Making Boston Awesome For Entrepreneurs
Posted on May 4, 2011
Filed Under Entrepreneurship | 8 Comments
A bunch of people sent me this article from The Boston Globe last weekend about what Boston can do to become more “awesome” for entrepreneurs. As an outsider who moved a company here one year ago, people seem to be interested in my perspective, so I thought it was worth a blog post rather than a bunch of emails.
My initial thought on this entire topic is that economies, particular sub-communities within economies, are complex. As with any complex system, the causal explanations and corresponding solutions proposed are usually too simplistic and show a lack of understanding of the value drivers in such systems. Let me give two examples.
First, many people say that startups and entrepreneurs here aren’t as “cool” as they are in the Valley. While that is possible, I think these people are mistaking “startup” and “tech”. Based on my experience, “tech” is what is cool in the Valley, whether it is big or small. Most people in the Valley work for big tech companies, not startups. I think the Boston economy is more diverse, and so what is really a large technical community in the Valley is perceived to be a large startup community instead. That isn’t necessarily true. I don’t know how Boston compares to NYC or the Valley in terms of number of people employed in startups, but I bet the gap is not as big as most people assume.
Second, there is a lot of talk about how VCs here don’t “get it.” They won’t fund consumer stuff and early stage stuff and as a result, those companies move to the Valley or New York. But, first of all, I don’t see that. I will tell you that VERY few people understood Backupify two years ago when we first started, yet my first investor was Dharmesh Shah, who was based in Boston. I have seen Dharmesh and several other Boston angels make some pretty gutsy bets on some crazy consumer ideas and very very early stage stuff. Plus you have Spark Capital, who sort of has a reputation for exactly that - having the balls to go in hard and early on a half baked idea that could be really really big if the market breaks a certain way. And you have Avalon, who invested in Zynga’s Series A at a time when no one thought you could build a business on Facebook.
Lumping all VCs together and branding them as “not getting it” isn’t very useful. In my experience, the views and styles of firms vary quite a bit, both over time and even among partners within firms. I’ve seen a lot of Boston based VCs make some aggressive bets on companies with no revenue but lots of potential.
And let’s not forget that it takes two to tango. Why doesn’t it occur to anyone that Boston has fewer good startup ideas at the moment, and that’s why there aren’t more early stage ideas getting funded? No one is blaming the entrepreneurs here, who surely deserve part of the blame for being uncreative.
Here is what I really think is happening.
1. Boston has no consumer homerun. Boston feels bad for not having a Facebook or Google, but these companies only come along once a decade. I see no reason Boston can’t have the next one.
2. Dumber ideas get funded in the valley. If you want to start a niche Groupon that targets just employees of daily deal sites, maybe you can get a $10M pre for that in the Bay area. Who cares? If someone leaves Boston to go get funded for that, it doesn’t matter. The Valley has more available money to invest, and as a result more overall ideas get funded, good and bad. Boston shouldn’t be envious because some of the dumb ideas that get funded in other places get some temporary press.
3. The tech press doesn’t reflect the truth of the matter. I know they want to do a good job, but I talk to entrepreneurs and VCs on a regular basis, and what I read in the tech press almost never matches what I hear from the people in the midst of it all. The picture painted by tech blogs isn’t accurate, so Boston shouldn’t get hung up on that.
4. It’s a PR problem, not a real problem. Carbonite, CSN, and lots of other interesting Boston companies don’t get nearly the same level of press as they would if they were in the Bay Area.
All that said, some people do leave to go to other places. Why? Maybe the weather. Maybe they were just restless and wanted a change. Maybe they had a dumb idea that could get funded somewhere else. Maybe they had a good idea but the ecosystem in Boston wasn’t right for it. But overall, I don’t see a massive problem.
I spent last night at an event put on by General Catalyst that had 700 entrepreneurs and VCs in attendance. I don’t see Boston going in the wrong direction. I think things seem to be getting better all the time.
But more importantly, the ecosystem required to build startups is complex. The initial matching of teams and ideas and capital is complicated and nuanced, and that is why dozens of matchmaker sites have all failed at trying to make it easier to get startups funded. Improving it requires either a massive juggernaut (HP, Google, etc) that drags everything along with it, or lots of small bottom up tweaks that don’t always show immediate progress. Blaming attitudes and offering simplistic solutions that sound nice but have little substance isn’t going to cut it.
I moved Backupify here last year after evaluating both NYC and Palo Alto. I was long Boston then, and I am long Boston now. We should never think everything is fine, because that leads to complacency, which actually would kill the startup ecosystem. But the sky isn’t falling. Startups take a long time to bear fruit. Be patient. The seeds have been planted, and I think they are being tended well.
Business (and Life) Is Messy
Posted on April 8, 2011
Filed Under Business | 9 Comments
A few years ago, shortly before my grandfather passed away, my grandparents celebrated their 50th wedding anniversary. On a day when family and friends were celebrating this achievement, my grandmother pulled me aside in the middle of it all to tell me something she had to get off her chest. She said that if she could do it all over again she wouldn’t. So much for the admiration of true love. But surely this is an outlier, right?
Fast forward to last summer when a friend of mine told me about the couple who used to live across the street and how she and her husband grew to know the couple over time and admire their marriage. The older couple gave them marriage advice during the many dinners they shared together. Then, as the elderly husband got sick and was on his deathbed, the wife confessed that every day, she hoped he wouldn’t come home from work. She said that she hated him and wished he had died long ago.
Memories of both stories were triggered this week when an interesting message was posted on a usergroup to which I subscribe. The gist of the message was that dropbox sucks and the company is looking for an alternative solution. Apparently, as groups that share a file or folder increase, dropbox’s performance moves in the other direction.
I was surprised to see that message about a company so beloved by the press and supposedly by their users as well.
The lesson here is that things are never really what they seem. The outside view of a company, of a marriage, of someone’s life, are carefully constructed to convey what we want people to think, not what really exists. I don’t think this is necessarily a bad thing, but it can lead to problems at times when you have problems and you think you are the only person or company going through such things.
For example, people rarely volunteer that they have had a miscarriage, but if you ever have one, and discuss it with your friends, you will be surprised at how common they are.
And sometimes the truth is just difficult, or uninteresting, to disseminate. We had a problem at Backupify several weeks ago when, after a massive influx of new users, we had some routine maintenance go awry. We had to keep putting our site in maintenance mode for most of a several day period because of a problem with the Cassandra upgrader (it was an estoeric memory allocation error) and some users freaked out because in maintenance mode they can’t access their archives. All of our user data was fine, most of our users had no problems, and the real details of the technical issues and the users that were affected by them were never really discussed. When I actually offered some journalists the real explanation, their eyes glazed over. It wasn’t an interesting story.
The most interesting thing about moving to Boston and taking VC money is the things I have seen now that I am an insider in this ecosystem. I’ve learned that so much of what you read about who is, or has been, successful, is wrong. There are companies held up as role models that are really a mess if you raise the hood, and companies you have never heard of that are crushing it. There is hype, and there is substance, and the two are rarely in sync.
What is the point of all this? The point is that as an entrepreneur, or startup employee, it is easy to get derailed. We all want someone to look up to. We are quick to idolize. We cherish heroic stories and after the fact narratives that may not be totally true. When things get messy in your own startup, you can think you are the only one. You can think you won’t get through these things. But you aren’t alone. You are normal. Business is messy. Life is messy. Messiness is the normal condition of the world. Embrace it, and you are more likely to get through it successfully.
Investors Don’t Care About The Quality of Your Product
Posted on February 2, 2011
Filed Under Entrepreneurship | 1 Comment
The single most common mistake that I see entrepreneurs make is waiting on their product to improve. On a regular basis I have conversations with startups who aren’t promoting their product or aren’t talking to investors because they want to wait until they release some new functionality, and THEN they will go after the market and the investment.
The problem is, there is always a temptation to push that stuff off one more release cycle. And it is almost always the wrong decision. Investors in particular, care about traction, not product. Most of them seem to believe that if you can get market traction, you can always hire more or better engineers and get your problems fixed. The hard thing to do is get that market traction in the first place.
Here are just a couple of random thoughts and things I’ve learned about this at Backupify.
1. You will never be satisfied. At Backupify, we have released some features (like one click google apps restore) that people consider pretty damn awesome. It doesn’t matter. As a founder, I always feel like the product sucks no matter how much it improves. You will feel that way too. So don’t wait until it is “better.” It will never be good enough in your mind.
2. It’s ok to have unhappy users. In the early days, Dharmesh used to tell me that people will sign up, hate the product, and leave… that I should expect it, I should not get upset about it, but that I should use those data points to continually improve the product. We all know the release early release often mantra, but it is hard to do in practice because we want to wait until it is perfect so people don’t say negative things about our products. Negative things are ok.
3. The world is a big place. Just because some people bad mouth you on twitter because they don’t like your product doesn’t mean you will never sell anything again. The world is a big place, and despite our belief that negativity spreads like wildfire through social networks, my experience is just the opposite. Bad press will encourage some people to still check you out. Plus, the world is a big place. Everyone hasn’t heard of you, no matter how long you’ve been around. New customers don’t care about how your product was, they care about how it is. So having a few negative comments from a year ago is no big deal.
4. Backupify got money for a partially working product. When we raised our seed round, Chris Sacca actually sent me an email saying he signed up and our Gmail backup wasn’t working. I told him I knew it was broken, and we were trying to get it fixed. He still became an investor.
5. You will always fight this battle. Most product/engineering people who work for startups want to be the next Apple or Dropbox, and build an elegant product that everyone talks about. You will constantly have to push for speed over perfection. Do exactly that.
6. Perfect products are a better strategy for mature markets, not startups (unless you are a startup in a mature market). You know why Microsoft kicked Apple’s ass for the first 25 years they were both around? Because Microsoft’s strategy was to get something out the door and dominate the market. Apple’s strategy, by contrast, was to wait until the product was perfect. In new and rapidly growing markets, Microsoft won. It wasn’t until the PC market matured that people started choosing Apple. Apple was late to the mp3 player market and late to the phone market. Understand which type of ecosystem you are in so you can choose the right strategy.
7. Dropbox’s success wasn’t because of their kick ass product. I know that is heresy to say on the web these days, but I’ve used a bunch of sync tools, many just as good as Dropbox. Their innovation was actually their dual sided incentive invites. People believe they raised money and grew so fast because they had such an elegant product and everyone talked about it. That did help, but their real genius was around marketing, not product.
So push your stuff out the door. Talk to investors early. Do anything and everything to get traction. A high quality product is not a business by itself.
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