Slightly different format for today’s publishing.  I had the great fortune to spend the weekend with close to 300 people on the Microsoft campus for the Startup Weekend.   It was amazing to see so many people come together and create so many awesome products in such a short period of time.  I will have post my report out on the weekend up at my other blog sometime this week.  For now, I wanted to share the slides from the talk that I gave: Product Management for Hackers.  I received so many requests for the slides that I have posted them online.  I have embedded them here if you just want to click through the slides, but would encourage you to download them to get the speaker notes as well.

Do you know what kind of leader you are? Are you sure you want to answer that question? For all my conflicts with him as a CEO, I did learn a pretty succinct way of categorizing managers from Doug Erwin during his time at the helm of RLX. According to him, there are “generals,” who lead from the front, and there are “sergeants,” who have to push from the rear to get people to go where they need to go.

The “sergeant,” as used by Doug, was meant as a derisive epithet. He was talking about me. In his world, the sergeant is the guy who is responsible for taking a hill, and will do so no matter what the cost. In this way, he will not engender positive will with his team, and many of them will in fact have a negative set of feelings associated with their sergeant. As such, according to Doug, the sergeant is in the rear, quite literally pushing his men up the hill because they don’t want to follow him. He was letting me know he didn’t think too much of me as a leader. I disagree (of course), but debasing this claim is not the point of this essay. Illustrating that leadership persona is, and sergeants have their place inside of companies.

Sergeants can be useful when you really need to get the job done, and aren’t worried about team morale or the leadership path of the sergeant with that team. Sometimes it is absolutely necessary to have this person who is going to force people up the hill. If done right, he will get more productivity and performance out of the team than even they thought possible. Some members of the team will reach the top of the hill and want to quit. Others will be much stronger for the process. Clearly you want a disproportionate of the latter than the former when all is said and done. The risk with being a hard-nosed sergeant is that you will burn through your staff, and, worse, gain a reputation as someone who burns through headcount, making hiring much harder in the future.

I actually have some issues with this bimodal classification of leaders, and would prefer to expand on it just a bit. I think there are three types of leaders. The “general” Doug referred to is more like a “lieutenant.” A lieutenant is much more likely to be leading from the front, and they will know the name and responsibility of each and every person on their team. When you are thinking about a startup, this is your leader/founder. Ideally, they exude confidence and leadership, and always have an answer, even if it ultimately is the wrong one. A lieutenant never says “I don’t know” to his troops. They will know when to ask for help, and will do so from their trusted advisors, but never letting on to those down the chain of command that they are not in control of the situation. A lieutenant can make the transition from small company to large by way of checking their ego at the door; essentially becoming a middle manager.

The “generals” to which Doug was referring do in fact exist, but they lead from off the battlefield, and have a very broad view of it. Not everyone who is following them will necessarily have even met them, but know that they must follow their directions. Think of a general as a construct appropriate for a larger company. The risk with a general in a startup is that they are likely to be too separated from the work, and instead choose to lead the team(s) by management sound bites and motivational stories. These can be a bit tiresome on a small team, especially when the members of the team feel like they are doing all the work.

Knowing what kind of leader is going to gate what kind of results you are likely to see, and what kind of situations you are most well suited to take on. As a general, you generally (no pun intended) can’t have a very depth oriented view of the details. You know what the overall goals are, but you are no longer a front line soldier worried about the minutia of the tasks to get it done. This will actually prevent you from making some of the harder real time decisions, for no other reason than you lack context (or data). These generals will need strong downstream leaders who are closer to the action to make those decisions.

Generals are also less likely to be willing to roll up their sleeves and do “real” work. They’ve done plenty of it in the careers, but having reached this point in their leadership career, they are more apt to seek opportunities where they have a team of doers, so that they can be a planner and strategizer. As I stated earlier, this type of leader is a hard sell for any new venture, and you have to know if this is the type of person you are before you get involved in a startup or smaller company.

When we first invested in RLX, the management team was thought to be full of rock stars (remember what we talked about with regarding rock stars) from Compaq. The CEO had literally built the server market from scratch. That was a long time ago, and he was quite removed from the day to day requirements of creating business from the ground up, and certainly quite a bit removed from the resource constrained environment that is a startup. Because he was of this leader type, and the fact that his entire senior leadership team had a similar mind set, the company had some problems relating to conserving cash, building customer pipelines, having small teams, and building product cheaply. Not understanding that the stage of the company necessitated a different type of leadership was a failing on the part of the investors, and, to his credit, it wasn’t until Doug showed up as CEO that things really started to turn around from a sales and product development standpoint.

As a leader, Doug had just come out of a startup environment, with a very successful exit. He had spent many of his formative years at IBM. I bring this up because it’s important to note that just because you have a substantial amount of big company experience doesn’t mean that you can’t take the lead role in a smaller company and be successful. You just have to be willing to roll up your sleeves and do actual work, and ensure that your management team has a similar view on their responsibilities.

The moral? Know what kind of leader you are, and whether or not it is appropriate for the environment into which you are stepping. If you are the wrong leader for the given scenario, you risk alienating your team, and potentially burning through headcount by way of disenfranchised employees.

One of my favorite parts about being in business school was working on business plans. I loved to write me a business plan. It really felt like I was creating something. I got to spend a bunch of time researching and learning, and then committing to paper the fruits of my labor. Better than the researching and the writing was the model building. Going into Excel and building a gigantic model clearly laying out the next five years of the business was something I loved to do. Finally, I could take the model and the business plan, roll it all together into a 60 page tome, and prove to everyone just how smart I was. Fail.

Unfortunately, I wasn’t proving how smart I was. I wasn’t proving that I was a business titan who could craft a business out of nothing. I wasn’t showing the world that you needed to get an MBA to be a successful entrepreneur. What I was showing was that I could waste a bunch of time doing a bunch of work about which no one would ultimately care, and in fact was making little progress in the actual building of the endeavor.

Anyone who tells you that you need to have a long and thoroughly written business plan is either a banker, a consultant, or has never been an entrepreneur. Why a banker? Well, if you do decide to go to a traditional bank for any kind of loan, they are going to want to see very exhaustive information about you and your business. They are not in the risk taking business. They are in the risk mitigation business. In theory, the more information you present to them, the more risk you are mitigating. Venture capitalists are ostensibly in the risk taking business, meaning you can get money from them with far less of a plan, but we’ll talk more on that later. VCs are actually some of the most risk adverse people on the planet, but they will certainly invest in your opportunity without you having to show up with a 60 page plan.

The truth about those long business plans is that you will never read it again. Well, not never, but the likelihood that you will read it again with any level of depth, or use that document as a detailed plan for success is very low. Why? Because in the early stages your business is going to be very fluid. What makes your business successful will not turn out to be what you thought would, and the business you build will be very different from the business you planned.

Another reason to avoid writing a long business plan is because, well, let’s call it what it is. It’s an advanced form of procrastination. You can spend time writing this long document which lays out your value propositions, key target demographics, competitive analysis, financing needs and management team background, or you can actually get started on building the business. You would be surprised how much time you can waste with the work that you can put into one of these documents.

The last thing that I want you to think is that a plan of any kind is a waste of time. You should have a plan. You should know who your competition is. You should understand who your customers are. What you should not do is write a very long document that you will never read again. Much like there is a minimum viable product, which necessitates that you get to market quickly and iterate on design, the same can be true of a plan. Get a minimum viable plan done as quickly as possible, validate it, and use that to start building your business. That minimum viable plan is a PowerPoint presentation that answers the following questions:

1. Who are you?
2. What is the problem you are going to solve?
3. What is your solution?
4. Why will the market accept your solution?
5. What does the competition look like?
6. Who are your customers?
7. What are the details of your product?
8. How will you acquire customers?
9. What is your best approximation for the financials of the business?
10. What are the risks/challenges?
11. What’s the timeline?
12. Bonus: What’s The Exit Plan?

If you take a close look at this list, you will see that it is stage agnostic, meaning you can apply it to the planning for any new product, group, or company.

Every single business plan that I wrote in business school amounted to nothing. Nothing. You never would have thought that would be the outcome given the time, energy, and effort that I put into those business plans. I had a ton of ideas, and wrote several plans, and some of them might have even been good ideas. Unfortunately I spent so much time writing them, and not so much time going about trying to implement them.

Even when I was working in private equity, the length of the presented plan seldom dictated the decision to invest in a company. The first question to which we always needed an answer was about the management team. Then the product. Then the market. Much of the investment decision was based on a completely separate long document, called the investment memo, which was written by the investment team at the firm. This document had much of the content delivered in a long form business plan, but generated through independent research by the investment team. We primarily did this because we never took what the companies said at face value. So if you think about the amount of time that the management teams of all those potential investment opportunities spent writing long form business plans, you can see that it was largely a waste of time.

There is no shortage of books at the book store or online resources which will walk you through all the steps to writing the killer business plan. These books will often times espouse writing tomes of absurd length and depth of content. It’s not necessary, and you will just be wasting valuable time better spent on getting started.

To help give a little more context to this discussion, I want to use the exact slides I used when I was out raising money for the angel round of IMSafer. These slides constituted the entirety of our business plan as of June 2006 when we were raising money, and served as the roadmap for how we were going to spend the next 12 months. It took us 8 days to raise $1.2 million.

For brevity, I have removed some of the slides which served as backup or further explanation on a given topic, but I have not changed one word of the slides as presented to investors. Incidentally, if you think the content is shit, that only further proves my point that investors invest in people first, plans second.

Who Are You?

The very first question that you are going to need to answer is who is on the team. If you are presenting to investors, they want to know who they are backing. For anyone who has skipped ahead, you will catch that I broke one of my own rules in trying to go it alone (next chapter). The reality was that while I had other “founders” on the team, because of my misunderstanding of what was required to be called a founder, I only represented myself as a founder. The investors want to know about you, your experience and your pedigrees, in that order. It’s more important to have relevant work experience, preferably in similar company stage and with you in a similar role. Don’t be afraid to list failures. They are great learning experiences, and allow you to demonstrate your ability to learn from fluid situations. They will also want to know about any other advisors you have with the company. For privacy reasons, I have blocked out some names.

What Is The Problem You Are Going To Solve?

Consider this section of your plan a place to tell a story. You want to grab the attention of your audience, and connect them to the problem that you are going to try and solve. You don’t need specifics about the product at this point, or how you are going to solve it. You just need to make it clear that there is a problem worth solving. After laying out some interesting statistics about the incidence rate of potential illicit contact of children on instant messenger and the number of sexual predators on the Internet, we laid out the problem in plain English. This is done primarily so that we knew which problems we were trying to solve, and, more importantly, which problems we weren’t going to try to solve.

What Is Your Solution?

Very early on in the presentation, you need to explain what you are going to be making. If you can’t sum it up in a few sentences, you have to work on your elevator pitch. The description should not only highlight what you are going to be doing, but further help your audience understand why it’s important. Remember, we’re talking about your business plan here, so this will serve as your sign post for future discussions about product features and/or changes you want to make to the plan of record. This one slide, for us, served as the key set of rules by which we designed our product, kept costs low, and prevented feature creep from plaguing the product.

Why Will The Market Accept Your Solution?

Immediately after you explain what you are going to build, you have to lay a pretty good case for why you should build it. Among the reasons should be a clearly laid out set of reasons as to why the current market offerings are failing to deliver on the promise they propose, or do so in a sub-optimal way. These reasons should evoke rational reactions, like “of course, the current offerings don’t do that,” as well as emotional reactions, like “I hadn’t thought of that, and the current offerings should do that.” These market failings will inform not only your design work for the product that you are trying to build, but will help you better understand your customers. If you are not delivering value to your customers, then you should pack up. Understanding how those customers are being ill-served in the marketplace, and being able to connect with them in a logical and emotional way, is a sure fire way to fail.

What Does The Competition Look Like?

Whether you are presenting to investors or keeping yourself honest, to not understand your competition is to prematurely raise the white flag. By mapping out their core features and functionality of your competition, you will gain clarity on how you do or will stack up. Understanding where they are weak will also help you identify the potential opportunities for improvement on existing products. It’s important to note, however, that just because the competition isn’t doing it doesn’t mean that it should be done.

Incidentally, if you are in the fortunate position of having no competition in your market space, congratulations. In reality, if your answer to the question “who is your competition?” is “no one,” you probably need to revisit that answer.

Who are your customers?

Hopefully you will have a better understanding of who your customers are when you get down to putting together your plan. As you can see from our over simplified graph here, we dug into some US Census data and did what could be called “nothing more than a very cursory analysis of household data.” I actually give us a great big fail for not really understanding our target customer better when I first went out to raise money.

First, what kind of households were we targeting? To suggest that we were going to target any household with children ages 6-17 is crazy. Are those single parent or dual parent homes? Is one parent working, or are they both out of the house with jobs? What about income ranges? Broadband and Internet penetration? Does race and level of education of the parents impact Internet use in the home, and likelihood of children being in potentially dangerous situations online? Is IM more likely to be used by white kids or black kids? Boys or girls? Do parents of boys or girls care more about online safety?

Second, which parent were we selling to? Based on research we did later, we found that in most households, the male is responsible for the technology, but they aren’t generally concerned with the parental control software. Women make that decision. Further, women will do the research and tell their husbands which software to install. It turned out (as we found out much further down the road), our core audience was divorced and single moms in their late 40s and early 50s who were not that technologically savvy.

It should be pretty obvious that we didn’t know what we were doing when it came to understanding and segmenting our customer base. Take advantage of the wealth of free research information which exists on the Internet.

What are the details of your product?

Presumably, once you sold yourself, or potential investors, on the idea of your product, you are going to have to demonstrate what the product is and that it’s a feasible idea. The first chart above is how we initially talked about what we were going to build. This was not a formal spec, but it certainly set the tone for the scope of the product that we wanted to bring to the market. The amount of information that you need to accurately depict what you want to build is going to vary, but if you can’t do it in a few slides, you might be in a situation where you are being far more ambitious than you ought to be.

Once upon a time you could present your plan with nothing more than words; maybe even a few sketches of your product. Specific to software, but also in general, the availability of tools to create mockups of your product necessitates that you at least build a prototype so that you can gain understanding into the user interaction. Without being able to demonstrate how customers will use your product, you are merely speculating, and it’s very tough to invest in speculation. Further, while mockup demos are fine, and this is also especially true for software, a working product is far more powerful. As you can see, we had our obligatory architecture diagram of what we were going to build, but we also were able to present screen captures of the working product, and, if necessary, show the product during the early investment meetings. If you can’t succinctly scope your product, and show a working (barebones) product, you need to reconsider your decision to put yourself in front of an investor or decision maker (including yourself) seeking investment.

How will you acquire customers?

Ah, the marketing plan. How are you going to get customers? I am tempted to spend a bunch of time on this topic here, but since it’s a topic for which I dedicate several essays later in the book, I will pass on this for now. The exception I will make in the discussion is to point out that nowhere in these two slides do I even broach the topic of how to measure success, or what my per user acquisition costs would be. Fail. Having a bunch of ideas as to how you might approach the market is fine, but if you don’t know how you are going to measure that, then you have a problem. More importantly, most investors are going to want to see that information. My investors gave me a pass because they knew me, and I had been in a consumer Internet startup before, and they had mostly all seen the financial model which presented my per user costs. Which brings me to…

What is Your Best Approximation for the Financials of the Business?

For any presentation that you are going to make where you are seeking investment of any kind, you had better come prepared with numbers. I present only the base case here, but realistically you are going to need your base case, as well as an upside and downside case. Financial modeling is something on which I am also going to dedicate quite a bit of time later in the book, so I will leave the specifics for there. I do want to point out that it’s important to be cautiously optimistic with your numbers, be realistic, and anything beyond eight quarters out is a guess, and completely useless. For the record, when the diligence began for the sale of the business in November 2007, we had 160K users. Our projections were very close…because we were metrics driven and realistic. More on that later (in another post to come).

What Are The Risks/Challenges?

No new business or project is going to go off without a hitch, and if you are going to be seeking risk capital, you are going to need to lay out the risks of what you are attempting. In this specific instance, I chose to focus on the technical and business risks. I wasn’t too concerned with the competition because the analysis we had done so far on the market indicated that the dominant players were not innovating, and those new entrants who were innovating were marginally improving on existing ideas. There wasn’t anyone doing exactly what we were doing, which begged the question “why not?” The technical risks were the most pressing and obvious.

In this enumeration, you are going to have to know which risks are within your control and which ones are not. There’s an element of luck in everything you do, and knowing which risks are going to require a little more risk than others helps shape how you spend your time. Stack rank your priorities based on impact to the business and which ones are most in your direct control.

The investors also want to know what the risks are to their money. While these may be a reiterated form of what you have already stated as business and technology risks, you have to be a bit more circumspect about your thinking here. Demonstrate that you are thinking about things that could drive the valuation of their investment to zero. You can never show too much care when talking about their money and how you are going to be a good shepherd for it.

What’s The Timeline?

Lastly, you are going to need to lay out a timeline. When will all this stuff get done? How are you going to be measured and held accountable. My view on this, for right or wrong, is that you can really only plan so far out with a high degree of certainty. When presenting to investors, I chose to let them know what the timing looks like through the next likely funding point. In my particular case here, I hadn’t anticipated being able to raise $1.2 million straight away, so the pitch was tailored for a much smaller raise, and I chose, instead, to focus on the time line which got us to launch of the product.

Bonus: What’s The Exit Plan?

Any investor is going to want to know that you have at least thought about how they are going to get their money back. The answers here tend to be the same, so be realistic and don’t overreach. Just show them that you intend to get them their money back.

The moral? Spend the absolute minimum amount of time to appropriately answer the questions laid out above. The data which you collect should be presented in a slide deck and not a long form business plan. If you are successful in raising money, you will seldom refer to a long form document, and the interconnected nature of the document will make editing and maintaining it very difficult. If you aren’t able to raise money, you will waste many precious hours tinkering with this document instead of doing the more important task of building product and proving you can turn the crank and acquire customers. Focus on this core content, and be pithy. My deck was 30 slides, but you really should be done in 15-20. This deck is your set of core principles, product road map, and marketing plan all rolled into one. Most importantly, you are selling yourself and your ability to get the job done. Investors (specifically early stage investors) are investing in people first. Building your team is one of the most critical things on which you must execute and get right.

UPDATE: Chris Yeh, an old school mate from way back, has pointed me to a great post he wrote on the topic of business plans being a waste of time.

I cannot tell you how many times I have spoken to entrepreneurs and colleagues who told me that they wanted to start a new company, or even looking to join a new, young company, because they "hate their job." Let me say this up front: if you are going to go and take the risk associated with a young company, please, please, please make sure you are doing it for the right reasons.

The very first question I ask someone when they come to me with that glimmer in their eye, the wanderlust effusing from within, spouting off about how great it’s going to be at this new company, or starting their own thing, is "are you running to something or from something?" It’s a pretty simple question, and one that is easy to misunderstand. The core principle is to determine if you have thought through what you are doing and understand the situation into which you plan to insert yourself.

The common fallacy about a new or young company is that you do only what you want to do. This is especially true if this new company is your own. Admit it. You’ve thought the same things:

1. I’ll get to make my own schedule
2. I’ll work on only the things that interest me
3. I won’t have to deal with anyone else’s shit

Unfortunately, these are all very, very wrong. So very wrong. One of the first things you will discover when you venture out on your own is that there is all this other "stuff" that needs to get done. Seemingly, all the time. Stuff that you don’t want to do, and will never find interesting.

What is it that you hate about your job so much? Ask yourself that. Then, be completely honest with yourself, and ask if those things will still exist in your new gig. If you get over that hump, ask yourself how much you think you will enjoy doing the following:

Not getting through when you call

The first job that I had when I got out of college was working for Microsoft. In the early 90s, this meant quite a bit more than it does today in terms of what attributes people ascribed to you by virtue of your association with the company. Whenever I had to call a company for a contact, I would either get through, or my calls were returned quickly. Seeing as this was my first job out of college, I just assumed that’s how people in business conducted themselves.

It turns out that people were responding to "Microsoft" and not "Brandon Watson." People didn’t give a hoot who I was, but they did care that I worked for Microsoft. When I switched jobs to working for AskMe.com from Microsoft, I got a very, very rude introduction to the realities of being at a small company. No returned calls. In fact, when I got the admins of people that I knew, I would have a tough time getting through those gate-keepers. Getting your calls through, much less returned, has a somewhat inverse relationship to the age and size of your company.

Getting rejected 99% of the time

Even if you do get your calls through, get ready for the word "no." A simple fact of life is that people are simply not going to be interested in whatever it is you are selling. You will be fighting an uphill battle on many fronts. They don’t know who you are, what you are selling, why it’s important, why they need it, why your company is the best at solving whatever problem you are solving, and, most importantly, whether or not they want to give you money for it. That’s if you are trying to sell them something. It’s a completely different bag of "no" when you are looking to raise money, and yet another when you are trying to hire someone.

There are so many different reasons why someone is going to tell you "no." Worse, the inertia of saying "no" far outstrips that of saying "yes." Saying "no" is easy. It’s safe. Most importantly, it costs them nothing. It’s not personal, generally, and you need to keep that in mind as you work your way through the gauntlet of "no"s that will accompany you on your journey.

Dealing with the myriad of government forms and processes to ensure that your business is in good standing

Do you know what forms you need to fill out with your State Comptroller’s office to start your business? What about with the county registrar? Which tax forms do you need? What kind of legal entity are you going to create for your new company? Do you know whether or not you have to pay taxes on the furniture and other capitalized equipment that you have in your office?

The answers to these questions will vary based on the location of your business, and this book is not about trying to help you answer those questions. I am merely trying to point out that there’s plenty of these sorts of questions waiting for you, and they are going to occupy a large portion of your time, which will obviously take you away from the very thing you want to be doing – working on your product/service. If you join a new company, this is probably already done, but if you are going out on your own, invest the time to ensure that you get this one right.

Quickbooks, or dealing with accounting in general

I make it no secret that I hate Quickbooks. It’s not that I have a blood feud with Intuit per se, but rather a severe distaste accounting and accounting software. Everything has to be just so, and if you screw something up, it’s difficult to back track and figure out what you did wrong. The software has a direct link to your bank account, so you can forget feeling comfortable about the whole check writing process. Me personally – well, every time I used Quckbooks, I felt like I was going to blow up my bank accounts and never recover the data file.

Your basic bookkeeping is certainly something that you can contract out, and I would strongly encourage you to do so. If you use Quickbooks, you can even give your contract accountant access to the file and they can do your bookkeeping remotely. In the early days of your company you will most likely not have the revenue base to support someone full time handling the accounting, and if you have a transaction intensive business (even something as simple as an eBay business), you will be interacting with the accounting software quite a bit.

Have fun. I hated it. Even when I was working as an investment banker, I didn’t ever have to deal with the nuts and bolts accounting, and certainly not the accounting software.

Asking people who owe you money to pay you the money they owe you when they owe it to you

So you got the sale? Congratulations! That’s awesome. You’re only part of the way there. Now comes the part where you have to actually ask for the money. You may have sent out the invoice, and you are probably dealing with someone who handles their vendors on a net 30 or net 45 basis (meaning you get paid 30 or 45 days after they receive the invoice). What do you do when they don’t pay you? How comfortable are you going to be when you have to call and ask for the money?

At larger companies, you never think about this sort of thing. You probably have an Accounts Receivable department who handled all of that for you. Now you are the AR department. You will hear all sorts of excuses. Yes, you will even hear "the check is in the mail." If you are selling to small companies, you will find that they are just as cash strapped as you, and are also probably waiting on getting paid from another vendor who owes them money. It’s a tough cycle to get caught in, and your little company goes to the back of the line. Who do you think your customer is going to pay first? No name, young company with whom they have a short working relationship, or large, well known corporation with an army of lawyers?

As you can see, there’s no shortage of suck work that goes into a new company. In all probability, you have never given much thought to any of these things, and therefore don’t really have an appreciation for all the various departments within your current company that handle these items. I know I certainly hadn’t.

I mostly wanted to paint you a picture of some of the harsher realities of a new company. In having something that you are running to, these other issues won’t be the show stoppers they often times end up being. Knowing what it is you are looking to get out of your new gig, and knowing with certainty why you are doing it, will create for you a sense of purpose which will override the voice in your brain asking you why you got yourself into this mess. Starting a new company because your current job sucks is just trading in one bad situation for a new set of pain and drama.

The moral? Know whether you are running to something or away from something. Running to something will get you through the rough times when you are dealing with all of the fun subtleties that come with being a new company.

“What’s in a name?” A famous question that is as relevant today as the day it was penned. There are a few things that are completely in your control when you think about starting a business or kicking off a new project, and the name that you select is one of them. It never ceases to amaze me how few people give the name selection process the attention it deserves when they are commencing.

There once was a time when you could take a product almost all the way to the finish line and come up with your name then. The companies who really understood marketing and brand management would spend considerably more time on this exercise, but some of them are the worst offenders when it comes to coming up with names. More often than not, what they would bring to market is a line extension, utilizing some portion of an existing brand (i.e. Coke Zero, Miller Lite). They successfully bi-furcated the target market, and end up losing cumulative share.

The Internet changed the importance of a name in a few ways that may not be immediately obvious when you are thinking through a name, but are exceedingly obvious when you hear them said out loud. The discovery process that consumers go through today for information about your product or company will most likely (I really want to say “absolutely will”) begin with a search engine. Thus the question, “what’s in a name?” Perhaps a more contemporary version (much to the horror of Shakespeare lovers around the world) is “how Google-able is your product?”

A great example of this is a language invented by Anders Hejlsberg, and released by Microsoft in 2000. Initially, the code name for C# was “Cool” (supposedly for “C-like Object Oriented Language”), but in an effort to tie the language to the anchor brand of the C programming language, Microsoft opted for “C#” – pronounced “C sharp.” The only problem with this is at the time, the “#” character was a non-allowable character for search engine crawlers. They ignored anything after the “#” because the “#” is used for HTML to mark an anchor on the page. Further, at the time, most search engines ignored the “#” as an input character on the search page. This meant that anyone typing “C#” into a search engine would get a search for “C,” as the search engines would strip out the “#” character. Worse, not only would customers be confused if they found links to the older “C” programming language, but what if they were presented with stock information for Citibank, whose NYSE stock ticker is “C?”

Imagine how frustrating this must have been for anyone who heard about this cool new language and immediately went to the search engines to get more information. Sure, the year was 2000, so search engines were still new-ish, but the primary consumer of a new programming language, especially in 2000, would certainly be search engine savvy. The search would have come up empty, or, worse, pointing to many non-relevant sites.

Further compounding this naming gaffe is the fact that the character “#” is not usable in a URL. What? In plain English, Microsoft could not have the URL “http://www.microsoft.com/c#”. The “# is supposed to represent an anchor within the document, but without addition text after the “#,” the URL doesn’t work. Failing in finding the information in a search engine, a customer might try to simply tack the name of the new product on the end of the company domain. Again, the tech savvy customer who would be seeking this information would be stymied in their attempts. Even today, in 2009, this URL fails.

Typing “www.microsoft.com/c#”

What’s interesting about this is that even today, the Microsoft search box throws out the “#” for the customer. You can see this by looking at the search term presented on the lower left. As you can see, because the URL failed, Microsoft conducted a search for what came after the dot com, and thinks I was looking for “C.” With this as a failure, a customer might spell out “csharp” and find that the URL www.microsoft.com/csharp comes up empty:

Typing in the URL “www.microsoft.com/csharp”

Unbelievably, they repeated this error in 2005 with their new language F#.

When we first started IMSafer, the name wasn’t IMSafer. In fact, that name was more of a serendipitous discovery than anything else. The original name of the company was Collabarent. I was trying to be cute, and was hoping to convey the concept of parents collaborating. It’s a pretty awful name. Tough to spell and even harder to say if you aren’t ready for it.

One of the design principles of the product was meant to harness the collective wisdom of the parents using the system. We weren’t really clear what problem we were trying to solve other than taking on the “parental controls market.”

The challenge put to me by Tommy, my VP of engineering and co-founder, was that we didn’t have any focus. Without focus, and a clearly laid out problem set, there was a good chance that we would try to do too many things, and in fact do none of them well. The name I had chosen had pretty much demonstrated that sentiment.

Tommy took the challenge one step further and suggested that we really ought to spend time thinking about the core problem set, the impacted customers, the feelings we wanted to evoke from those customers, and see if a name would evolve. We set forth the following requirements: The name had to be:

1. “Google-able,”
2. Memorable
3. Not confusing with other products in the market
4. Immediately convey the purpose of the product

We also needed to ensure we could get the domain. You must always, always, always get the domain, and it must be a “.com.”

I want to take a quick moment to hit this point about domains really hard. Don’t underestimate the need, nay requirement, for a .com address. When Microsoft first shipped their Zune player, they didn’t own Zune.com. They do now, but at the time, it was www.zune.net. The same story played out for their Silverlight technology, except that Microsoft still doesn’t own the .com URL.

How many respectable or popular businesses do you know of that have a “.net” URL? Very few. The opportunity cost in terms of lost traffic and customer mindshare is pretty high, especially if there are two commas in your marketing budget. This problem is further exacerbated should your product or company have any level of market success and you decide that you are going to procure the .com address if it’s being squatted. Your market success will have the perverse effect of driving up the price for the .com version of your domain.

Back to Collabarent. With the above guiding principles in mind, we set about on an exercise to enumerate the problem sets we wanted to tackle, list out our customers, and decide what feelings we wanted to evoke. The final test for any proposed name was whether or not GoDaddy told us the domain was available. We came up with a bunch of names, but for one reason or another, the each failed the tests above. Finally, Tommy said, mostly out of frustration, “I just want parents to know their kids can IM safer.” I remember my first thought was that there was no way that domain was available. The likelihood of any seven letter domain comprised of any real words being available in early 2006 was pretty low. IMSafer.com was available. Unbelievable.

Sounds like we had a winner, right? Sort of. There were two problems which wouldn’t present until much later in our cycle. First, my board of directors, and many people we spoke to, often dropped the “r” from the name, and were convinced we were “IMSafe.” We did not own that domain, and spent a good deal of our time correcting people. We failed the rule of not testing the idea with enough people. Had we done that bit, we would have discovered this issue.

Second, the “IM” part of the name had the potential limiting effect on design and product direction. Company versus product name is a discussion for another essay, but it’s something to keep in mind when you are thinking about your company and your product portfolio. By adopting the name of our flagship product for the company name, there was a potential branding issue down the road should we have decided to broaden the scope of the company.

We had a similar problem at AskMe.com. When we started the company, it was known as “Xpertsite.com.” Yes, we spent a good deal of our time repeating the following, in one form or another: “no, w-w-w-dot-x, no e, p-e-r-t-site.com.” Very annoying, and distracting for potential customers. When we switched to AskMe.com, we spent a lot of our time explaining to people that we weren’t Ask.com the search engine. To this day, when I tell people that I worked for AskMe, some people tell me that they “use that search engine.”

The moral? First, make sure that you have a name that can be found in a search engine, and is unique enough that you are not going to get lost amongst the information about irrelevant products. Second, make sure that your name is not only easy to remember, but that it won’t get confused with some other existing product which already occupies some spot in the mind of your potential customer. Third, it helps if the product name immediately conveys purpose or relevance to your target customers. Lastly, make sure you can get the domain name, and make sure it’s a .com.

I don’t know about you, but many times when a supposed flash of brilliance hits me, I believe I have the mental equivalent of gold. I tend to get a bit ahead of myself, and start thinking about all of the money that I am going to make, what the product is going to be, how much customers are going to love it, how I am going to sell it, and who is going to buy it. Somewhere in the middle of that process, I start designing the product; making decisions about the absolutes of what the product will and won’t be.

You will find that your first idea is seldom your best one. This is true along two separate axes. First, if you spend any incremental time on design and storyboarding, you are likely to improve upon the original idea in immeasurable ways. Second, if you start letting your mind wander, you may come up with a completely different product/solution that addresses the same need, either directly or tangentially, and does so in a far better way than your first idea.

Just as the notion of testing your idea with only one person is a guaranteed recipe for fail, using yourself as the sole testing point will likely land you in a situation where you could potentially create something that no one will want. This is especially true if you just start building the first thing is that pops into your head.

Building is something that you should only be taking on after you have thought through what it is you are hoping to accomplish. Let your thoughts percolate for a little. Then let them simmer. I’m not talking about taking weeks or months, but don’t be afraid to let an idea sit for a day or two before you act.

Further, if you have a set of people you trust to not crap on your ideas, you will find that the simple act of trying to describe what it is that you want to do will reveal cracks in your idea. If you can’t explain it, you probably shouldn’t be building it. Even if your colleagues don’t buy into the concept, it’s likely that they will ask questions which will force you to think about what it is you are actually trying to do, and whether or not you are accomplishing that goal.

How many times have you said “I know what I want to say, I just don’t know how to say it?” My eighth grade English teacher would beg to differ. If you can’t explain it to someone else, why do you have any reason to believe that your translation of what’s in your head to an actual product will make any more sense? A great example of this is a focus group. If you have ever sat in a focus group, there’s a high probability that in your head you were screaming something along the lines of “why are you doing that you stupid customer?!?! You’re not supposed to use it that way. No!!!!” The physical instantiation of your idea is simply a representation of your ability to explain what it is that you wanted to do, and if you can’t explain it, you certainly can’t build it.

When I first came up with the idea for IMSafer, the product concept was to have a local program running on a computer doing all of the language analysis, and to have the code based on an open source product called Snort. IMSafer was envisioned as a program which was supposed to trap all of the traffic on a local home network, and perhaps even talk to the house router/cable modem. In not thinking through the idea, and not sharing the idea with anyone, I started making design decisions that were terrible. Awful, actually.

The team and I spent some afternoons and nights at the local Starbucks during the very early formative days of IMSafer, and just the exercise of trying to explain to them what I was trying to do showed me that I was designing something that not only would not scale (that’s a fail), but would also fail the grandma test (“can grandma install and use this?”). There was no way to make a customer friendly and easy to install piece of software doing it the way I originally wanted to do. Here’s a useful tip: any time you have to use the words “network” and “configuration” in a product intended for home use – fail.

It was clear from just the first conversation that we needed to vastly simplify the product, and that meant changing where the code lived. It also meant removing the number of moving parts from the customer computer. Our target customer was a parent in their late 40s to early 50s, and at the time we started IMSafer, that particular demographic was not the most technically savvy. If I had just rushed headlong into development, I would have either made design decisions which would have destined the product to failure, or would have cost me a great deal of time, energy, and effort to redesign when we finally figured out that what we had built was wrong.

All of this reminds me of an old joke that I love:

There’s an old bull and a younger bull sitting on a hill. The younger bull says, “Look at all those cows. Let’s run down and shag one of them.” The older bull ponders this for a moment, considers his answer carefully, and says, “How about we walk down and shag them all?”

The moral? If you take your time and think through what you are doing, you will more than likely get an optimized result.

The funny thing about great ideas – they are most often loved by the creator and completely misunderstood by those around him or her. Imagine Evan Williams trying to explain Twitter (www.twitter.com) in 2006 to people right before he went live with it. How many people do you think told him that a) they didn’t get it or, b) it was a terrible idea?

We’ve already established that passion for the project is one of the most important factors in determining whether or not there is going to be a success or fail. People with whom you share your idea are far less likely to have the same passion for the project that you have. After all, you have come up with this idea in what you would describe as nothing less than a flash of brilliance. In fact, you have probably spent many hours thinking about this one thing; how you would create it, how it will work, and, most importantly, why people will love it. Those around you with whom you plan on sharing this idea have not, and therefore won’t care and won’t get it.

The single most dangerous thing you can do when you have a brilliant idea for some new project is to ask just one person. Overcoming the gap of single denial is treacherous and terribly important for any new venture to see the light of day. After all, you are in love with this idea, but, like most new entrepreneurs, you are probably feeling terribly self-conscious about the notion that somehow you are going to have this great idea that no one else has had. Further, you will have doubts about your ability to execute against it. It’s very easy, then, for a would-be entrepreneur to become a wayward one by virtue of the fact that they asked but one person what they thought of their idea.

The reason people will crap on your idea, in my opinion, is that most people don’t like change. They don’t like things to be different than what they would consider the status quo. The notion of a friend of theirs stepping out on their own, for most people, is just too hard to imagine. Some of us are lucky to have friends or colleagues who are entrepreneurs, and so they understand. However, for the vast majority of the population, they see this change as a risk. People don’t like risk. They like knowing that a paycheck is coming every two weeks and that someone is going to be providing their benefits. They don’t like the idea that those securities go away, and they certainly don’t like new things. Not unless the masses tell them that they need to get this thing. When first presented with this new idea, however, they won’t get it, and in fact will do whatever they can to dissuade you from following a path that would lead to you endeavoring to create it.

I remember one day in college when I had just returned from my first summer internship with Microsoft. I met my best friend during that internship, and to this day I bring up this story any time he decides to shit on one of my ideas. The year was 1994, and the web was very, very new. Netscape hadn’t come out. Mosaic was the first browser, and for those of us nerds in college, we knew about this coming tidal wave. I can still remember the first day I used Mosaic. I knew right then that my world had just changed.

One afternoon we were in the campus store looking at books, and I uttered the single infamous question. Standing there, staring at books about technology, I thought to myself how surprising it was that there were so few books about the Internet. It’s a hard image to conjure, for sure, but I assure you, there once was a time when there were virtually no books about the Internet. I turned to Alex and said, “You know what would be cool for us to do? We should write a book about how to use the Internet for college kids.” I don’t remember his exact words, but the way I tell the story he turned to me and said, “That’s the stupidest idea I have ever heard. Who would buy such a book?”

To set context, this was a time when there was actually a product called, I’m not kidding, “Internet in a Box.”

 Figure – Internet in a Box Product Image

This is back when getting online was very challenging, and there was nothing, and I mean nothing that was readily available for the average Joe. So in my mind, the idea of a book about how to use the Internet for college students made tons of sense. I made the mistake of testing the idea on one college student. He wasn’t my target market, mind you, since Alex easily outclassed me on the technical nerd scale. Asking him made no sense. I did what most of you will do, however, in that I didn’t seek market research from my target market; I didn’t verify that there was in fact a market. Alas, I simply asked one friend. Since I think he’s pretty much one of the smartest people I know, I figured he must be right, and moved on.

There’s no guarantee that had I pursued that venture that I would have had any success, but the market for Internet and technology related books certainly exploded through the mid to late 90s on into the new century. I gave up too early because of my sample size of one.

Here’s another great example of not letting a sample size of one influence your decisions. I had a good friend of mine in college go to Stanford for his MBA. This friend and I had spent many hours working on labs and project teams together in college, and we both held each other in very high regard. So it was with great skepticism that I listened to him tell me about how he was going to start a new business.

It’s so clear in my mind, I remember the exact location. We were sitting in Mel’s Dinner in San Francisco, with another friend of ours, also a Stanford MBA student. Jeff was sharing this idea for a new company he was going to start. He was so excited about it, but I couldn’t be dissuaded from my advice. I said, simply, that bailing on his second year of business school to pursue this company idea was insane. What would happen if he failed? At least if he had the MBA, he would have that as a fallback position. Besides, based on the idea as I understood it, eBay would pound him into the ground so fast that he wouldn’t stand a chance.

At this point, I had been out of business school for a few years and was convinced (COVINCED!) that having the MBA was responsible for opening doors to greater opportunities. So I told him, in no uncertain terms, that making this decision was a huge mistake. I didn’t make much of an impression. Jeff went on to start a company called Liquid Seats, later renamed to StubHub. eBay come along some years later and purchased that company for $310 million. I give myself an epic fail on that one.

The moral? Most people are not going to share your same level of excitement or passion for your project. They will bring their own fears or prejudices into any feedback they give you, and that feedback will most likely be negative. Further, if you are going to spend time sharing your idea, make sure that you share it with more than one person, lest you get dissuaded too easily. Last, make sure you share that idea with people who have actually gone out on their own, and not people who are office dwellers without a hint of entrepreneurial spirit in their body.

I carry a little notebook around with me everywhere I go. I keep this notebook so that I can jot down the ideas for random businesses which pop into my mind. I’ve had plenty of them, and some of them I have pursued with mixed results. When you are considering venturing off, there’s a two part question you have to ask yourself when deciding to get up off the couch and start your next thing which will drive whether you are searching for happy face or sad face emoticon in your email to your buddies.

First, “do you have any relevant experience?” If the answer to that question is “no,” that’s fine. It’s more than fine actually, as many a successful business has been started by someone who was in way over their head. You need to understand that your lack of domain knowledge will necessarily create some hurdles for you to clear, and some of the hurdles universal to all new businesses will get a little bit higher. However, there have been plenty of people who learn on the job en route to building a very successful business. How you ask? Well, that’s the second question.

What is it that can counteract the bludgeon of ignorance? It’s a really important question, and it must have a “yes” answer if your answer to the first question was “no.” “Are you really passionate about whatever this thing is that you want to go do?” You must have a “yes” answer to this one if your answer to the last question was “no.” Without that passion, the hurdles that are going to be in your way are going to seem pretty impassable. It’s that passion for what you do that is going to get you through the hard times, and believe me there will be plenty of hard times.

So what about the other two possible answers? If you have relevant domain knowledge and are passionate about this project, then you are in the best position of all. You are going to clear over many of the early hurdles, and probably have many of the necessary contacts and rhythms to get yourself started. Further, as your business evolves, the likelihood that you run into blind spots is greatly reduced on account of your domain knowledge. Consider yourself in an enviable spot.

If you said you had relevant domain knowledge, but that you couldn’t be passionate about the project, I actually think this is worse than having said “no” to both. How could that be? You’re bringing domain knowledge to the business, so that has to count for something right? Sure, if you care about the problem. If you don’t care about the problem, why on Earth would you sign up for all of the stress of doing this as your own gig? Running or starting a company isn’t all about fun and games, and as we’ll talk about later you will come to understand that there are a great many things that you simply don’t care to do but have to do. Quickbooks anyone? The stories I could tell about my absolute hate and distaste for having to ever deal with Quickbooks are legend.

You see, if you have the domain knowledge it’s probably because you are already working in the field. You have some security associated with that in that you are pulling down a paycheck, have benefits, and can count yourself pretty lucky to have a job. Jumping to something new brings many new risks. When you are ultimately the last line of defense between success and fail, it’s a tough thing to take on if you really and truly don’t have a deep passion for it. You are essentially signing up for your old job, without the security and without the benefits. What fun is there in that? You are basically setting yourself up for failure.

In true business school form, let’s construct a 2×2 matrix to analyze the problem. Along one axis is the “do you have passion” question, and along the other is the “do you have relevant knowledge” question. I’m always happy to put the $50K plus that I spent on my MBA to work to boil down long winded discussions to a really simple 2×2 matrix. Want to hear something funny? There’s an MBA or MBA-candidate reading this right now trying to optimize this matrix. That just makes me laugh to think about.

The genesis for the project came about when my wife was pregnant with our first child. I was surprised at the state of the children’s DVD market. First, some of the titles were/are just terrible. Second, they are expensive given the amount of content you typically get with a DVD. Third, there wasn’t anything terribly innovative going on with the products. I’m a tech nerd, and thought I could do better, so I set about investigating my idea.

The basic premise was to create a series of DVDs that had stories on them, “animated,” and with dual audio voice over (one female “grandmother” and one male “grandfather” voice). Each DVD would have three stories, and a parent could choose which audio track they wanted to hear. The real interesting idea I had for the DVD was that through the use of some tricks in DVD authoring, each story would be made up of chapters, and each chapter represented one page of the story. The chapters would play in the right order, but each chapter actually had three different versions of itself. After the text of the page was read, there would be question asked about something happening on the page. Each of the three versions had a different question. This is akin to how you would read a story to a child. With the randomness element mixed into the ordering of which version of the page played, a parent could get multiple playback value out of the DVD, and would likely never hear the same order. I thought this was huge. Ask any parent how many Dora or Thomas DVDs they can recite from memory, and hate themselves for it.

My wife and I both thought that this sounded like a great idea. I secured the rights to some stories, prototyped the product, fixed some issues, had professional illustrators (hired via eLance) work on contract to bring the stories to life, and had the stories mapped to the DVD. I even provided the voice over work for the first version to save on costs. I pushed this all the way through to the manufacturing of many boxes full of DVDs.

What happened? I didn’t have passion for the project. I got caught up in some other things, and selling kids DVDs is actually pretty hard, especially when you aren’t 100% focused on it. If you want to get on the shelves of the stores, you need to go through a distributor. When you sell retail, there are margin issues. Oh, and retail also has “returns” issues. These were the sorts of things about which I didn’t know anything, and actually didn’t want to know anything about.

Unfortunately for me, I come from a software background, where you sell bits (not atoms).  Bits have zero marginal cost of production, and getting distribution is easy. My passion waned, and I ultimately ended up with a bunch of boxes in my garage. The obstacles that were placed in front of me became impassable. Had I been honest with myself from the beginning, I would have realized I was in the “probably screwed” box, and would have saved myself a ton of trouble and money.

As a side note, if you have a child between the ages of 2 and 5 and are looking for some interesting, limited edition DVDs, please drop me a note.

The moral? It’s OK if you don’t have domain knowledge for your project, so long as you have passion for it. If you are going to get outside of your comfort zone, you have to have that passion or the roadblocks will become impassable and you will fail. Having no domain knowledge and no passion is a terrible spot, because you are placing an order for “risk” topped with “I don’t give a shit.” That’s a recipe for fail. If you do have domain knowledge, and you are passionate about the project, you are in the best position of all.

There could be any number of reasons that I finally decided to write this. I guess the biggest reason is that I keep saying that I will.  The astute reader will note that I have been guilty of breaking the very first rule.  I can’t have that, can I?  Besides, I am not a multi-millionaire, despite having worked for Microsoft through the mid-90s, a dot-com before the bust, and for one of Wall Street’s most hallowed names.  “How could that be?,” you ask.  Great question.  I will attempt to answer that within the confines of the essays herein, but I think the most obvious answer is that I’m just not that good.

That must be the reason, right?  I’m just not that good.  I’m not as smart as I think I am.  All of the talent, schooling, and work experience have failed me in my quest to hit it big.  Of course, I could put forth some of the statistics as they relate to the percentages of people who have actually accumulated a multi-million dollar net worth, but that wouldn’t matter.  Rest assured, it’s a very, very small percentage of the population.

We all know one or two people who have hit it big with the stock options at one of the companies we could name.  I know I can.  The funny thing is, there are a good percentage of the people who have hit it big who can chalk that up to luck more than anything else.  Yes, they were good enough to get hired at the right company, but let’s be honest, there are a lot of people who have ridden coat-tails of luck, and there are a lot of people who just got lucky in getting hooked up with the right company.  And that’s OK.

Another issue is that there’s a real survivorship bias built into the many stories with which you are regaled about the multitude of startup successes, all of which are intended to make you feel some sense of inadequacy with regard to your own progression through life.  Failures are a boring topic about which to write.  Nothing is more exciting than reading about a life you don’t have but want, rather than don’t have and don’t want.  Could you imagine a magazine, like People or Us Weekly, which followed the mundane lives of everyday people?  Call it “15 Minutes.”  That was actually one of my ideas once upon a time.  Unfortunately, trivialities are just not nearly as exciting as reading about fabulous people going to fabulous parties wearing fabulous gowns (i.e. People).

One of the biggest lessons I have learned over the course the last two decades is that if you spend your time comparing yourself to your peer group, you are on the express bus to Pissed-Off town.  The funny thing about going to the “best” schools and working for the “best” companies is that you will invariably know some very, very successful people, even if you are not one of them.  I can name at least 10 personal friends worth over $10 million dollars.  *I* don’t have that kind of money, and might never.  There’s always someone smarter than you, richer than you, in a bigger house than yours, or with a better sounding job.  So what are you going to do about that?  You can spend your time being mad about it, or you can try to learn what they already know about success and hopefully apply it to your own life.

I’ve always enjoyed writing, and I’ve always been a story teller.  I’ve had the wonderful luck of being involved with some of the coolest people and companies during some of the most innovative periods in our history.  I’ve seen some great things, and some not so great things.  Most importantly, I always considered myself a student, and I have made it a point to learn from each of my experiences.  Right now I’m enjoying a break from my last venture – I made what I like to call a “wifestyle” decision, and not head-rush into the next venture (we’ll talk about that in the “Running the Business” chapter).  As I have been thinking about the things on which I am currently working, and the projects which will come down the road, I wanted to codify the many things I have learned so as to create a blue print for the next gig.  During that thought process, I decided I would share it with you.

You see, I got a bit tired of all the books that basically pump you up with inspirational stories and little substance, or try to tell you that their one way of doing something will make you a million dollars.  It’s patently absurd.  You can’t control for luck.  You can’t script million dollar ideas.  You can control desire and work ethic, as well as experience.  Experience tends to trump all.  Experience and the network of people you have around you.  I’ve seen some good blog posts about failure, and I will link to those in the essays.  What I had never seen, in any book store, was honesty about failure.    Honesty about why the author wasn’t a bazillionaire.  Honesty about why their company (or companies) failed.  I actually don’t mind being the lone voice of fail.  I suspect that the number of people who have tried and failed far outweighs the number of multi-millionaires.  We all have a story to tell, and this book is just the beginning.

They say that it’s only a mistake if you do the same wrong thing twice.  The first time is for learning.  What I’m hoping to do with this book is prevent you from making the first mistake.  I’ve made many of them already, sometimes with hilarious results.  I’ve also had some pretty solid wins, and many things of which I am very proud.  With each of the stories, I hope to not leave you thinking “what a drag,” but rather leave you pumped up with a moral of the story.  Aesop I am not, but hopefully the lessons will keep you from reaching The Failing Point.

This is the first essay from the first chapter in my community book “The Failing Point” – essays will be published here online first, and I’m looking for feedback from the community.  The permanent site will be live shortly.  Each essay title finished the sentence “Under no circumstances should you…”

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I can’t tell you how many great ideas I have had in the last decade. I am literally a legend in my own mind when it comes to creating awesome products that everyone in the world must buy. It seems like I have a new idea every day. Here are a few examples:

• Spinner rims for baby strollers
• A teddy bear with a beeper network activated voice box
• A book about the Internet for college kids
• A location based dating application for the iPhone
• An SMS based trivia text game
• Fleece gloves which are sleeve length
• Children’s utensils that have cars, trucks, boats built into the utensil

As much as I would love to believe that I am the master of generating million dollar ideas, one look at this list would tell you that I am as much a fool as the next guy. However, being the eternal optimist, when I came up with these ideas I thought they were, in the words of Kenny Bania from Seinfeld, “gold, Jerry, gold!”

In any event, once I have come up with the most awesome product in the world, I come up with the most awesome name, which of course has the proper awesome domain name available, and then of course I figure out how I am going to promote this awesome product via a blog, Facebook, or even Twitter. The romance period of thinking up ideas often involves thinking I am awesome, which I clearly am not. The challenge is that these are all ideas, without any action plan. I never once put in the time, energy and effort to kick start any of these projects.

As someone who used to be a semi-professional motorcycle racer (which basically means that I paid way more than I ever hoped to make), I can tell you that the time honored tradition of bench racing is not reserved for those of us who used to flog around a track on two or four wheels. As racers, we all used to love getting together after a race and talk about this lap or that pass. It’s pretty funny that I was always faster and closer to the front of the pack the more time that had elapsed from the race itself.

Startups and bench racing go hand in hand. It’s like peanut butter and chocolate (not to be confused with peanut butter and jelly, an abomination I don’t get, which is further compounded by those loons at Smuckers who put them both in the same jar). People love to sit around and talk about that company they are going to start “one day.” Or, better yet, “when the economy improves a little bit.” Or, my personal favorite, “when I’ve saved up enough money to tell my boss to shove it and start my own gig.”

What it is about the startup that has so many people spending so many hours fantasizing about taking on such huge risks, with extremely low probability of success, and really is quite a thankless task? It’s the fantasizing on which they spend so much time. Not the “start”-ing or the “up”-ing (as in – get up off the damn couch), but the fantasizing. Let’s call it aspirational dreaming. All the energy which is wasted thinking about how a person would spend the millions they are going to make when they eventually start their company would be far better served accomplishing tasks toward the goal of getting your idea off the ground.

The biggest mistake that people make is setting some big hairy audacious goal without properly level setting expectations as to what is required to get there. Nerds and tech folks love this big hairy audacious goal (or “BHAG”s as it’s called), because for them it’s like a badge of honor to have accomplished this big hairy thing. A great example of this would be Google. They want to “organize the world’s information and make it universally accessible and useful.” Wow. That’s big. Hairy even. Sergey and Larry didn’t start with that one though. Their original vision was slightly more mundane: “The anatomy of a large-scale hypertextual Web search engine.” You see, before you can start working toward your BHAG, you need to have accomplished a few smaller items to get some momentum.

There is no greater killer of an idea than lack of forward momentum. The easiest way to set yourself up for success is to decide what the end point is, and break the task into a series of smaller tasks. Preferably, there would be some very small, very easily accomplished tasks on the front end such that you can feel like you have made some noticeable level of progress in a reasonable period of time. This is a little trick I learned many years ago. You trick the mind into thinking you have forward momentum. Celebrate some of the early successes. You know what happens next? Each successive step actually requires less and less effort.

Here’s a great example. I’ve been saying I was going to write a book for 15 years now. Why haven’t I done it? All signs would point to the fact that I am quite the able bodied accomplishment engine. How could it be that this over-achieving, type-A person would have so much trouble getting off his ass for one of his ideas? To put in bluntly, it just seemed too hard. Every book on my shelf appears thick and meaty. Lots of pages. Plenty of words. That just seemed like too hairy a goal for me, for whatever reason, and I never got around to it.

This time is different. First, I broke the task down so that I could make progress every day. There was coming up with the topic, then coming up with the chapter topics, then working through the potential names, and of course finally getting around to writing the content. Specifically because I broke down the BHAG (“to be a NY Times Best Selling Author”) into a series of mundane tasks (“come up with a topic”, “come up with a name”, “come up with some topics”, etc) I was able to make some progress quickly, get my excitement levels up, and maintain the energy.

The moral? You can get off the couch and start that thing, whatever it is. If you can’t seem to muster the excitement, you either have a terrible idea, or too big of one. If the latter, then break it down to some smaller pieces and get moving.