Trust me: don’t tell me what you’re doing.

Posted: November 25th, 2012 | Author: | Filed under: Startups | 6 Comments »

There’s a startup in Seattle I’ve been tracking for a while. They’re a part of Techstars (where I serve as a mentor) so that’s not particularly unusual. But I’ve been keeping a particularly close eye because they’re working in a product area that overlaps with my responsibilities at my day job.

Because of the potential competitive conflict, I avoided them throughout the Techstars program.  That wasn’t a big deal – mentors are encouraged to focus on a few companies, so I just picked other ones.  They approached me and I let them know that I didn’t want to know what they were working on until it was public information.

Now, I’m usually on the “don’t sweat confidentiality” bandwagon.  In fact, I’m generally the guy in the front of that bandwagon in the big fuzzy hat with a baton.  But this was a little different.

Instead of explaining it in the third person, let me excerpt the emails.

Their email:

So fun to see you yesterday at Demo Day. I’m probably naive, but I trust you and I trust that there are more than enough consumer pain points to “go around” in the auto space. Accordingly, I’m an open book, I’m happy to talk any time, and I’d love to get together for lunch whenever works for you.   :)

My reply:

Let me be direct: “trust” means that you believe someone.  So believe me when I say that if you give me a good idea, I am obligated by my responsibilities to my employer to make use of it.  In my case, being trustworthy means being completely transparent that I’m running a business that has overlapping opportunities, I have an obligation to run that business in the best way I can, and some aspect of that business may be a zero-sum game with yours.

I still want to help these guys.  Heck, maybe their company can create tons of value and I can buy it someday and give them a great exit.  But right now is not the time for them to be spilling secrets to me.

They’re mostly thinking about this the right way.  Startups rarely get killed by direct competition.  Ideas getting stolen are the exception, rather than the norm.  But when someone not only has means, motive, and opportunity but actually tells you their full intent… then it’s probably time to play it coy.

Look, I’m paranoid about conflicts of interest. Perhaps I’m an unusual case.  But remember: trusting someone isn’t enough.  Even if they are trustworthy, their obligations may not be to you.


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This is why I’m not backing you on Kickstarter

Posted: November 16th, 2012 | Author: | Filed under: Startups | 19 Comments »

I want to buy some clothes.  From From Holden (not a typo).  And I can’t.  Because they’re full of Kickstoppers.

More and more, I’m seeing exciting, fun projects on Kickstarter that make me think they’re being run by the cast of Community.  Clever, well meaning, adorable, and more clueless than a general with a gmail account.

In case you just landed from Planet Preorder, Kickstarter is a site where you can “back” projects and get “rewards” in return.  For most of the civilized world, it’s a way to preorder stuff from teams that haven’t figured out how to make it yet.

I’ve backed a few projects before: Romo the Robot (in front of me), Stack Soap (in my shower), LadyCoders (in progress), DIY Spectroscopy Kit (in the mail), and Pebble (in schedule la-la land).  They’ve turned out with varying degrees of success, and that’s OK – part of Kickstarter is that you’re taking a bet on a team to make something amazing happen.

But more and more I’ve been seeing the same set of mistakes that just leaves me sighing wearily, hitting the back button, instead of kicking start.

Because examples are precious, I’m going to pick on the good folks from From Holden*.  I’m choosing them because a) they’re an egregious example of all three Kickstarter sins, and b) they’ve already raised 6x their target as of this writing, so I’m not going to stifle what appears to be a very well intentioned team that seems to have a great product offering.

Kickstopper 1: Dodging Details

Are these shirts machine washable?

Are the T-shirts cut for your founder? Because my abdomen does not look like his.

“You built a venture backed firm that reached 275 million people monthly” – Who?

I realize that you want to sell a crap-ton of T-shirts.  And I know the answers to these questions may not endear you to everyone.  That’s OK.  As a startup, polarizing decisions are a virtue. If you’re selling dryclean-only T-shirts cut for Arnold Schwarzenegger, own it!  You’ll get fewer returns and your target market will love you to bits.  A dear friend of mine (who may choose to identify himself in the comments?) was effusing, without irony, about how much he loved a pair of jeans that is completely unwashable but, instead, must be frozen and thawed.  If they found buyers, so will you.

But when you don’t address issues like these proactively, when you’re answer to “How do I know it will fit” is “Well if it doesn’t send it back”, it makes me think you’re more concerned with having lots of customers than having happy customers.

Kickstopper 2: Not Totally Thinking This Through

“We’ve had dozens of people ask us – ‘what’s next?’, ‘Do we have any reach goals?’ …. well, we spent all night thinking about it and here is what we came up with.”

Maybe you said this solely for the purposes of dramatic illustration, but let me take you at your word.  It is terrifying to me that you are now accepting real cash money for a product that you conceived of less than 24 hours ago.  I’m not entirely sure what a beanie is (this?) but presumably it hasn’t received the same care and diligence for sourcing, design, and so on as everything else you’re offering.  Or even worse, it has.

Kickstopper 3: Bull****ting About Risk

Quite recently, Kickstarter added a section called “Risks and Challenges”. They did this so you could reassure your customers that you don’t have any risks, and that there are no possible challenges to deliver your product.

Or at least that’s what I surmise from reading your section on risks and challenges.  You spend the whole (short) section talking about how awesome you are, then quite literally say that all you need is fabric.

Pro tip: if I, who know your business as well as I know the feeding habits of the Springbok Antelope, can come up with more risks than you can, you’re not doing it right.

Kick this nonsense to the curb

Come on, Kickstarters.  It’s OK.  We know  you’re excited.  We know you’re new to this.  We want to see you succeed. We don’t expect perfection.

We can forgive a lot, as long as you’re being straight with us.


From Holden has clearly mastered the rare and precious skill of listening to customers.  They’ve overhauled their Kickstarter page, and have gone from being the worst-case example to best-case.  I just backed them, because they’ve demonstrated a lot of planning about how to mitigate risk smartly. Bravo guys.

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Livesheeting Techstars Demo Day

Posted: November 1st, 2012 | Author: | Filed under: Startups | 1 Comment »

Much as I did before, I’m running a live, world-writable spreadsheet of my notes on the pitches from Techstars demo day 2012. Things are just getting started as I write this now and the lineup of companies looks strong. You can follow along in realtime (questions & comments very welcome!) at:

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What you probably don’t know about NDAs

Posted: October 22nd, 2012 | Author: | Filed under: Startups | 10 Comments »

This blog post was originally published in Xconomy, after which I promptly forgot about it and left it to languish in my drafts folder until today.

There is no love like a first time entrepreneur’s love with nondisclosure agreements.  They are a romantic dream: secret pacts bonding two economic entities together as one, if only for the transaction.  Promises of futures together and sweet nothings exchanged.  The Humbled MBA nailed it – newpreneurs love NDAs.

Now let’s talk reality.  First…

NDAs don’t stop leaks.

Theoretically, a nondisclosure agreement commits the signing parties to… well, not disclose stuff.  Practically, it gives you theoretical standing to prevail in a lawsuit where you sue someone for disclosing your secrets.

But that’s a giant stinking load of donkey dung.  It’s almost never going to happen that you actually sue someone for disclosing a secret and prevail.  It’s just too hard, too complicated, and frankly too easy to lie your way out of getting caught.  How are they going to prove they didn’t just think of the idea themselves, or hear it from a different, third party that wasn’t covered by an NDA?  Remember that if you have 99 people sign an NDA and 1 person doesn’t, that person can publish your idea in the Wall Street Journal – and to add insult to injury, when they do, the other NDAs all become invalid since they only apply to confidential information.

NDAs: terrorist threats

So forget winning lawsuits.  What about threatening lawsuits?  Well, you can threaten a lawsuit for any reason, and you can generally file lawsuits for almost any reason.  But having an NDA with someone is a very good way to make that threat more annoying.  You can file a suit that you have no  intention of consummating, and if there’s an NDA in place, they will be forced to take it more seriously – and that’s a pain in the rear.  NDAs are a force multiplier in legal blustering.  If you like legal blustering, get lots of people to sign NDAs.  It’ll make your sound and fury signify a bit more than nothing.

If you’re not the legal threatening type, there’s still some value to an NDA.  They don’t know that you’re not a crazy legal Quixote, so they might think twice before leaking.  Maybe.  But I find deceptive folk make a habit of being deceptive, and honorable folk respect these things with or without paperwork, so I don’t see a terribly great amount of benefit to it.

When NDAs get signed

There’s one and only one reason that NDAs get signed: when one side or both have a great deal of leverage in the negotiation.  You see, whichever side makes a commitment not to disclose is basically opening themselves to NDA terrorism.   Usually NDAs are exchanged before real value trades hands.  Why would someone take on that significant liability for no benefit?  Generally, because the other side has something they want.  Let me give some examples.

Company talking to a potential service provider, contractor, or employee

Someone approaches your startup and wants you to pay them money.  You think you can best evaluate their capabilities by sharing Secret Sauce with them, so ask them to sign an NDA.  They almost certainly will.  That’s because you have the money, and with money comes leverage.

Company talking to an investor

Fundraising time!  You go talk to an investor, and ask them to sign an NDA.  What’s wrong with this picture?

Well, the investor will give you a story about how they hear lots of ideas over and over again, and most ideas aren’t original, so while you might think they misappropriated your great idea they really just came across it separately.  And they might resort to platitudes, saying “VCs don’t do that” (which is true, but not a very good argument).

But the bottom line is that they have the money and you don’t.  You have no leverage to get them to sign.

Of course, there are always exceptions.  If someone of sufficient stature showed up in a VC office and said they had to sign an NDA with a first-born assignment rider in order to look at their pitch deck, they’d be fighting over the pen.  It’s all about the leverage.

Two companies talking

You can guess how this works:

  • Startup signs Microsoft’s NDA
  • Two startups dicker a bit before agreeing on a mutual NDA, or decide to save energy and skip it
  • Microsoft and Intel negotiate a master NDA for nine months, and can’t start any individual project without spending three months building out an addendum to cover the specifics of that project.

It’s all about the leverage.

NDAs: the sign-ee’s view

If someone asks me to sign an NDA, I have to assume they fall in to one of three categories.

1.       They’re a legal terrorist and see great value to getting me to sign it, so they can abuse me later with frivolous lawsuits if they think I leaked something.

2.       They have leverage, and know that they can probably get me to sign it.

3.       They’re inexperienced, and don’t realize that absent 1 or 2, it’s probably not worth asking.

#2 is pretty easy to spot, because I’m asking them for money or we’re negotiating a major business agreement.  If that’s not the case, then I figure I’m dealing with a terrorist or a novice, and either way I’m going to decline and have second thoughts about working with them.

A special note for visitors to Google and RealNetworks’ campuses

Google wants you to sign an NDA before they let you in, but they do have the courtesy to offer a “decline to sign” button.   I always click it and get a funny look from the receptionist, and then nobody else cares.  The line I have prepared (just in case) is: “If we need an NDA to have this conversation, please send it over and I’ll have counsel look at it.”

Real wants you to sign an NDA before they let you pee.  This is not a dramatic hyperbole to emphasize their vigor in pursuing your signature; it’s the literal truth.  Go in to the front desk of their Seattle office and just try to get to the bathroom without signing an NDA.  I pulled it off, but it required three security staff, one of whom had to escort me to the men’s room.   Fortunately for all involved they opted to stay outside.

In summary, then:

1.       If someone is asking you for money, make them sign an NDA.  It will make them slightly more scared of leaking information.

2.       If you are asking someone for money, don’t ask them to sign an NDA.  You will come off looking like an ignoramus or a terrorist.

3.       If you’re doing real business with a company, you will probably sign an NDA.  If one company’s bigger, you’ll use theirs.

Happy non-disclosing!

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Startupville: The hot new social game you play with your future

Posted: September 21st, 2012 | Author: | Filed under: Startups | 4 Comments »

Welcome to StartupVille!

It was a few mint juleps in to the evening when Joe Heitzeberg and I started talking about the common experiences of startuphood.  “I just maxed out one of my credit cards”, Joe told me, consulting his iphone nonchalantly at 1 in the morning.  “I should get a badge for that.”

We both looked at each other, and the idea for StartupVille was born.

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A cap is not a valuation

Posted: September 12th, 2012 | Author: | Filed under: Startups | 14 Comments »

(apologies in advance: the content of this blog post is for startup financing geeks)

I was having drinks with a dozen founders who should know better.

“So YC company valuations are up around $10mm.  And some are $20mm+.”

“What!?” I exclaim.  “That’s crazy!  It’s insanely high.  And, wait… I thought YC was using convertible debt for most of their rounds?”

“Yes, they are.  They’re doing convertible debt with a $10mm-$20mm cap.”

AARGH.  Come on.  This is bananas.

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How to be half as effective

Posted: September 11th, 2012 | Author: | Filed under: Startups | 8 Comments »

When I founded Ontela with my friends Charles and Brian, we were all sick of big companies.  There were a lot of things we wanted to do differently, but one of the big ones was to build a company that wasn’t a faceless bureaucracy.  (Hindsight: good goal)

A company where everyone was impactful.  (Absolutely!)

A company where nobody felt disempowered. (Everyone should be empowered to do their job, for sure!)

A company where everyone was a part of the decision making process.  (Wait… everyone should be a part of every decision making process?)

A company where nobody was left out! (Now something has gone dreadfully awry.)

We made one of the classic startup blunders.  We confused individual empowerment, which we all wanted, with its precise inverse: decision by committee.

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Pyramid Pitching

Posted: September 9th, 2012 | Author: | Filed under: Startups | 9 Comments »

Everyone knows of the mythical elevator pitch. You find yourself in an elevator, rocketing towards the penthouse suite of a downtown office edifice, when you realize that the person standing next to you is a powerful and influential investor. She asks what you do, and you calmly deliver your pitch. Just a sentence or two, properly chosen.  The doors open, the conversation continues, the IPO is near at hand.

I’m here to tell you that the elevator is real. While you may not be trapped in a small ascending room, the potent entrepreneur’s life is full of inflection moments: brief opportunities to shift the destiny of your company. And a proper pitch is essential to take advantage of them. But contrary to what you might have heard, the solution isn’t the 60-second elevator pitch.  In fact, the elevator pitch is only a simple, basic example of a much more powerful tool: the Pyramid Pitch.

The Pyramid Pitch is based off of a simple and fundamental principle: startups are dictated by randomness and chaos.  Sometimes this is obvious, as in the elevator case.  Other times the situation appears controlled, for example when you have 5 minutes allocated to speak at a pitch event.  But minds wander, distractions beckon, bladders fill… if you don’t grab your audience immediately, you may never get them back.

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Tacocopter Basics

Posted: September 1st, 2012 | Author: | Filed under: RC | 17 Comments »

The Tacocopters are coming. Sure, the original pitch was a clever troll aimed at credulous and impatient fast-food junkies. But the numbers don’t lie – a typical taco weighs less than a pound, and aircraft that can autonomously fly a few dozen ounces of payload to your doorstep are already available for around a thousand bucks. Amazon Prime is cool, and I can’t wait for self-driving delivery cars – but there’s a reason they call a beeline a beeline. Flying autonomous deliverybots are coming.  Fast.

Lest you doubt the logistics, the Hong Kong based hobbyshop of wonderment, Hobbyking, recently sponsored a contest called Tacocopter T-shirt design“Beerlift 2012”. While the contestants mostly used water as a standin for the bubbly, the winner, Romanian pilot Muresan Alexandru Camil, lifted over a hundred pounds of liquid – meaning that deliveries of entire beer kegs are not out of the question.  While his massive octocopter looks like quite an endeavor, American David Ditch lifted a respectable 50 lbs with a 2-foot-square quadcopter – enough for quite a few Taco Bell Doritos Locos to your door.  279 of them, if you’re counting.

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Livesheeting YCombinator Demo Day

Posted: August 22nd, 2012 | Author: | Filed under: Uncategorized | 1 Comment »

I was fortunate enough to be invited to check out the 70+ companies of the current YCombinator batch. With that many companies to keep track of, it helps to take notes! I did this in a public Google Docs spreadsheet, and it turned out to be a lot of fun. A few hundred (at least) people joined in, and there were questions and additions from all over (including some of the YC partners and the companies themselves).

If you want to see what YC was like this year, here’s the spreadsheet (still editable, if you have questions or thoughts). Here’s the original spreadsheet of Ycombinator demo day pitches.


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