This interview with @naval from AngelList is outstanding. An amazing view into the world of angel investing.

The Foundations Of A Startup Community

This post originally appeared as a guest post on TechCrunch.

For the past few months, my wife and I have been traveling and meeting startups around the world. We’ve met entrepreneurs in Tokyo, Thailand, India, Israel, and Istanbul. In the next week we’ll be meeting with a community leader in South Africa. It’s been fascinating.

In addition to meeting with the teams, we have been leading Q&A sessions with larger groups. The discussion always includes the group asking “how do we make our startup community as strong as Silicon Valley?”

It’s an important question, as a lot of the startups’ success in Silicon Valley can be attributed to the strong community. However, that community has been growing and maturing for over 40 years. So when people ask about how to replicate it, I try to direct the conversation back to the foundation of the community.

These are the elements I think are important to seed a startup community:

Support

There are a lot of places where starting a company isn’t seen as an exciting and inspiring pursuit. In fact, in places like Japan, we learned that becoming an entrepreneur is seen as an unwise and ill-informed decision. This kind of environment makes launching a startup, which is already an incredibly difficult task, near impossible. The founders needs to find a way to feel supported. If they don’t feel support, they won’t make it through endless 18 hour days. In places where support isn’t the norm, founders need to find ways to support each other until the rest of the community comes around.

Collaboration

One of the best things about having co-founders is it gives an entrepreneur other people to bounce ideas off of and work through problems with. But in good startup communities, this kind of collaboration isn’t limited to internal conversations. Founders of different companies should constantly get together to share their experiences and help each other. Especially in newer entrepreneurial communities, it’s incredibly important to pool knowledge, instead of everyone figuring out everything on their own. This can happen in any form, whether it’s late night hack sessions or weekly breakfasts. Figure out what works for your community and then get together and talk.

Transparency

When collaborating, transparency is a must. In many places, people are afraid to talk freely about their ideas, figuring that someone might steal what they’re working on. In more mature startup environments, we’ve learned that this shouldn’t be a concern. The risk of someone stealing your idea (which I’ve never seen happen) is almost always offset by the huge amount of value you get from sharing what you’re working on and asking for feedback. So when you get together to talk, really talk.

Embrace Failure

It’s human nature to talk about your successes and hide your failures. After all, why tell people what you’re not good at? Why admit you didn’t do something well? In startup communities, it’s one of the most valuable things you can do. Most entrepreneurs (and people in general) will tell you they’ve learned more from their failures than their successes. By keeping these failures to yourself, no one else can learn from them. In startups, people don’t see failure as a reflection of your talent, they see it as an opportunity to learn and improve. Most startups fail. So if you’re going to get into startups, embrace failure, and learn from it. Then share what you learned.

Form Startup Hubs

Getting a group of entrepreneurs talking is a great step, but finding some common places to do that makes it a lot more powerful. This be a permanent location (co-working space, incubators, technology organizations, cafes) or a scheduled event (meetups, happy hours), but it’s important to establish places where entrepreneurs can co-exist. There are probably a lot more entrepreneurs around you than you think, and getting everyone together is one way to understand the size of your community. This is one of the reasons that Startup Weekend is such a powerful organization. It brings the community together.

Invite Outsiders In

People from more established entrepreneurial cities love helping smaller communities grow. Use this to your advantage. Invite people who have been successful in established hubs to come speak at a local conference, come speak at the local hub, or just come and meet teams when they’re in town. Pay attention to people’s travel schedules (which people always post to Twitter) and if they’re in your area, invite them. Entrepreneurs love sharing knowledge with someone else, and it’s rewarding to do this with a new community. Dave McClure has formed a whole organization around this concept withGeeks On A Plane, which takes entrepreneurs to all corners of the world to teach and learn from the local startup community. Jeff Slobotski has done it for years with the enormously successful Big Omaha conference.

Send Insiders Out

You community can’t expect everyone to come to you or to figure it all out on its own. It’s important to see how people are doing it elsewhere, and there’s no better way to do that than to get knee deep in it. I don’t think I’ve ever spoken with an entrepreneur who took a trip to the bay area who left without learning something new or meeting at least one valuable connection. So use whatever connections you have and visit places with mature communities like San Francisco, New York, etc. If you can’t make it, send ambassadors for you to go learn and then come share back with the community.

Be Patient

A lot of people worry that since top tier investors aren’t interested in their community right away, their efforts aren’t paying off. But they need to be patient. Building a startup community takes a long time.Brad Feld of the Foundry Group spoke about this at last year’s Tahoe Tech Talk, saying it’s taken 15 years to build the community in Boulder, Colorado, even though many people think it’s happened just over the past few years.

Overall, just understand that the most amazing thing about Silicon Valley isn’t the huge amount of venture capital, or number potential acquirers. It’s not all the incubators or co-working spaces. Instead, it’s the collaborative, helpful, and inspiring community that’s developed around it all. It’s the 10 other entrepreneurs sitting next to you at the coffee shop willing to help you through a problem or make an introduction to someone who might be helpful. It’s the support that the entire community consistently gives each other.

A strong community won’t appear overnight, but if you start with the right foundation, the rest will come in time.

Please add anything I missed in the comments.

[Update: A video of Brad’s talk]

Source: TechCrunch

Reduce Friction, Increase Happiness

This post originally appeared on TechCrunch.

There has been a reoccurring theme on my mind recently as I’ve advised startups on areas of focus. It revolves around the goal of reducing friction.

Reduced friction in a product leads to less user frustration, high conversion, and overall user happiness. I’d like to use a few examples to illustrate what I mean.

Taxis / Uber

Let’s start with Uber, the startup that lets you order a black car from your mobile phone in San Francisco, New York, Seattle, Chicago, and a growing list of cities. Because I know the team, I’ve been following this startup since they launched. I actually took an Uber car to celebrate selling my first startup during one of their first weeks in beta.

When I first heard about the service, I focused on the luxury aspect of traveling in a black town car with a private driver. Who wouldn’t? It’s in their tagline (“Everyone’s Private Driver”) and it sounds awesome. But after my first Uber experience, I found out that while nice, the luxury component is strangely unimportant compared to their much bigger function of reducing the friction of getting a ride somewhere.

Let me elaborate. Friction points are italicized.

Here is generally what you need to do to get a cab:

  • Find a Car: Stand on the street waving at taxis as they drive by, hoping one stops (this can take a long time in SF), or call for one, which usually takes 15-30 minutes to arrive.
  • Set Destination: Tell the driver where you are going.
  • Ride: Many taxis aren’t the most peaceful drivers.
  • Pay: Take out your wallet and pay with cash (or credit card if they accept it – many don’t).
  • Tip: Calculate a tip to add to the fare.

Here is the Uber experience:

  • Find a Car: Open app and hit Pick Me Up. The car usually arrives within 10 minutes, sometimes within 5.
  • Set Destination: Tell the driver where you are going (although you can set this ahead of time)
  • Ride: Almost always a quiet, peaceful experience.
  • Pay: Your credit card is charged automatically.
  • Tip: Tip is calculated for you and included in fare.

Uber has reduced all the friction. What was a tedious process before is a seamless, pleasurable interaction. The most important thing Uber provides its users is that frictionless experience. The fact that it’s a black car means it’s generally an aesthetically nicer experience (and with SF Taxis, that can make a big difference), but that’s a small detail compared to the other benefits of using the service.

Zipcar / GetAround

A lot of people are familiar with Zipcar. It’s pretty simple. There are a bunch of Zipcar-owned cars around the city that members can rent on an hourly basis. All reservations are done through their website.

GetAround is a new startup taking on Zipcar by altering the model. Instead of GetAround purchasing a lot of inventory (cars), they built a marketplace for car-owners to list their own vehicles for other people to rent. I love the idea, and so do thousands of car owners looking to make money from their unused cars. The company won best startup at TechCrunch Disrupt in NYC and since thenhas been well funded. I have used the service frequently. I love what they’re doing and think they’re going to build a great company.

However, they face a serious challenge. Zipcar owns its inventory, so they have more control of the friction in the experience:

  • Search: Search Zipcar.com
  • Reserve: Click on an available car and it’s instantly reserved.
  • Get Keys: Unlock with your Zipcar Card
  • Find Car: Go to the dedicated Zipcar parking spot
  • Drive
  • Add Gas: If less than 1/4 tank is left, use provided gas card to fill up tank. Otherwise, just return the car.
  • Return Car: Park car in reserved parking space
  • Lock and Return Key: Lock with card and walk away

There isn’t really a lot of friction there. Now let’s look at that experience with GetAround:

  • Search: Search GetAround.com
  • Reserve: Since the cars are personal property, car availability isn’t guaranteed, so this turns to two steps.
  • Request several potential rentals.
  • Wait to hear from an owner.
  • If an owner replies, your booking is reserved. If not, repeat search.
  • Get Keys: You can unlock some cars with the mobile app. Most, however, you need to set up a time to exchange the key in person with the owner.
  • Find Car: Since GetAround owners don’t necessarily have dedicated parking spots, the car’s location varies, so you need to ask the owner where it is. Sometimes the answer resembles “On 27th between Guerrero and Dolores”.
  • Drive
  • Add Gas: Before returning every rental, the gas needs to be filled up to where it was at the beginning of the rental, which you pay for. So you need to remember the initial level and try to add just enough gas to return it to that level.
  • Return Car: If there’s not a reserved spot, you need to find a place to park it. If this takes longer than expected, you might be late returning it.
  • Lock and Return Key: Coordinate with the owner how to return the key and tell them where their car is parked.

Wow. That’s a lot more friction.

Again, I love GetAround, and their team is more aware of these issues than anyone. I’m 100% confident that as they go, they’ll iron this stuff out, just as Zipcar ironed out all the challenges they faced at the beginning. The friction issues GetAround faces are a result of the fact that Zipcar bought cars, while GetAround buys bandwidth. This initial disadvantage will make the company much more nimble and scalable long term.

I think the key to reducing friction quickly is to incentivizing the car owners to reduce the friction points. Give owners the option to guarantee their schedule, so cars can be booked immediately. Push them to install the CarKit, (the device that lets the renter locate and unlock the car from their smartphone). Then, when owners do these things, GetAround should give them a bigger percentage of the rental fee or prioritize those cars in search results. These owner will get more rentals and make more money. Over time, as users choose these cars, other owners will need to add these options to compete in the marketplace, and friction starts to disappear.

Airbnb / Kayak

Even successful startups still work every day on reducing friction. Let’s quickly compare Kayak andAirbnb.

Kayak:

  • Search: Search Kayak.com and only available hotels appear.
  • Confirmation: You can make a reservation instantly on the hotel website
  • Arrival: You go to the front desk, get your key, and go to your room.
  • Checkout: You leave your room.

Airbnb:

  • Search: Search Airbnb.com and get a list of properties, some available, some booked (since the owners don’t keep their schedules up to date).
  • Confirmation: Many times, owner writes back saying the calendar wasn’t updated and you need to search again.
  • Arrival: You need to arrange a time to meet to get the key, sign a small contract, etc.
  • Checkout: Most of my experiences, you can just leave the key and go.

A lot of times, finding an Airbnb accommodation is a bigger hassle than a booking hotel. But they’ve managed to build a $1 billion company, and continually works to make the process seamless and frictionless. And it’s getting better and better.

So what does all this mean?

Friction is important to consider when creating a product. If your users feel friction using or signing up for your service, you have a problem. Sometimes it’s unavoidable, but you should do everything in your power to remove as much friction as possible. And you should pay attention to this constantly as your product and service grow.

When you examine your product, where are the friction points? Are you letting users sign up with Twitter/Facebook, or do they need to register separately? Are you opening popups to get their attention instead of letting them continue on the site? Are you requiring information you don’t need?

Reduce friction, increase happiness.

Source: TechCrunch

Understanding How Dilution Affects You At A Startup by Mark Suster

Mark Suster (@msuster) has posted another incredibly valuable article for startups on Techcrunch. In this one he teams up with Visual.ly to create an infographic that shows the realities of equity dilution over time in a startup. 

Take a look. It’s really interesting and shows that founders with big exits don’t walk away with as much as you’d think. 

Designers Are The New Drivers Of American Entrepreneurialism by Bruce Nussbaum

Great article, shared by Elle Luna, about the increasingly import role of design in startups. We’re seeing this everywhere these days, and it’s an incredibly important theme in the entrepreneurial landscape. A lot of startups start with design now, where before it was an afterthought.

Perhaps the most important dot of all is the one of innovative startups started by entrepreneurs with design degrees or backgrounds—YouTube, Flickr, Slideshare, Tumblr, Airbnb, Slideshare, Vimeo, and Feedburner, and YCombinator. These successful examples have inspired countless design students who want to start their own companies. They see that it can be done.

Our visit to Open Network Lab in Tokyo

This post originally appeared on Techcrunch.

Before coming to Japan, we asked everyone we knew for advice on how to connect with the startup community in Tokyo. Every recommendation pointed at the exact same place: Open Network Lab.

Open Network Lab (“Onlab”) is a Japanese startup incubator in the same vein as Y Combinator or TechStars. The incubator provides startups with mentorship, office space, and a small amount of cash in exchange for a piece of equity. This model is popular in the United States, and leading Japanese internet company Digital Garage(investors in Twitter, Path, and more) wanted to try it in Japan. Onlab is currently in its second year of operation has incubated three batches of startups. Even though it’s a young program, they are already making an noticeable impact on the Japanese startup community.

We spent our first hour talking with Hironori (Hiro) Maeda, the guy in charge of overseeing the incubator’s operations. Hiro grew up in Japan and attended an international school before going on to study computer science at Bucknell University. After college, he launched a startup of his own, and several years later was asked to return to Japan to help build and run Onlab as a way to move the Japanese entrepreneurial community forward.

But developing that community has its cultural challenges. “Launching a startup, where there is a lot of uncertainty and unsuitability, does not fit a culture where harmony and stability are strongly emphasized,” Hiro told us. “However, a lot of younger Japanese are realizing that the nation itself is at uncertainty. The employment rate of college graduates have reached the lowest point in the past decade and the Japanese earthquake has made the people in entire nation uncertain about their future. The uncertainty and the increasing interest of the success that Silicon Valley is experiencing has made more younger Japanese take bigger risks.”

This has led to a ton of interest in Onlab from both entrepreneurs and the general public. This interest doesn’t come without its hurdles, however. Even though the community is willing to take risks, Hiro says it’s just not quite ready to be as transparent as entrepreneurs in other parts of the world.

“Entrepreneurs in Japan haven’t realized the benefits of transparency and sharing information. People are afraid of sharing ideas and experiences — thinking that it is their only competitive advantage”, he said.

In more mature startup communities like Silicon Valley, entrepreneurs share their war stories on a regular basis. And they don’t hide their failures, but instead embrace them and try to help others avoid it. Hiro knows this, and is fostering the same type of communication with his startups: “We encourage failed entrepreneurs to move on to their next idea and hope that they will see their failure as an experience they can take advantage of for their next venture.”

Hiro also requires his startups to get together at least once a week to discuss ideas that have worked, tasks that they found challenging, and points in they’re development where they’re getting stuck. Although it doesn’t necessarily come naturally, it’s working. Hiro says these sessions are getting better and better and the entrepreneurs are seeing the value in openness and transparency.

And Japan is taking notice.

When we were there, national network Tokyo TV was spending the day filming the lab and talking to the startups. When they found out some people from Silicon Valley were visiting too, they asked us to sit down for an interview. Most of the questions were around whether or not Japan had the ability to compete with Silicon Valley and whether Onlab could work. Overall, my responses were that it was already working. People are learning about this community all over the world and Onlab has started to put the Japanese entrepreneurial community on the map.

We also spent a few hours talking to and mentoring the startups (listed below). Overall, the companies were on par with the types of startups you see in the Bay Area’s incubators. There was an impressive focus on design and user experience and most had well-fleshed out business models and quality prototypes. As a taste of what Onlab has been producing, here is a quick look at a few of the incubator’s current startups:

Giftee
Giftee has built a platform that allows people to send each other gift certificates for physical goods. They’re responding to the gifting trend, and already have deals in place with some major brands in Japan, including Muji.

FindJPN
FindJPN is the AirBnB for Japanese experiences. They focus on providing a marketplace for some of the best excisions, experiences, and events that tourists to Japan can easily purchase via their website.

ABCLoop
ABCLoop is building a language learning community that enables people help each other learn a foreign language in very short, direct interactions. The site gathers the lessons in Loops, which are conversations around a particular topic.

Pirka
Pirka has built a mobile app that inspires people to help pick up litter around them, by giving users a social network to post photos of what they’ve picked up. They’ve already recorded over 20,000 pieces of trash picked up in 20 countries.

Dressful
Dressful is building a social shopping network for working woman, where they are recommended new items by Dressful according to their taste profile and also by their friends through a mobile app.

Mieple
Mieple is building a new way to meet people through your social connections. Think about it as LinkedIn Introductions for the entire web.

Our advice: Pay attention to what Onlab is doing and expect to see it develop and inspire a new generation of Japanese entrepreneurs.

Source: TechCrunch

Celebrate The Small Victories

This post originally appeared on the 500 Startups Blog.

Startups aren’t easy. They are a never-ending series of extreme ups and downs.

Your product launches! No one uses it. You get unexpected press and the user base spikes! The servers go down and all those users are pissed. You get funded by top-tier investors! A major tech blog claims a competitor will make your startup irrelevant. You strike an amazing partnership with the biggest company in the industry! The partner re-prioritizes and cancels the deal. Your company goes viral and the mainstream starts using it! Another company sues you for some stupid reason. You spin the lawsuit to generate international press! The legal fees bleed your company dry. Google wants to acquire you for tons of money! Then they acquire that competitor the tech blogs said would make you irrelevant. Oh, and the dog pissed all over your bed. And it smells.

You get the point.

Although this scenario is extreme, it’s not that exaggerated. It’s different for every company but inevitably, you will go through some of the most intense joys and disappointments. It happens to everyone, even seasoned entrepreneurs. It’s part of the process and why living this life is so exciting (and why having a supportive team/family is so important.)

Unfortunately, the gaps between the cycles might (and usually do) contain more downs that ups. And often the downs are more extreme than the ups. So overall, especially at the beginning, the good times don’t come as often as the challenging ones. It’s rough, but there is one thing I learned to do to make this whole process easier (and more fun): celebrate the little victories.

Now, I’m not encouraging entrepreneurs to get ahead of themselves, but I want to remind everyone that creating a business from an idea and having people express any interest in what you’re doing is an insanely huge accomplishment. Be proud of it. Be excited when things go well.

Some ideas of little victories to celebrate:

  • First employee hire
  • First time you see or hear about someone who you didn’t talk to directly about your product, using it
  • When the first major company emails you about partnering
  • Someone expresses interests to acquire you
  • You get an email from a customer whose life is better because of what you created

Remember, these are little victories, so the celebrations should be as well. Don’t overdo it. The point is to do something just a little out of the ordinary and special. Take your team to go see a movie some afternoon when you’d normally be working. Or go eat taco’s together away from your desks. Buy a new (reasonably priced) TV for the office. Bring in donuts one morning. Take everyone to go kart racing. Go to the supermarket and get them to make a $10 “congratulations” cake and bring it to the office. Hell, go buy a piñata and give your team a bat. Again, it’s just a small, fun activity to reward yourself and your team for doing something great.

As important as it is to celebrate with your team is, it’s equally important to share these little victories with your spouse. Most likely, whoever you share your life with hears you bitch more than they hear you celebrate. So make sure to share the good news with them too. Take them on a date. And again, make sure you’re reinforcing how rewarding your career is. When you share good news, it makes it a lot easier for them to support you through the not-so-good news.

With my first startup, I would make sure to tell my wife every exciting thing that happened. For example, the first time we got an email showing serious acquisition interest, my wife and I went out to dinner to celebrate. Although we knew the deal probably wouldn’t happen (it didn’t), it was a huge accomplishment just to have someone express interest. That was worth raising a glass to.

Celebrating these victories is healthy, and will make it easier to make it through the times when things seen dismal (incidentally, it’s not nearly as dismal as you think). Everyone celebrates the big victories (the product launches, the funding, the user and revenue milestones, the exits). But make sure to take the time to celebrate the little ones too.

Source: blog.500startups.com

Pizza And Ramen Are Hurting Your Startup

This post originally appeared on the 500 Startups Blog.

The typical stereotype of an startup environment is a bunch of kids sitting around living off of pizza and ramen noodles. It makes sense because that food is quick and cheap and entrepreneurs don’t have enough time and money.

Here’s a New Year’s resolution for you: Put down that slice of pizza. Don’t heat up that Cup O’ Noodles. Stop putting all that crap in your body. Your startup will be better for it.

Why?

The biggest reason is by only fueling your body with shit, you’re also fueling your brain with shit. If you improve your diet, you will improve you work, and in the end, your startup. You’ll sleep better, be better rested, and use your time more effectively when you’re awake.

Another big reason is that the majority of startup events you’re going to (and you should be going to a lot) also serve all that crap. Eat it then, but try not to eat it when you’re at the office working.

I know you’re probably thinking that eating healthy is too expensive, and again, startups don’t have any money. But in reality, you can easily make eating healthy affordable. Here’s one (of many) simple ways:

Go to a farmers market or local produce stand (NOT Whole Foods) and buy a bunch of rich, colorful vegetables – bell peppers, zucchini, squash, onions, carrots, baby bok choy, and whatever else you like. Get as many different colors as you can. You can probably get vegetables for 5 meals for about $10-15. Then go to a store and get 3 cans of low sodium beans (about $1 per can) and 5 boneless/skinless chicken breasts ($1-3 per breast).

Total: $18-33 for 5 meals. $4-7 per meal. Not expensive and probably about the same price as a fast food meal.

Prep is easy. Here’s the simplified directions:

  1. Steam or saute a couple handfuls of chopped vegetables with some oil until soft.
  2. Saute or grill a chicken breast with some oil, salt, and pepper.
  3. Heat the beans in a sauce pan (even better with some parsley or cilantro leaves and chopped scallions).
  4. Put it on a plate and eat it. Then get back to work.

There! You’ve just cooked an incredible healthy meal for about $5 that will keep you feeling full all day. You can make this in bulk at the beginning of the week and heat some of it up each day. To give it some varied flavor, find spices or sauces you like and add when heating. Next week, choose different veggies. Or use lean beef instead of chicken. Or a different kind of bean. Or a different marinade.

And stop drinking soda all day. Instead, drink twice as much water as you do now. The constant pee breaks will be a good chance to stretch your legs and take a break from your computer.

As a note, I love unhealthy food. It’s delicious and I’m not saying it’s evil. I’m just saying it’s not a productive addition to a 14-hour, high stress work day. I constantly try to make sure the majority of meals I’m eating don’t make me want to take a nap afterwards. Especially lunches.

Source: blog.500startups.com

Video Interivew for Chicago’s Beyond The Pedway

I had the pleasure of sitting down with Tim Jahn last week and talking about ArtistData. Tim has been doing a series of interviews with Chicago-based companies called Beyond the Pedway and wanted to add ArtistData to the mix. We chatted for about 45 minutes, but so you’re not bored, he only included about 6 minutes.

We chat about starting a company, how artists and startups are alike, and some things I’ve learned along the way. It was fun, and while I absolutely hate watching myself on video, it turned out well. Video is embedded below. Thanks Tim!

Source: bmull.posterous.com