Saturday, October 20, 2012

How To Choose Your Startup Idea

- Greg McAdoo

Editor’s note: This is a guest post by Greg McAdoo, Airbnb board member, partner at Sequoia Capital, and Sequoia’s lead on their partnership with Y Combinator. Sequoia is an investor in Airbnb, Cue, Dropbox, Stripe, Weebly and Y Combinator and was an early backer of PayPal.

Tomorrow hundreds will meet up for Startup School, YC’s annual event for gutsy hackers thinking about founding a company. It’s one of my favorite events, and this year’s attendees will get to hear from everyone from Mark Zuckerberg to Stripe’s Patrick Collison to Weebly’s David Rusenko. It’s oversubscribed again, so here are some thoughts on how to choose an idea for your startup for those who can’t make it.
Investors always tell you to pursue big ideas, find your passion and iterate rapidly.That’s valuable advice, but there are some other important considerations that you don’t hear very often: tackle a small market, look for bizarre behavior, don’t make waves, and be unwilling to do anything else. Paul Graham also has some helpful suggestions here and here.

1. Tackle a small market. Most people tell you to address a large market. But what you really want is a small market today that will be big tomorrow. If it’s too big now the incumbents will come in too early and crush you; if it’s too small tomorrow then you’ll never build anything of enduring value. So go for a small market today where something is changing to make it a big market tomorrow. Like GitHub, which is serving the software development market, but is well positioned to expand into other large markets like developer recruiting, PaaS, analytics, content management and more. Make sure you’re very clear in your own mind what the change is — it’s the only thing that keeps you warm at night when things look grim.

2. Look for bizarre behavior. You’ll know it’s the right problem because others are desperately trying to solve it. If there’s acute pain, people will be hacking shortcuts and cobbling together workarounds. Long before your wonderful solution there will be 10-20 imperfect ones. That’s a strong signal.
Another one is strange behavior. Drew Houston asked why people were always emailing large files to themselves. Patrick Collison asked why accepting a credit card on the web was so hard. Daniel Gross asked why he had to check six different apps to find out what his day looked like. For similar reasons, beware of an issue that no one’s tackling — superficially it may sound like an opportunity but it’s more likely a dead end. Also, don’t just create businesses to serve yourself: many students think starting something that caters to students is a great idea. Sometimes it is, often it’s not.

3. Don’t make waves. Whether it was the major transition from terminals to PC that fueled the likes of Dell and Microsoft, the massive adoption of the Internet that drove Cisco’s rise, or more recently the structural shift towards collaborative consumption that is propelling Airbnb, the disruptive companies didn’t create the waves they rode. Like surfers who aspire to greatness, the founders sought out their wave, often seeing it much sooner than almost anyone else.
They had the foresight to see the future first, the insight to build the right kind of surfboard, the courage to paddle very far out into the ocean amongst the sharks (and naysayers) long before the wave hit, and ultimately the steely determination to ride atop the wave, even as it rose to scary heights, and broke in ways they couldn’t foresee.

4. Be unwilling to do anything else. If you’d have thought joining PayPal as employee #9 was attractive — and it was very attractive — you were not ready at the time. The great founders won’t do anything else. They’re willing to strain their most important relationships, work around the clock, and take risks that to others seem insane. They’re maniacally driven and have selective blindness. If they understood all the risks most of them wouldn’t move forward.
I’ll never forget the advice I received when I was thinking about targeting the DSL business in 1997 at SourceComm. An important early advisor, Jim Gallagher, told me great founders are dumb enough not to understand the risks and smart enough to overcome them once they see them.
Just because you’re not ready now doesn’t mean you won’t be.
Just look at how many people emerged from PayPal and went on to found remarkable companies: SteveChen, Chad Hurley and Jawed Karim (YouTube), Nathan Gettings (Palantir), Reid Hoffman (LinkedIn), David Sacks (Yammer), and Jeremy Stoppelman and Russ Simmons (Yelp). In the world of start-ups where impatience is often rewarded, there are times when patience may make you a better founder.

Sunday, April 1, 2012

Set-up for a Film School Student

Mon May 22, 2006 6:36PM EDT - Article in Yahoo

In this episode we help a struggling student get the gear she needs to take on film school.          

Oluwaseun (Seun for short- rhymes with own) lives in Brooklyn with her mom and sister. She's a student at Hunter College and desperately wants to be the next Sofia Coppola or Quentin Tarantino. But for a student on a budget, buying your own gear is next to impossible. And accessing the school's shared cameras, editing equipment, and online film resources is tough.

Who wouldn't want to help a starving student? Seun is a great candidate for a Hook Me Up, so I dispatch Jon Chase to help take her video aspirations to a high tech level.        

The Expert Jon is a technology journalist, gadget reviewer, and tech support for his entire family. Most importantly, he's a big fan of all the new technology that's available for video enthusiasts.         

The Budget This sector of the consumer market has changed radically in the last ten years. High quality video cameras and editing equipment used to cost thousands of dollars. But our goal is to get Seun shooting and cutting video for less than $5000.                                                     

The Problem Seun needs a camera and a computer to get her Hollywood dreams started. On a budget of $5000, we will have to make some sacrifices. The Goal: new computer, camera, and video accessories for under $5K.                                                                         

The Camera For semi-serious video (anything more than the family videos), Seun should have either a 3 CCD camera or an HD camera using a CMOS chip. CMOS chips and CCD sensors are the components in the camera that capture images and transform them into digital data. Traditionally CCD sensors have been higher quality than the less expensive CMOS chips, but the introduction of High Definition CMOS processing is starting to change that perception.     

Sony HDR-HC3 Jon decides to outfit Seun with a Sony High Def camcorder, the HDR-HC3 model. Its suggested price is $1599, but we got it for $1152. The upside on this camera is that it can record high definition video: creating crisp images and bright colors for display on a high definition TV. It can also record in the letterbox format, 16:9.                                                  

Aspect Ratio Most camcorders record standard analog images in the traditional 4:3 aspect ratio. Aspect ratio refers to the shape of the picture. 4:3 is mostly square; the shape of a traditional TV set. But some cameras are able to record in 16:9, the aspect ratio of movies, otherwise known as ‘letterbox' or ‘cinema display.' The Sony HDR-HC3 can do both.                       

Video output The HDR-HC3 is a very versatile camera: especially when it comes to the way you output your video. It has all the necessary video outputs: firewire (for transferring video to your computer) component video (for watching high definition video on an HDTV), and composite video out (for watching video on a standard definition analog TV).                             

Tape/data format There are multiple media formats you can record onto these days: Mini-DV, Hi-8, DVD-RAM, DVD-R, Micro-MV, Compact Flash, Smart Media....

For some people this is the hardest decision to make: what media should my camera use?         

Here is what Jon decided to do for Seun: most videographers in the TV industry use Beta- this is a high-end, broadcast-quality video format that no struggling student could afford. After Beta, the most popular recording format in the industry is Mini-DV. It records onto small tapes that are easy to carry and store, it records a clear picture- 500 lines of vertical resolution, and tapes store an average of 60 to 90 minutes of video. The HDR-HC3 records onto Mini-DV.

NEXT: The Computer In my next post I evaluate the computer Jon got for Seun and tell you the one thing he didn't get that's a must for all videographers.

6 steps to being your own boss

6 steps to being your own boss

Young entrepreneurs have to work hard to overcome inexperience and gain credibility. These tips increase your odds of success when starting out and starting up.
By Kiplinger's Personal Finance Magazine

Got that entrepreneurial spirit? You aren't alone. In fact, two out of three teen-agers who completed last year's Junior Achievement "Interprise" Poll on Teens and Entrepreneurship said they hope to start their own business one day. But it takes more than a good idea and a desire to be your own boss to launch a successful venture.
Just ask Max Durovic. At 18, he increased his odds of making it with formal and thorough business planning. By taking the right steps, he built a booming business before he even graduated from college.
While a sophomore at Georgetown University, Durovic founded the inventive street-advertising company Aarrow Advertising. He began hiring 14- to 24-year-old students to carry sandwich-board sign ads for nearby retail chains and to perform trademarked tricks, spinning and tossing the signs to attract attention. The sign spinners received hourly pay with a 10-cent increase for mastering each new trick. Durovic turned the idea into a booming livelihood by crafting a complementary team with an expert mentor, meticulously writing a business plan to focus his vision, following the financial feedback and continuing to plan. Now at age 22, he leads 200 employees in five cities and has revenues that have grown at an average rate of 10% per month.
Early on, Durovic faced one of the biggest challenges of enterprising young adults: the credibility gap. Most entrepreneurs endure long hours, challenging management decisions and months without income, but young entrepreneurs may face larger hurdles. With minimal work experience, limited financial resources, fledgling credit histories and no startup experience, they often have difficulty convincing people to take their business ideas seriously. Startups are already risky -- inexperience adds more risk. In fact, one in three new businesses fails by their second year.
How can you minimize your risks? Use our checklist to get ready. We'll help you carefully weigh whether to trade valuable years of traditional work experience for your new business dream -- and then how to pull it off when you're ready.

Get some experience

If you've never clocked a day of work in your life, you might consider taking a job before striking out on your own -- even if the thought of doing time in a cubicle makes you shudder. Work experience in the field you want to break into may be the most productive use of your energy. Think of it as a paid research position. In a couple of years, you can give your business a go. By then, you'll have learned the ins and outs of the real world and reduced the risk of total inexperience.
"Financial literacy is the language of owning a business," says Irwin Rudick, the vice president of the San Diego chapter of SCORE, a nonprofit firm that gives advice and training to small business owners. So, if you're still in school, take classes in business, management or entrepreneurship. If you've already graduated, sign up for night classes. Durovic, an international business and marketing major, says that his formal business education has been integral to his success. "Nothing brings the classes to life like running your own business," he says.

Build a winning team

Bring on people who complement your skills and fill in the gaps. Mary Beth Metrey, a 24-year-old Spanish literature master's student at Georgetown University, had always dreamed of opening a boutique, but her short stint in retail didn't provide all of the details of running a shop. But Heather White, her hometown friend from Wyckoff, N.J., had studied fashion design and merchandizing. Naturally, Metrey asked White to be her business partner when she opened her charming new shop, Valise, in Georgetown this spring.

Fight inexperience with advice

Universities and alumni networks are great sources for mentors. Durovic found business plan help in a Georgetown entrepreneurship class, and he continues to consult with his former professor on business decisions. Ryan Comfort, a 22-year-old grad of the University of Pennsylvania's Wharton School and founder of the online art sales business also found cost-cutting connections through his school's alumni network.
The Internet is another great place to get free advice. SCORE, for example, boasts a mentor network of more than 10,000 mostly retired entrepreneurs nationwide. You can search by related background and meet the mentor locally or by email. You can also get feedback online from 12,000 peer entrepreneurs at
And seek out local organizations. This spring, New Yorker Leah Alani, 27, founded, an online boutique for stationery and gifts for special events. She gained the confidence and the practical skills to accelerate the startup date after taking a four-week class with Ladies Who Launch, which has local chapters in metropolitan areas.

Write a bulletproof business plan

One of the biggest mistakes a young entrepreneur can make is simply failing to write a business plan. There is no other single process that can be more useful in beginning business problem-solving than addressing the risks and thoughtfully forecasting by writing the plan. Don't fall into the excuse that you have the business plan in your head. "That's a fantasy," says SCORE's Rudick. "It only becomes a reality when you put it into writing because when it's in your head, no one else can see it."
Not only is it a good planning tool, but a solid business plan is also your key to raising capital -- the money you need to get your show on the road. Although you may not have had time to build a long credit history to show that you are financially responsible, you can demonstrate your penchant for using sound judgment by crafting a document that sells your business and lures financers on board. It's your greatest opportunity to fill the credibility gap.
A business plan will showcase your product or service, how you plan to make a profit and the exceptional team who can bring the business to success. It should include market data and tests to show the service or product will sell, the essential skills that will drive profits, estimates for startup costs, projections for sales and profits, a break-even analysis and long-term goals for the company.
If, while writing the business plan, you decide from your research that the business isn't as sensible or profitable as you originally thought, the plan has served its purpose. Rather than cost you money and effort, you've spared yourself any loss. Once you've crafted a plan that satisfies you, show it to your mentor or entrepreneur friends and ask for their input on how to improve it.
Find inspiration from sample plans at But be sure your plan shows your original thinking for the unique situation so that readers can see how the team problem-solves and relates to the business, says Stever Robbins, business consultant and startup veteran of nine companies.
The top-rated Business Plan Pro 2006 ($100 and up) from Palo Alto Software will walk you through the entire planning process. It includes cash-flow projections and a useful tool to help you understand when you'll break even. With the $200 Premier edition, you can collaborate with other teammates and split up specific parts of the plan to streamline the process. Best of all, it includes freebies like a company logo crafter and a guide to small business law.

Raise money

Your business plan should overestimate how much money you will need from the beginning because it's easier to raise money before the launch than it is after you've failed to meet projections. To minimize risk, limit the amount of personal money that you put into the business, says H. Irving Grousbeck, co-director of the Center for Entrepreneurial Studies at Stanford Business School. Also, you'll be tempted to use credit cards, but credit-card debt is the most expensive debt you can have. Try to steer clear.
Clutching a business plan that sells, go first to a bank to request a loan. "Banks are conservative, and they're still in business," says Robbins. If you have a FICO credit score of 680 or more and you're seeking a loan for less than $50,000, you'll likely be granted the loan, says SCORE's Rudick. Even if the banker can't offer you a loan, ask for his or her advice about how to improve the plan so you can try again.
If your credit history is too short, friends and family may be your best shot. But tread carefully: Set the loan up like a formal business transaction that explicitly states when it will be repaid. A smart way to manage a loan between family or friends is with a professionally-administered loan from CircleLending. The company will send statements and track payments -- and provide healthy distance.

Follow the money

Count on a cash cushion to live on for at least the first six months because you likely won't have an income. Conserve your money before you start. (See Build Your Financial Foundation to learn more about how to build your stash -- and where to keep it.) Once the business launches, regularly compare your actual income and expenses to your original forecasts to take the pulse of your company. Intuit's QuickBooks software ($200 and up for Pro and more advanced versions) features many bookkeeping tools and services such as expense tracking, check printing and payroll managing. Another plus is that you can export your information to Business Plan Pro to simplify your comparisons.
And stay focused on your financial goals. One of the biggest causes of failure is diffusion of focus, Grousbeck says. The first year you should have two overarching goals: meeting or exceeding your projections and treating your customers right.
By Elizabeth Kountze