Bootstrapper.com - Confessions of Serial Entrepreneurs

I’m still following the health care debate, with a special focus on how it will impact our community’s ability to bootstrap ideas into small businesses.

The New York Times blog offers a great recap of how the pending health care legislation affects small businesses. The legislation provides a mandate for small businesses to provide health insurance, but the fines for not complying end up being far cheaper than providing insurance. It also creates a small business health insurance exchange that may or may not (I bet not) rein in costs.

This makes it cost-effective for small businesses to drop health insurance coverage for their employees. The incentive to provide health care comes not from the government, but from companies who have built a successful business model and are looking to recruit top talent.

But I’m more interested in the bootstrap stage… what happens to the people who want to grow ideas into small businesses. I’ve argued that health care woes, at the margin, limit the field of entrepreneurs who can take the plunge into bootstrapping world. I’d hoped legislation would ease this burden by providing access to affordable insurance. Instead, it raises the hurdle by mandating entrepreneurs purchase coverage, swelling the cost of living for self-starters. In the future, expect the bootstrapping community will skew towards the already-wealthy and away from innovative youngsters the middle class.

At the 9.14 KM view, the bootstrapping community today jump starts the economy of tomorrow. This legislation undeniably burdens American innovation and punishes our enterprising community. The already difficult path to bootstrapping a business just got tougher to traverse. Shame on our leaders.

The plus side is that daredevils will keep playing with fire. No matter how outsized the risk, there’ll always be exceptional risk takers who rise to the challenge. And our community is talented at spinning struggle into opportunity.

Case in point, I’m already exploring starting a health care/venture capital company, one that simply provides discounted health care in exchange for equity in promising ideas. If you have experience in the health care industry, I would love to talk with you about this!

Happy holidays and best wishes to all our readers in the new year.

It’s not embedding for some reason, but check out this hilarious video of HP’s “epic fail” attempt to include facial tracking software.

In terms of business lessons, it should be easy let you draw your own Aesop from this one…

Hat Tip to BusinessPundit

Focus magazine covers 25 things they learned about business from It’s Always Sunny in Philadelphia.  Must read, if you’re as much a fan of the depraved show as I am.

Two other lessons they could draw from the sleeper success of the show:

• “If you build it, they will come.”  The show languished in the ratings for a while, but kept putting out great content. Eventually, Hulu came along and the show’s popularity skyrocketed.
• As the quotable H.L. Mencken phrased it, “No one in this world, so far as I know — and I have researched the records for years, and employed agents to help me — has ever lost money by underestimating the intelligence of the great masses of the plain people.”  The show proudly plumbs new lows of immorality, and it’s always fun to watch.

Nowadays, I always hear the same clumsy phrase on loop:

EVERYBODY’S ___________!

In reality, here’s an alphabetical list of what “everybody’s” doing:

• semi-actively setting personal goals
• semi-passively seeking entertainment
• sleeping or worrying
• thinking about family
• thinking about food
• thinking about friends
• worrying or sleeping

Happy Discoverer’s Day, y’all!

Inc magazine published their list of the fifteen best industries in which to start a business.  The first on their list was candy.

It got me realizing how our love of a quick sugar fix has actually produced a vast marketplace for many stable and long-lived brands.  Somehow, candy brands don’t die.  Necco started in 1847.  The kindly old Werthers grandpa has only been around for a decade, but the company itself dates from 1903.  Hershey’s was founded around the turn-of-the century, and its stock has paid a regular dividend for the past two decades.  I don’t know anybody who enjoys old-timey candies like Circus Peanuts, Wax Lips, Bit-O-Honey, Oh Henry, or the great taste of Charleston Chew, and yet a market clearly still exists for these 80-100 year old candies.

So if you’re one of those entrepreneurial types focused on sustainability and the long term, I second the call to create a new candy recipe.  Caramel wasabi cakes, anyone?

According to Danah Boyd, MySpace has become a digital ghetto, following the online equivalent of white flight to Facebook.  She doesn’t attribute this to any kind of active racism, but rather that offline racial and class divides are extending themselves onto the internet.  The “Stuff White People Like” blog has smartly parodied this phenomenon.

Although the internet was initially a color-blind and unwalled neighborhood, the hidden hand of racism had no problem moving into the digital age.  Kozmo.com, a casualty of the first internet bubble, ran a cool on-demand delivery service that redlined zip codes with a predominantly African-American population.  Google’s unsuccessful attempt at an online social network, Orkut, devolved into a haven for various hate groups in other countries.

The takeaway? Don’t invest in services that promise to make the world less divided.  It’s easiest to gain market share if you focus on dominating a tiny niche.  Competing services that try to be all things to all people will, if they survive, diverge and inheriting a different segment of the audience.

As health care makes its way around Congress, it’s worth noting that nobody has a higher stake in health care than entrepreneurs and small business types.  Nationwide, about 15% of people don’t have health care, and 63% of these people are self-employed or work for small businesses.

Where I sit, my generation consists largely of well-educated yet risk-averse 20-somethings.  In this crowd, a job doesn’t count unless it comes with health care, and the minority who forego these benefits to pursue entrepreneurial ventures are insane (in my case, guilty as charged.)  I think it’s a shame that much of this talent pool has quarantined themselves from the most exciting scene in the world.  Small startups could really benefit by having these bright young folk pushing innovative ideas, making mistakes, and getting their hands dirty before their lives get too settled.

A well-drafted health care plan would be a boon.  Providing a basic plan on the cheap could meet the sparse health care needs of our younger generation and give people a bit more breathing room to learn to bootstrap.  Pre-funded startups would have an easier time convincing talented workers to jump ship for start-up land, and more creative business ideas would see the light of day.

Of course, a significant chunk of the population will always be too tepid to ever surrender the comfortable K-Cup coffee lifestyle large corporations provide.  I nonetheless suspect we would see enough movement at the margins to add a number of great new voices to our culture.

The small business community should openly embrace any universal health care plan that does not mandate small businesses shoulder the burden.  We have everything to gain from the creation of an affordable alternative to the crippling health care cost of hiring an employee.

Google’s taking to TV to advertise its Chrome web browser because it’s gotten such a lackluster response online.

Here’s the question that has eluded the tech and business press coverage of this event… is Google implying that TV ads are preferable to internet advertising when you want to achieve real results?

On some level, I think this is obviously true.  Integrated ad campaigns are almost universally better than single channel ones.  If see an ad for Absolut on television, you’ll pay more attention to it if you happened to also catch one of their ads while thumbing through a magazine.  It stands to reason that some suckers will click through the internet ads more often if Google’s Apple-esque TV commercial is still on their brains.

Fortunately for Google, they’ll gain valuable analytical data from the whole experience whether or not Chrome succeeds.  They’ll gain metrics on precisely how effective their internet ads can be when mixed with other channels.  This provides a useful case study for when they want to convince PR agencies to divert some of their TV dollars towards Google.

For a small fry like myself, however, their little experiment just so happens to reinforce my firsthand experience with how ineffective a Google AdWords campaign can be.  It makes me think Google ads might be great if only my small business could afford a TV campaign to back it up.  As it stands, I’m further convinced Google AdWords remains bad option if you’re looking to Bootstrap your company.  Instead, we should all rely on our own creativity and grit.

Re: Fed to pump another $1 trillion into U.S. economy

Does the Fed have a secret plan to undermine AIG bonuses by devaluing the dollar?

So you’ve decided to take your brilliant idea and put it into execution.  Maybe you’ve even started building something, registered an LLC, or ordered your business cards.  You’re finally at a point where you’re comfortable opening your mouth and telling your friends and family.

Get ready for a stampede of advice.  Everybody you tell it to will tell you fifteen things you need to do.  And how you have to do them right now.  And how you’ll never succeed unless you do what they say.

I call it the Brainswarm.

During the Brainswarm, you get a hundred ideas a day.  You probably already thought of 99 of them.  But each idea you hear again suddenly becomes the most important idea in the world.  With so many things people say you need to do, you have no idea how you could ever get them all done.

How do you cut through the mess?  At risk of adding another voice to the Brainswarm, here’s the three steps I take to help me focus:

1. Write down how you’re planning on making money.

Write it in UPPERCASE in the center of a piece of paper.  Circle it.

Haven’t picked a way to make money yet?  Do it now.  Have too many ideas?  Pick one.  Have no ideas?  Try something simple: “charge people for my widget” or “slang our band’s newest album on ourstage“.

2. Write every new idea in appropriate proximity to this central idea.

Every time your pals from church or your motorcycle gang give you an idea, you have a good place to jot it down.  As you do, take a second to judge whether it belongs in the center or on the edge.

Adding magenta stripes to your widget?  Probably on the edges of the paper.  Calling the gal who works for the widget distributor?  Right up next to the nucleus.

Work your way from the center outwards, and you have your priority list.

3. Fail.  Back to step 1.

So the gal from the distributor sez she can’t distribute your widget until it has magenta stripes.  So be it… at least you learned how to attack that core idea at the nucleus.

The first nucleus of your chart will probably fail.  It’s wonderful news.  You’ll learn a heap, and the next chart you make like this will be more informed.  Maybe it won’t be until the fourth or seventeenth chart you draw before you score some revenue, but it counts as positive yardage.

Finding a way to monetize your idea should be priority number one for any startup.  If your budget is in the black, you’ll have the resources to chase after all the sexy ideas floating on the periphery.  Most importantly, once you’ve found a revenue stream, it proves that your brilliant idea is also of value to your customers.

The best part is that this strategy even works for companies like Twitter, who are all-but-missing business models.  The idea at Twitter’s nucleus seems to read something like: “Avoid profit at all costs.  Act super-hip so millionaire playboys will write us big checks.”  By golly, it’s worked so far.  If it ever fails, they’ll change their nucleus.

Alanis Morissette lamented the free advice that she just didn’t take.  Maybe if she had properly diagrammed the ideas from her brainswarm, she wouldn’t have had the same problem.  Who would’ve thought, it figures?

Do you want to make money, or do you want to be famous?

Neither answer is necessarily correct. The two often collide, however, so it’s useful to decide which you prefer before you start a venture.

Mark Zuckerberg of Facebook (happy fifth birthday!) prefers fame, building millions of loyal users without anything resembling a business plan. Bernie Madoff prefers money, accumulating truckloads of money from his reclusive Manhattan cave.  I’m in business, so I prefer the latter by default.

The two don’t have to be exclusive, but they tend to be inversely related.  With exposure comes questions, liabilities, and competitors. The best-run companies I’ve ever seen keep a low profile, make large deals with a small number of targeted clients, and keep profit margins absurdly high.

Money is made in the shadows because information is still power. A two-seven face down in hold ‘em is still worth more than a two-seven face up. Rock, paper, scissors is easier to win when you wait until your opponent has thrown. The value of a wedding ring to a man at a pickup bar drops dramatically if he admits he’s not married.

If you’re looking to make money with your startup, I’m not suggesting being super-stealthy or dishonest. Instead, the next time you schedule a meeting, see what happens if you listen more than you talk. I’ll bet the other person will feel better about the meeting, and yet you’ll have learned more. If you two have a possible business overlap, make it a game: how little you can tell them and still close the deal? Legend has it LBJ could win a Senator’s vote with just ten minutes and a handshake. Try getting it down to a sentence and a wink.

But enough about me, tell me more about your strategy.

Two Facebook stories for you… one of them is delicious, but both are connected.

Story One: Burger King has ended its clever Whopper Sacrifice campaign.  For a time, Facebook users could get a free Whopper if they agreed to unfriend ten of their friends.  This was the rare viral marketing campaign that actually got people talking.  I, for one, had just started to pit my Facebook friends against each other for survival before the promotion got pulled.

Story Two: Facebook’s valuation seems to have dropped from about $15 to $2 billion.  This volatility is unsurprising, as it’s still a controversial question whether or not Facebook will be able successfully monetize its vast potential.  The potential is certainly there: if Facebook were a country, Zuckerberg boasts that they would have the world’s eighth largest population.  What he doesn’t mention is that, at an estimated 2008 revenue of $300 million, their theoretical GDP would barely rival the tiny island nation of São Tomé and Príncipe.

It turns out these two stories are elegantly connected by the internet’s reigning übernerd, Jason Kottke.  In a eureka moment, he crunches the numbers on the Whopper promotion.  Given that ten friends are worth a $2.40 Whopper and the 150 million Facebook users have an average of a hundred friends, he computes Facebook’s valuation at… $2 billion dollars.  Whether Facebook’s value is calculated from the exchange of private shares or a quarter pound hamburger, the numbers work out the same.  Coincidence… or math?!?

The moral of the story, if there is one, is the power of outside-the-box metrics.  Often times, pre-revenue startups struggle to quantify their contributions.  But with a little creativity, you can probably come up with a bizarre conversion index to give substance to the intangible.  What’s the exchange rate between an SMS and a tweet?  Can Youtube’s value be expressed as a function of the number of Cherry Chocolate Diet Dr Pepper cans Tay Zonday moved?  Whenever a seemingly useless number emerges from your startup, can you use that number to estimate something important?  All food for thought.

Speaking of food, I never got myself a free Whopper