austinpreneur

Bootstrappers will shine in the startup depression

Some really smart people have commented publicly about the US and global economic crisis at hand and what that means for startups. Jason Calacanis was one of the first, followed by Fred Wilson and Ron Conway (my good friend Ian Clarke has jokingly referred to me as the Ron Conway of Austin because I'm an early stage investor in so many different Austin companies). As I've been fundraising for OtherInbox, I've talked with many other entrepreneurs, advisors and investors and wanted to share a summary of what i've been hearing and how its affecting my direction at OtherInbox. Each comes at it from slightly different perspectives.

Jason, an entrepreneur, takes a very introspective view of how he wants to respond to adversity and who he wants to be as a person. He says the three main causes of startup failure are poor execution, a poor idea or external factors (in this case the market) and advises startups to focus on execution and make the most of the down time by being lean and acquiring good talent.

Fred Wilson, a venture capitalist, explains the view of a well-funded company with cash reserves of its own and experienced investors with deep pockets to draw on in tight times. He points out that companies who are not profitable or growing could have trouble, but that companies that are doing well shouldn't have trouble because VC's have deep pockets and will invest more capital to help weather the storm.

Ron Conway, a prolific angel investor, looked from the perspective of entrepreneurs about to take the plunge and raise angel money. He cautioned them not to quit their day jobs until they have secured funding for at least one full year of operating capital.

Ajay Agarwall, a venture capitalist from Bain Capital Ventures and friend from when we both worked at Trilogy software, pointed out that the typical Series A investment takes 7 years to mature and that 7 years from now is probably the right timeframe for the economy to recovered and growing. Consequently, he thinks that the next year will be a great time for smart venture capitalists to make early stage investments. He cautioned that later stage companies that are not profitable and have a shorter time horizon are going to have a tougher time raising capital over the next few years.

My first company, SKYLIST, saw incredible growth during the last recession. I started it in 1996, but we really started to boom in 2000 as the dotcom bubble deflated. True, it was the first time when I was focused on it full time, and not going to college or working at Trilogy. But I think the reason for the growth was that we were riding the rising tide of online marketing and email marketing in particular.

Even though the overall economy was down, some forms of online marketing grew. Marketing budgets were scrutinized and cut. Broadband Internet became pervasive and online marketing boomed because the audience was finally there and it was more measurable than traditional advertising. Budgets shifted from offline to online. Even though the total budgets were shrinking, the total amounts allocated to online were growing.

One way to be successful in a down market is to find these niches that may be growing as a result of shifting budgets and priorities. With currency, when the value of the dollar goes down, the value of gold goes up. Where is the gold in the market now? What opportunities have been created as a result of the credit crunch?

As I've been fundraising for OtherInbox, the current market conditions have certainly affected my goals and risk profile. I'm inclined to raise more a little more money and make sure that I give myself a longer runway. I'm searching for ways to generate revenue sooner than originally planned to cut my burn rate.

This is where bootstrapping will shine. All things considered, I'm kind of wishing I was bootstrapping a startup right now and am looking for every way to make OtherInbox more like a bootstrapped company. Bootstrapped companies are lean and efficient. Bootstrapped companies delay every cost as long as possible. Bootstrapped companies are resourceful. But most importantly, bootstrapped companies are forced to focus on the Right Thing at the Right Time because there is no alternative.

Necessity is the mother of Invention (and winning Chinese battles)

I'm reading Predictably Irrational, by Dan Ariely, and came across a story that reminded me of bootstrapping a company.

In 210 BC, a Chinese commander named Xiang Yu led his troops across the Yangtze River to attack the army of the Qin (Ch'in) dynasty. Pausing on the banks of the river for the night, his troops awakened in the morning to find, to their horror, that their ships were burning. They hurried to their feet to fight off the attackers, but soon discovered that it was Xiang Yu himself who had set their ships on fire, and that he had also ordered all the cooking pots crushed.

With their ships gone, the soldiers had no route of retreat. Winning was the only option. And win they did. 9 battles in a row before defeating the Qin forces.

This is similar to when a bootstrapper enters the Valley of Death and commits to their venture, but before they are making money and cash flow positive. They are forced to figure out how to make it work with what they've got. The timeline is not completely in their control.

We're always tempted to leave ourselves an escape route or path of retreat. And usually that's a good idea. But sometimes there aren't enough resources to mount the attack and cover the retreat. In order to be successful sometimes you have to commit the resources to what you believe in because the retreat option isn't acceptable. Sometimes once you head down a path there is just no turning back, so you might as well commit all of your resources to getting to the end.

When I was CEO of SKYLIST, this happened twice. We were growing and needed to shift focus based on customer demand and a rapidly changing market. Both of those times it was focused on eliminating unprofitable customers and focusing sales on specific types of opportunities. Each resulted in a temporary drop in revenue but strengthened the long term sustainability and profitability of the company.

When Datran Media bought SKYLIST, we went through the same exercise again. Each time the SKYLIST business came out stronger than before and had replaced the revenue with better customers within a year.

Each time it was the right thing to do and left us stronger than before, but each time we went into it kicking and screaming. Change is hard. When something works, we often get the urge to just do that over and over - well past the point where it stops working. It felt bad to move away from lines of business we had traditionally dominated.

But it was turning point for the company. Had we not burned the ships behind us, I'm not sure we would have survived and succeeded.

Citibank loves me, Southwest Vision does too

Some companies just make you feel loved and appreciated. They are getting harder and harder to find but they do still exist. I hope I can make OtherInbox a company makes its customers feel loved!

There is this local eyeglasses store called Southwest Vision on Bee Cave Road in Austin that has impressed me more than once with their customer service and commitment to standing behind their product. First off, everyone that works there is as nice as can be. But they also take care of their customers. I had a scratch on a lens and brought it to them the day after my warranty had expired and they replaced it anyway. Months later I somehow warped one of my lenses and it was popping out and they replaced it for free well after the warranty had expired.

Citibank also came through for me recently. My first credit card was set up in 1994 with Citibank and the account is still active. Back then they were putting your photo on your credit card and every year or two the send me a new card with the same photo from when I was 16 years old. As long as they keep doing that, there is no chance that I'm getting rid of this credit card! I haven't been using it much at all and a few months ago stopped charging to it entirely. But I didn't realize that my dry cleaner had that card and was charging to it every month. A few months later, I had $160 in charges and $130 in late fees! I called Citibank and explained what happened - they transferred me to a manager who promptly waived not only the late fees but also all of the finance charges! They definitely made me feel like a valued customer and specifically told me how they appreciated that I had been a customer for more than 10 years.

And they say all corporations are evil!

I need an iPhone application that times how much I use each other app

A recent New York Times article about a dispute over whether checking your email on a blackberry should be counted towards overtime pay made me think about the benefits of tracking usage of specific apps on your iPhone or Blackberry.

I wish it would send me a daily or weekly email report showing how much time I spent talking on the phone, checking my email, text messaging and browsing the mobile web. For simplicity it could just break it down by application. Ideally I could drill down on a particular day and see my usage pattern of certain applications over the day. Or maybe it would just give me an iCal feed I could subscribe to that showed my activity.

If they went the iCal feed route, you could then pipe that into your contact management software to log phone calls and text messaging or into your time tracking software for logging hours spent doing email at the pool.

Why stand when you can walk?

I've been working at a standing desk for close to 10 years. When I talk on the phone I'm constantly pacing. At my house I end up walking in circles around the island in my kitchen. At work, I stand on a balance board to keep my body occupied. In a strange way, it seems to help me focus.

I've thought about trying to turn a treadmill or exercise bike into a workstation but never got the energy to make it happen. After seeing this treadmill desk, I may have to finally give it a try!

Hat tip: Mike Subelsky

Don't touch my iced tea!

I know they are trying to provide good customer service, but I really wish that waiters would stop refilling my iced tea when its half full.

Normally, I put a single sugar into my iced tea. But then I drink some and the waiter comes along to refill it and suddenly its not sweet enough. So now I need to put in more sugar, but not a whole packet because that would be too sweet and so now I'm trying to pour out only half the sugar pack and I end up leaving a half-empty sugar pack on the table which spills on the table and ends up on my pants.

I wish they would wait until my drink was almost empty before refilling it!

Thank you for an amazing evening

Thank you to all the friends and family who turned out for the party! It was an evening that I won't ever forget - everything I had hoped for and more. I can't imagine anything that could compare to being surrounded by so many people I love.

Thank you to Sarah and Cindy at Red Velvet Events, Toddy B, the Southern Sirens, the Grove, and the Four Seasons!

And of course thank you to my beautiful bride for making it all happen!

Will the real "Joshua Baer" please stand up?

For all of my childhood, I was the only Joshua Baer.

Sometime in high school, my cousin sent me a picture of the sign in front of Joshua Baer & Co, an art dealer in Santa Fe, New Mexico. And I realized that I was not the only Joshua Baer in the world. My innocence was shattered.

10 years later I set up a Google alert for "Joshua Baer". Except for the occasional message about the art dealer, I only received alerts about myself.

Then last year I joined Facebook and was surprised to see 26 other Joshua Baers! From their pictures and school info, they all seem to be much younger than me - most graduated after 2000. LinkedIn shows 5 other Joshua Baers. I can't figure out how to find Joshua Baers on MySpace.

Are my Google alerts doomed to be polluted with news about other Joshua Baers?

I have joshuabaer.com and joshbaer.com and @baer.name. I have joshuabaer on twitter and on MySpace and on Linkedin. But how long can I keep it up?

Will the real "Joshua Baer" please stand up?

Total Leadership

Last night I had the pleasure of meeting Stewart Friedman, professor at Wharton and author of the new book Total Leadership. Much thanks to Brett Hurt for introducing me!

Stew has an interesting perspective on how to maximize your success and happiness by integrating work, community, family and self in a holistic way. He provides specific exercises to help you discover what works best for you and to empower your employees to do the same. After a few hours with Stew, I'm re-evaluating some of my choices and priorities. I'm looking forward to reading the book!

Tonight he'll be speaking at a Leadership Austin and Bootstrap Austin event hosted by BazaarVoice and I highly encourage you to attend if you can make time!

Elvis has left the building

Friday was Joleen Sanborn's last day at work at Datran Media. Joleen started out as the office manager at SKYLIST in 2001 and then became my executive assistant. After more than 7 years putting up with me, she decided to move on to something new. I wish her the best in her new endeavors!

In typical SKYLIST style, we called in the King to help send Joleen off on a good note!

Only drink half that Coke

For a few years now, I've been buying the mini-cokes (8 oz cans) instead of the regular sized ones. They cost about the same, but I realized that I'm just as satisfied after drinking a 8 oz can as drinking a 12 oz can - with 2/3 the caffeine and 2/3 the calories. Sometimes a full 12 oz can can be too much acid for my stomach and give me heartburn, which one more reason for the smaller cans.

Here's another reason from Wired magazine. Apparently they way caffeine works with your brain, smaller doses are better than big ones.

Go rent this movie - Maxxed Out

Please go rent this movie. It really entertaining. And it shows why credit cards are such a bad idea.

http://www.maxedoutmovie.com/clips/trailer.html