus 100% of our energy on learning, iterating, and building actual value.  At this very point of open communication real progress began occurring.  Notably, others began offering meaningful introductions, customers started telling us what they wanted, and our product began taking meaningful shape.

So if you’re working on a deal in stealth mode, do yourself a favor and purge that toxic philosophy from your vocabulary.

“The most important thing for a young man is to establish credit – a reputation and character.” -John D. Rockefeller

Theoretically, one can logically conclude that being the son of a tech industry veteran provides tremendous networking advantages.  Now living it, I disagree.

For a little background, those close to me know that I have a tremendous amount of respect and admiration for my Dad, Bob Lozano.  It’s not merely because he built and exited a tech venture in the Midwest – which folks on both coasts will argue is virtually impossible – or because he’s founded and persevered through 3 deals.  It’s largely because he ventured out on his own with 8 kids, no money in the bank account, and a fiery determination to simply make it work.  Yes, my Mom is a saint for all she’s put up with .

When I dove headfirst into my first real startup, my network was still budding.  So as expected, many early introductions came through my Dad.  The results were less than stellar.

How bad did these introductions turn out?

Well, fortunately some of these folks are charitable people, but it’s safe to say that my top 5 worst pitches/meetings ever were all in the presence of people that are strongly tied to my Dad.  Some things I noticed:

• I try too hard with these connections.  One of my core strengths is letting my natural passion, confidence, and industry knowledge take the reigns of a conversation.  When I’m trying too hard, all of that is absent.  For you baseball fans, it’s similar to gripping the bat too hard in effort to hit a home run.  Instead of a majestic Albert Pujols style bomb, you end up with a dinky, infield bleeder.
• A large portion of my Dad’s colleagues still remember me as the pimply faced kid running around the office, drinking the company’s Slurpees.  Those impressions stick.
• I receive an extra layer of scrutiny simply to make sure our deal is legit.  This is understandable, because as we know, parents always think their own kids are the best!

What did I learn?

Bluntly speaking, I learned to go out and build my own network.  I learned that if I create my own success, that alone will speak for itself.  The difference became dramatic.  Some now noticeable changes:

• Our deal is primarily judged on the merit of the team, product, & market opportunity.  Not much else matters.
• The connection to my Dad plays a negligible role.  After getting to know me, it’s common that someone connects the dots; however, at this point the blood ties either slightly reinforces a positive opinion or momentarily contradicts a negative one.  Regardless, it’s not a dominating factor either way.

You can still benefit

So for those in the same boat as me, what’s the point of a having a dad who’s built something?  That’s easy, he’ll be your #1 mentor.  The benefits are priceless:

• You’ll receive a realistic, firsthand education of the tech startup scene.  Understanding before you work on your first deal that missed paychecks, 18 hour workdays, and intense emotional roller coasters are just part of the process will keep you sane and keep you going.
• He’ll be brutally honest; providing the type of geniune, unfiltered feedback that a startup needs in order to be successful
• You’ll learn from his unscripted, unedited versions of mistakes and successes; as opposed to pulling lessons from the public, highly edited versions of other entrepreneurs’ wins and losses
• Even though, like you, he just finished his own 18 hour workday and can’t see straight because he’s so tired, you can still convince him to perform an impromptu 1am Starbucks brainstorming session
• You can get bs-free, firsthand insight on those in your industry
• You can intellectually debate the marketplace for hours; and when you’re both pissed off because ‘you’re obviously both right’, you can walk away from the conversation knowing that no bridges were burned in the process

Jason Calacanis, Founder & CEO of Mahalo (also known for Silicon Alley Reporter & Weblogs), wrote a must-read for all tech entrepreneurs entitled, “What to Do if Your Startup Is Failing.”  In it, he proclaims that there are 2 types of entrepreneurs in this world: real ones and the folks who play entrepreneurs for some portion of their lives.

Great read .

“All men dream: but not equally.  Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dream with open eyes, to make it possible.” -Thomas Edward Lawrence

An important question that frequently arises for any product company is, “How long will it take to build?”  Internally you will debate this (our lead developer can insert his silent chuckle here).  Externally you’ll hear it constantly from your customers, partners, investors, family, and really just about everyone you meet.  If you’re honest with yourself, the realistic answer is usually simple: we don’t know, but we’ll estimate anyways.

This rule applies to every build: your alpha, your beta, & every iteration within.  This is the nature of building a new product.

Product timelines are tough to pinpoint because of the large number of unknowns on Day 1. These unknowns result in consistently evolving product requirements.  For example:

1. Innovative systems many times require innovative solutions.  Using new solutions to solve new problems is an experimental process, not an exact science.
2. Your customers may not like exactly what your’re building.  You’ll need to alter your approach to build less of what they don’t like and more of what they do like.
3. Your market itself will likely evolve while you’re developing; sometimes drastically, sometimes slightly.
4. Bugs will take 10 times longer to fix than you anticipate.

….and I could go on and on.

Don’t be discouraged, these obstacles are normal.  What’s now comforting for me is that over time we’ve continually become more accurate with our estimates.  Better accuracy occurs because we’ve become more educated about our customers and their requirements, we begin to more keenly anticipate market moves, our system has taken on a more precise form, and the economic market forces focus, etc.

So as a parting note, here are three lessons I’ve learned to stay sane during the grueling process of building a product from the ground-up:

1. Avoid constant comparison to other teams’ development efforts; especially those within a different market than you. Your product requirements are different.  Your customer needs are different.  Your technology is probably different.  Just because the HotorNot.com guys built their initial technology in a weekend, doesn’t mean that your alpha product will also only take a weekend to build.
2. Perform frequent releases.  Get feedback.  Then build more of what users like and less of what they don’t (mentioned above, but this is an important point to reiterate). This provides your team the opportunity for consistent feedback so that you aren’t just building for the sake of building.  Building for a reason (i.e. real customer requests) is so much more motivating than anything else!
3. If you can still taste the market and you have the talent, then use your team’s vision as motivation to survive the long haul. If your market requires a tough solution then many of your competitors will either lack the skill set to get ‘there’ or will simply become too discouraged at some point and quit.  Keep going.  Persistence mixed with talent, agility, and keen market awareness will result in something special.