Warning:  I’m about to go on a bit of a rant.  I usually only reserve these kinds of articles for when things really irritate me, and this is one of those times.  I’m generally a patient, considerate person, really I am.

Here’s the source of the most irritation I’ve felt from a technology article in a long time (and this from BusinessWeek, a major brand that I respect): 

Beware The Hype For Software As A Service

I actually hesitated to even include a link to the article, because you might be tempted to go read it.  But it has to be done.  It’s kind of like when you smell something really awful that’s been growing in your refrigerator.  Then, you give it to your spouse and say:  “Hey, check this out — can you believe how bad it smells?” 

Disclaimer:  I work for a tiny little startup that provides marketing software as a service.  So, I guess I could be biased.  I’m not wrong on this one, but I could be biased.

Back to the article.  Here are some of the issues I had:

1.  SUVs Suck, So SaaS Must Too:  The author does some strange build-up in the opening paragraphs using “SUVs are cool” and “cell phone causes cancer” as examples.  The point?  That both of these are/were surrounded by “hype”.  And, we should always beware of hype.  Think of the children!  I’m already irritated.  For the record:  I don’t think SUVs are cool.  Oh, and these inane examples are what drove me to the title of this article.  Fight fire with fire and all that.

2.  SaaS Is Cheaper:  The article tries to refute the “myth” that SaaS is cheaper by providing this cogent argument:  “Most service providers charge each user by the month.”  There’s no discussion of the economics of installed software, drive-by sales in enterprise software, or the cost of capital for small businesses.  Hey, those SaaS vendors charge monthly, so it must be more expensive.  Right?  That must be why Salesforce.com has been so successful — they just charge more than Siebel.

2.  SaaS Reduces Hardware Investment :  It refutes the “myth” that SaaS requires less hardware investment by arguing that although you don’t have to pay for all the servers and stuff, you still have to pay for fast access to the Internet.  Here’s the quote:  “Sure, the SaaS providers deal with the servers, and all the Windows headaches and patches and builds and versions and whatever. That’s their problem. But you still need fast access to the Internet.”  The rest of this particular argument just gets worse from there.  Now, I’m really irritated. 

3.  SaaS Is Quicker To Setup:  Yep, this is a myth that is “busted” too.  The example provided:  “It’s kind of like assembling furniture.”  The author provides as evidence that SaaS is not easier to setup, the fact that he’s got a lopsided bookcase in his den.  This “proves” that little theory about SaaS being quicker to setup, wrong.  Sure, setup costs for SaaS can be high (based on level of customization), but on average, SaaS offerings are simpler and quicker to get going on.

4.  Data Can Be Secure In SaaS:  The article argues that data backup and reliability in SaaS is a myth.  Once again, we have extreme (and in one case totally unrelated) examples offered as proof.  Yes, data security is always a risk, but I’m not convinced that the risk is any higher for SaaS than businesses (especially small businesses) than running the software on your own servers, sitting in your closet somewhere.

If you think I’m being overly harsh, please read the article.  I dare you.  And, if you do go read it, please don’t forward it around to your colleagues.  Sometimes, you don’t need validation that the thing in your refrigerator really does smell that bad.

End of rant.  Back to our regularly scheduled program next time.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

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Today’s big news from TechCrunch is is that Google is in the final stages of acquiring digg for about $200 million.  Makes sense to me.  Particularly given some of Google’s recent experiments having social voting in their search results pages.

I’d been thinking about startup acquisitions earlier this year (and started keeping a side list of deals I thought should get done).  Just as an amusing exercise.

The 5 Tech Deals That Should Happen

Disclaimer:  When I say should happen, it’s not a prediction, just something that I think makes sense.

1.  Facebook should acquire Twitter:  Let’s face it, back in the early days, some of us wondered how Twitter was different from an enhanced version of Facebook status updates.  I think the two products would work well together, and Facebook has the resources to help Twitter get over some of the current platform stability issues.

2.  Google should acquire FriendFeed:  This would be a bit similar to the FeedBurner acquisition (although FriendFeed is nowhere near as far along).  Google gets a good product that can further it’s social networking stuff.

3.  Microsoft should acquire Xobni:  This one’s already been talked about before, and almost happened.  It should happen.  Xobini’s got a great team, Microsoft needs some new energy in the Outlook group.

4.  Intuit should acquire Freshbooks:  You may not have heard of Freshbooks, but it’s a cool company with a cool product for invoicing.  Intuit needs a much better web offering, and the Freshbook folks have great design and are great entrepreneurs.

5.  Ning should acquire Mixx:  Ning is growing, but needs more “best of breed” style social networking apps.  Mixx is brilliantly executed and more and more people want/need some type of focused social news product as part of a larger social network or community.

So, what do you think?  What’s your vote for the acquisitions in the remainder of 2008 that should happen?  Leave ‘em and debate ‘em in the comments.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

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If you read this blog, there’s a pretty good chance you’re somehow involved in the business of software.  By that, I mean you are trying to (gasp!) make money in the software business.  If that’s the case, I can’t think of any better place to be this September than the Business of Software Conferencebeing held in Boston on September 3-4. 

Some Reasons Why You Should Be At Business Of Software 2008

1.  Joel Spolsky will be there.  Well, he’s not just going to be there, he’s one of the organizers along with Neil Davidson, the CEO of Red Gate Software. 

2.  Seth Godin will be there.  Seth is a brilliant marketer.  Doesn’t get more brilliant.  And, if you’re in the business of software, you really, really need to understand marketing.  If you’re not reading Seth’s blog, you should be.

3.  Jessica Livingston will be there.  Jessica is the author of “Founders At Work“, which was an exceptionally fun and insightful read.  Parts of it gave me goose-bumps (yes, I’m that strange).  If you’re both a software person and a startup person, you need to read her book. 

4.  Jason Fried of 37signals fame will be there.  Jason’s on my list of “most pragmatic entrepreneurs ever”.  He was kind enough to let me interview him for my graduate paper at MIT back when I was a student.  All around swell guy.  Oh, and you haven’t already, you should absolutely read “Getting Real“.  Now it’s even free.

5.  Richard Stallman will be there.  Yes, thatRichard Stallman.  This should be one interesting discussion.

6.  Eric Sink will be there.  Eric is (in my mind), the software guy’s software guy.  Immensely articulate and thoughtful.  Eric’s aptly named “Eric Sink On The Business Of Software” is one of the books on my startup reading list.

7.  Mike Milinkovich will be there.  He’s the executive director of the Eclipse foundation. 

8.  Steve Johnson of Pragmatic Marketing will be there.  Steve was a big hit at last year’s conference.  If you want to understand why, just watch the video from last year.

9.  Tom Jennings and Paul Kenny will be there.  Tom’s a venture capitalist and Paul’s all about sales.  I’m guessing a few of you are looking for capital or looking for customers.

10.  People like youwill be there.  People that are in the business of software.

Note, the above is not a complete list of speakers. 

Oh, and by the way, I’ve been selected so speak at this year’s conference as well — but please don’t hold that against them.

All in all, Business of Software 2008 promises to be a great event.  Something I’d travel to come see, if I didn’t live in Boston — which I do. 

By the way, if you’re going to go, you can save $300 by registering before July 22nd. 

Hope to see you there.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

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For those that are nauseated or otherwise troubled by gushing praise of tech blogs, please click away now.  I will not be offended.

I’m an avid reader of the TechCrunchblog.  In their own words, it’s a blog “dedicated to obsessively profiling and reviewing new Internet products and companies.”  If you’re in the startup world, and aren’t reading it, you probably should if for no other reason than the fact that your peers are reading it, and it’ll get cited often.  It’s uncomfortable when I hear someone at the office say “Hey, did you read that article in TechCrunch about…” and because I’ve been stuck in meetings for 2 hours and am too polite to read blogs on my Blackberry during meetings, I have to say, “no…umm…I’ve been in meetings for the last 2 hours”. 

Anyways, you get the message.  I heart TechCrunch.

Now, fast forward a bit, and lets talk about CrunchBase.  CrunchBase is a user-editable structured database about companies, people and products in the tech world.  It’s a great complement to TechCrunch.  The site is well thought out, gets the job done and actually has a pretty good data set.  It’s useful.

On to the news that drove this article.  The nice folks at TechCrunch just released an API for CrunchBase.  I’m an API kind of guy.  As the developer of the reasonably popular Website Grader, a free website analysis tool, I am always on the lookout for new data I can feed into the Website Grader algorithm to make it even more useful.  The CrunchBase API is likely going to fit the bill.

So, here are the reasons I l am bestowing about TechCrunch the embarrassingly gushing praise:

Reasons I Love The CrunchBase API:

1.  Simple Invocation:  Invoking the API is simply a matter of accessing a URL containing the company or product in question.

For example: http://api.crunchbase.com/v/1/company/hubspot.js

2.  Simple Output:  The data comes back in JSON format. This is great for use within Javascript, but even for other languages (PHP, Java, C#, etc.), it’s relatively trivial to take the JSON output and convert it into some other format.  One tip for the TechCrunch folks would be to add a parameter to the API URLs to request output in different formats (like XML).  But, no biggie.

3.  No Registration, No Limits:  In an uncommon show of cluefulness, the nice folks at TechCrunch have made it supremely easy to get started.  You don’t have to register, request access to an API key or developer account, and there are currently no governors or limits on consumption.  That’s pretty cool.  Gutsy, but cool.

4.  Communication:  To top off all of this awesomeness, the TC folks have really gone out of their way to accept input from the community regarding the API.  The blog article announcing the API has 59 comments right now.  14 of them are responses from the TC folks — including Michael Arrington himself.  TC also setup a Twitter account.  I “followed” them, send out a tweet and was immediately tweeted back with a response to an idea I had for improving the API.

Having said all that, the one critical feature I think they need to add is better search through the API.  But, they’ve already said they’re looking into that.  

So, with all that I’d like to congratulate Michael and his team at TechCrunch for an awfully with-it approach to their business.  For those of you that I’m gushing like a teenager with a crush — you were warned.

If you’re a web developer and have an idea for building something cool on top of the CrunchBase API, drop me a line.  I’d consider funding it and contributing it back to the community.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

You can also find OnStartups on Twitter.

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For those that are nauseated or otherwise troubled by gushing praise of tech blogs, please click away now.  I will not be offended.

I’m an avid reader of the TechCrunchblog.  In their own words, it’s a blog “dedicated to obsessively profiling and reviewing new Internet products and companies.”  If you’re in the startup world, and aren’t reading it, you probably should if for no other reason than the fact that your peers are reading it, and it’ll get cited often.  It’s uncomfortable when I hear someone at the office say “Hey, did you read that article in TechCrunch about…” and because I’ve been stuck in meetings for 2 hours and am too polite to read blogs on my Blackberry during meetings, I have to say, “no…umm…I’ve been in meetings for the last 2 hours”. 

Anyways, you get the message.  I heart TechCrunch.

Now, fast forward a bit, and lets talk about CrunchBase.  CrunchBase is a user-editable structured database about companies, people and products in the tech world.  It’s a great complement to TechCrunch.  The site is well thought out, gets the job done and actually has a pretty good data set.  It’s useful.

On to the news that drove this article.  The nice folks at TechCrunch just released an API for CrunchBase.  I’m an API kind of guy.  As the developer of the reasonably popular Website Grader, a free website analysis tool, I am always on the lookout for new data I can feed into the Website Grader algorithm to make it even more useful.  The CrunchBase API is likely going to fit the bill.

So, here are the reasons I l am bestowing about TechCrunch the embarrassingly gushing praise:

Reasons I Love The CrunchBase API:

1.  Simple Invocation:  Invoking the API is simply a matter of accessing a URL containing the company or product in question.

For example: http://api.crunchbase.com/v/1/company/hubspot.js

2.  Simple Output:  The data comes back in JSON format. This is great for use within Javascript, but even for other languages (PHP, Java, C#, etc.), it’s relatively trivial to take the JSON output and convert it into some other format.  One tip for the TechCrunch folks would be to add a parameter to the API URLs to request output in different formats (like XML).  But, no biggie.

3.  No Registration, No Limits:  In an uncommon show of cluefulness, the nice folks at TechCrunch have made it supremely easy to get started.  You don’t have to register, request access to an API key or developer account, and there are currently no governors or limits on consumption.  That’s pretty cool.  Gutsy, but cool.

4.  Communication:  To top off all of this awesomeness, the TC folks have really gone out of their way to accept input from the community regarding the API.  The blog article announcing the API has 59 comments right now.  14 of them are responses from the TC folks — including Michael Arrington himself.  TC also setup a Twitter account.  I “followed” them, send out a tweet and was immediately tweeted back with a response to an idea I had for improving the API.

Having said all that, the one critical feature I think they need to add is better search through the API.  But, they’ve already said they’re looking into that.  

So, with all that I’d like to congratulate Michael and his team at TechCrunch for an awfully with-it approach to their business.  For those of you that I’m gushing like a teenager with a crush — you were warned.

If you’re a web developer and have an idea for building something cool on top of the CrunchBase API, drop me a line.  I’d consider funding it and contributing it back to the community.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

You can also find OnStartups on Twitter.

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I recently came across an article in Entrepreneur magazine that talks about startup hiring mistakes.  I don’t know Brad Sugars (the author), but he’s a columnist at Entrepreneur magazine and has written 14 books.  Though I’m impressed by the fact that he’s a published author, I disagree with several points from the article. 

I also was a bit put-off by the statement “the good thing is that there are some hard and fast rules startups should follow”.  I may not know a lot about startups, but one thing I do know is that there are very few “hard and fast” rules.  And, those rules that are hard and fast are rarely interesting enough to talk about.

So, here are my tips for startup hiring startups.  In some instances, these conflict directly with the Entrepreneur article — in others, they’re just different.

1.  Don’t Hire Based Solely On Intelligence/Brilliance:  You interview the candidate and she has a PhD from MIT and is off-the-charts smart.  That’s great.  Intelligence is an important factor in recruiting for most startups.  But, hiring just on intelligence is usually a mistake.  You need at least two more things:  A passion for getting things done and cohesion with your culture.  (That’s a fancy way of saying that they agree with what you stand for and “fit in”).

2.  It’s Ok To Hire The Inexperienced:  If you find super-smart people that fit the culture and are able to get things done they may be a great recruit — even if they lack experience.  At my startup HubSpot, we call this hiring people that “haven’t seen the movie before” (this is our way of saying:  They don’t have experience in the specific role/function).  We’ve had great success with this. 

3.  It’s ok to hire for an undefined role:  In an ideal world, you have a nice clear job description and a role in mind for the person you’re trying to hire.  And, your network is so strong and your luck so good that precisely the perfect candidates start dropping into your lap just as you need them.  Unfortunately, most startups are not so lucky.  Sometimes you get the wrong people for the right role (the one you’re recruiting for).  Other times, you get the absolute “right” people, but just have no current openings.  Sometimes, it’s ok to hire these “superstars” even though they may not fit the job description you are hiring for.

4.  It’s Ok To Recruit For The Job You Hate:  You might be good at a lot of things (developing code, designing things, selling, accounting, etc.).  But chances are, you may dislike some of these activities even though you could be good at them.  The good news is that there are smart people out there who love the very stuff you hate.  There’s nothing wrong with recruiting people for stuff you’re either bad at or just plain don’t like to do.

If you’re interested in more tips on startup hiring, I kind of like some of my points in “5 Quick Pointers On Startup Hiring“.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

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Copyright 2005-2008, Dharmesh Shah - OnStartups - Software Startup Blog

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The popular Boston Web Innovators Group held in Cambridge, MA is coming up this Tuesday, July 15th 2008.  Like the events before it, WebInno18promises to be another great event.  I plan to attend and might even experiment with Twitter Blogging it on my @OnStartups twitter profile.  If you’re going to be there, send me a tweet and let me know.  Will look out for you.

For one of the prior WebInno meetups, I did a quick analysis of those attending (using the RSS data of registrants as the input) and had come up with some Web Innovator Cambridge statistics.  I had the PHP script to do the quick analysis developed by one of the OnStartups readers.

Thought I’d do another one this time around and identify how the make-up of the group has (or has not) changed).

Here’s the top keywords that show up in the profiles of the people signed up so far.  There are about 870 registrants for Web Inno 18 so far (compared to 792 for Web Inno 17).  The event definitely seems to be growing.

Hope to see you at WebInno 18.  If you have any doubts that the Boston area has a vibrant Internet startup community, this should dispel those doubts. Hat tip to David Beisel who has done a fantastic job building this up.  I can remember the early, early days of WebInno when all of us would fit around a bar in Kendall Square.  We’ve come a long way.  Thanks David!

Hope to see you on Tuesday at the Royal Sonesta hotel.  I might try to put together an informal dinner for a few folks before (or after) the event as I’ve done every time since I started going to these things.  Send me a tweet at @onstartups if you’re interested.  I usually limit it to about 6 people and keep it to just tech-entrepreneur types that I haven’t had the chance to chat with in a while.

Looking for other startup fanatics?  Request access to the OnStartups LinkedIn Group.  13,000+ members and growing daily.

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The reasons so many people hate (or intensely dislike) Microsoft are plentiful and for the most part, pretty easy to understand.  If you were to ask around, reasons cited would centralize around too much power, lack of innovation, stifling creativity, being “closed” and generally products that on average, fail to delight customers.  If you’re one of those that hates Microsoft, I’m sure you have your reasons.  Many of us love to hate Microsoft.

And, of course, lots of us love Apple.  We love Apple in that sheepishly adoring way that causes us to want to run our fingers lovingly over our favorite Apple product when nobody is looking just because it makes us happy.  Happy in a good way, and not in that weird, twisted kind of way.  It’s an innocent love.  All sunshine and daffodils. 

But, I’m going to argue that though we will likely continue to love Apple for a while, there may come a day we hate doing so. 

Why might we hate to love Apple someday?

One simple, fundamental reason:  Apple cares too much about customers, and the customer experience — and not much about the community.  Apple has become a benevolent dictator.  They’ll invest lots of time, energy and money making their products great and their customers “happy”.  But, at their core, they want it to be them that delivers that happiness — not someone else.  Third-party developers are a necessary evil.

There’s a reason for this:  Apple (rightly) thinks that a phenomenal experience is created by closed, proprietary systems by companies that control the boundaries and edges of product design. 

Great experiences are created when the experience designer can dictate and control as much as possible.  The iPod would not have been great if the hardware were designed by one company, the device software by another, applications by another, etc.  The iPod was exceptionally great because Apple controlled it all.

This is why the original Apple computers had such a better experience than the IBM PC.  On the IBM PC platform different companies built the hardware, OS, apps, devices, etc.  Lots of creativity — but understandably, lots of crap.  And lots of complexity for the user/customer.

So, Apple likes control.  But this advantage of control only goes so far.  Eventually, users will come to value something more than the delightful experience.  Might be performance of an individual component (larger storage), lower price, wider selection of add-ons, etc.  (Maybe even replaceable batteries, less confining DRM, etc.)

Now, thanks to Apple, millions of consumers are enjoying technology like digital music that would likely not have done so without Apple’s fanatical focus on solving for ease-of-use and experience.  But, now that we’re there, will our love of Apple endure? 

And, if we do continue to love Apple, will we hate ourselves for doing so someday?  Maybe.  Maybe not.

The insight for startups?  Some of the biggest innovations and market successes come from companies that are total control-freaks and fanatically focused on solving the problem.  Often, the problem is best solved by an uncompromising purity of approach.  

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The reasons so many people hate (or intensely dislike) Microsoft are plentiful and for the most part, pretty easy to understand.  If you were to ask around, reasons cited would centralize around too much power, lack of innovation, stifling creativity, being “closed” and generally products that on average, fail to delight customers.  If you’re one of those that hates Microsoft, I’m sure you have your reasons.  Many of us love to hate Microsoft.

And, of course, lots of us love Apple.  We love Apple in that sheepishly adoring way that causes us to want to run our fingers lovingly over our favorite Apple product when nobody is looking just because it makes us happy.  Happy in a good way, and not in that weird, twisted kind of way.  It’s an innocent love.  All sunshine and daffodils. 

But, I’m going to argue that though we will likely continue to love Apple for a while, there may come a day we hate doing so. 

Why might we hate to love Apple someday?

One simple, fundamental reason:  Apple cares too much about customers, and the customer experience — and not much about the community.  Apple has become a benevolent dictator.  They’ll invest lots of time, energy and money making their products great and their customers “happy”.  But, at their core, they want it to be them that delivers that happiness — not someone else.  Third-party developers are a necessary evil.

There’s a reason for this:  Apple (rightly) thinks that a phenomenal experience is created by closed, proprietary systems by companies that control the boundaries and edges of product design. 

Great experiences are created when the experience designer can dictate and control as much as possible.  The iPod would not have been great if the hardware were designed by one company, the device software by another, applications by another, etc.  The iPod was exceptionally great because Apple controlled it all.

This is why the original Apple computers had such a better experience than the IBM PC.  On the IBM PC platform different companies built the hardware, OS, apps, devices, etc.  Lots of creativity — but understandably, lots of crap.  And lots of complexity for the user/customer.

So, Apple likes control.  But this advantage of control only goes so far.  Eventually, users will come to value something more than the delightful experience.  Might be performance of an individual component (larger storage), lower price, wider selection of add-ons, etc.  (Maybe even replaceable batteries, less confining DRM, etc.)

Now, thanks to Apple, millions of consumers are enjoying technology like digital music that would likely not have done so without Apple’s fanatical focus on solving for ease-of-use and experience.  But, now that we’re there, will our love of Apple endure? 

And, if we do continue to love Apple, will we hate ourselves for doing so someday?  Maybe.  Maybe not.

The insight for startups?  Some of the biggest innovations and market successes come from companies that are total control-freaks and fanatically focused on solving the problem.  Often, the problem is best solved by an uncompromising purity of approach.  

Original Article
Copyright 2005-2008, Dharmesh Shah - OnStartups - Software Startup Blog

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The Seinfeld fans out there will clearly recognize the reference to “the opposite” episode.  Basically, George tries to change his life by going against his natural instincts and doing the exact opposite.  [For the fanatics out there, I think this is Episode #86, aired May 19, 1994.

Here are a couple of clips from the episode:

George : Why did it all turn out like this for me? I had so much promise. I was personable, I was bright. Oh, maybe not academically speaking, but … I was perceptive. I always know when someone’s uncomfortable at a party. It became very clear to me sitting out there today, that every decision I’ve ever made, in my entire life, has been wrong. My life is the opposite of everything I want it to be. Every instinct I have, in every of life, be it something to wear, something to eat … It’s all been wrong.

Jerry : If every instinct you have is wrong, then the opposite would have to be right.

George : Yes, I will do the opposite. I used to sit here and do nothing, and regret it for the rest of the day, so now I will do the opposite, and I will do…something.
—

As it turns out, this “do the opposite” strategy works out for George.  Things start working out for him.  By going against his natural instincts, he ends up doing things “right”.  He’s noticed.  He comes off as being different. 

So, what does this all mean for startups?  Well, I’ve found that often “doing the opposite” (zigging when others are zagging) can actually work.  Conversely, if you take the tried and true path of others (like your competitors), in your best case scenario, you kind of wind up where most startups wind up — in an unhappy place.  Why not try to be different?

A few examples to mull over:

A Startup Doing The Opposite

VC funding negotiation:  Tell the VC:  “We don’t know what the pre-money valuation should be.  You have a better sense than we do about this.  We’re not looking for the highest “price”.  We just want a fair deal and a board member that is not a jerk.  You seem like you’re smart and not a jerk..”

Recruiting early employees:  If you’re just looking to make a lot of money, this is probably not the place.  Sure, we’re going to give you some options but nobody knows what those are going to be worth (including the founders and the investors).  We all work our butts-off and make less money than we could likely do otherwise.  We all must have some sort of genetic flaw that makes us do this.  If you have that genetic flaw too, you’d probably enjoy it here. 

Early customer conversation:  Yeah, the software kind of sucks but we use it ourselves and it does do useful things.  Why am I charging you to be a beta tester?  Although your input is priceless, we think it just distorts the relationship for you to get it for free.  If you’re a paying customer, we’re going to kill ourselves to make you happy. 

The idea is to be honest, direct and surprise people by taking an approach that they’re not used to seeing.  A lot of times this may fall flat — but lots of things fall flat anyways.  Why not try it? 

By the way, each of the examples above are based on reality from my own startup adventure. 

So, next time you’re in a situation go against your instincts to “spin” things and be super-sophisticated.  Just do the opposite!

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The following is a guest post by Jonathan Sapir of Silver Tree Systems.  I’ve added some editorial commentary (in italics) to help spark the discussion.  Enjoy. 

I have had the misfortune of personally making every one of these mistakes during my years as a software entrepreneur.  I am currently reviewing a startup that seems to be trying really, really hard to make all of them in one go.  As a result, I decided to put this list together in the hopes of saving as many startups as possible from crashing in to the rocks of false hope and misguided thinking.

20 Ways To Put A Monkey-Wrench In Your Machinery

1.       You think that your product must be awesome because your buddies are telling you it is the greatest thing since sliced bread.  Unless they are willing to hand over cold cash to use your product, they are just being nice.

2.        You are finding that your product is so versatile it could solve just about any problem.  This is a clear sign you don’t have anything worthwhile.  

Dharmesh:  This is one of the most insidious problems in software startups.  As developers, we tend to like dealing in higher abstractions.  Writing a simple business application is boring.  But, writing a framework that lets others auto-generate a business application (or any application!) is fun and challenging.  For startups, it is usually unwise to try and build a framework or platform as your flagship offering.  Most people use apps not platforms. 

3.       You have found a client, but in your euphoria you have forgotten to ask yourself if this client is an anomaly.  You need to make sure that the client represents a real market, otherwise you are just building a custom solution.

Dharmesh:  This is what I would call the “you can’t build a software company one custom implementation at a time”.  It’s fine to find big clients that have big problems they’re willing to spend some money for.  This is an easy to way to get started and some cash in the door.  However, it’s imperative to look for the patterns in the customer’s needs and be thinking about future customers.  If you have multiple sets of code running for multiple customers, you’re going to be in trouble.

4.       You keep coming up with ideas for all the many different ways you can make money with your product.  You can sell it to Google, ISV’s can include it in their products, Adobe for sure will be interested.  If you are not focused on something specific, you are dead.

5.       You choose to work with verticals that don’t have a lot of money.  Sure they like your product, but they can’t afford to pay you enough for it, so why focus on them?

6.        You choose to work with a small client first instead of one that will be able to help you get more clients later on.  Just because Joe’s Fish & Chips is using your product doesn’t mean Motorola will be impressed enough to try it.

Dharmesh:  Closing on some smaller clients early isn’t particularly a bad thing (in fact, you might be targeting the small business market).  As long as you can find some repeatable pattern so you can build software for many people (and sell it to many people), you’re probably ok.

7.        You think you can’t work with a “real” client early on because it’s too risky.  But you aren’t selling them the product - you are selling them the idea of the product.   If you can’t sell them the idea, you are never going to be able to sell them the product.

8.       You start building the product before you have a (real) client identified.  Again, if you can’t sell the idea, you are definitely not going to be able to sell the product.

9.        You think you can’t sell the idea until you have a product.  This is a major killer - you think that as soon as you have feature X or Y, you can start showing people your idea. One more time - if you can’t sell the idea, you can’t sell the product.

Dharmesh:  I agree.  Reminds me of  “Stealth Mode, Schmealth Mode” posted earlier.

10.    You don’t want to stop or throttle development when you aren’t really sure you are on the right track.  You just want to keep on going, because you just know that soon the product will be so awesome that it will dazzle everyone with its brilliance.   If people aren’t buying the idea, you better stop wasting money now until you have figured things out.

11.   You think that just because your product can solve a generic problem like “collaboration”, you have a sure-fire winner.  You have to ask yourself how your product really stacks up against the competition that is already out there and why people would buy yours, and if they would, for how much.  Often, the current solution being used is simply good enough, and even if yours is significantly better, no one is going to buy it.

12.   You underestimate the power of a penny over free.  If something is free and barely does what you need, you will stick with it versus something that’s much better but requires you to pull out your credit card.

13.    You think that just because someone says they would definitely use your product that they actually would use it - or that they would pay to use it.  Talk is cheap.

14.    You think that just because people say they would pay for your product (and actually mean it), they would pay enough to keep you off food stamps.

15.   You think that just because there is a company making money in your field, there must be a lucrative market that you too can take advantage of.  But there may not be room for more than one successful product in this particular area.  And the incumbent has a much better chance than you do of succeeding.

16.   You think it’s not a big deal for a user to create yet another login to use your product.  But it is.  This is like the penny versus free.  They have to have a really good reason.

17.   You think because your product integrates nicely with a bigger product, you’re golden.  But you forget that there is inside-out and outside-in integration.  If I am in Google and there is a tool (like a gadget) that I can easily access (i.e. I don’t need another login and password), I am much more willing to try it than if I have to go to another site, sign up, sign in, and then get to my Google application from there.  So if you are going to integrate with an application your target market is already using, it must be inside-out integration, not outside-in.  Facebook applications are a good example of inside-out integration.

18.    You think you can get users to pay a reasonable monthly subscription fee, but you forget that you need a LOT of $19/month subscriptions to make real money.  Do you really understand how many subscriptions you need, and how realistic is it that you are going to get there?

19.    You think that you need to offer an onsite solution to go along with your SaaS solution, but you forget the huge costs involved in supporting on-site software.  Besides, if think your market is both an on-site corporate solution and also a SaaS-based consumer application, chances are one of those assumptions is wrong.

20.   You think you have come this far, you can’t possibly stop now.  It’s like you are swimming across the lake, and you are more than halfway there.  So you just keep on going, but the shore keeps receding into the distance…

—

Thanks to Jonathan for a great article.  If you have your own list of “signs of trouble” in a software startup, please leave a comment.  Or, if you’ve got a great article that you think will help software entrepreneurs, email me to discuss making a guest submission to OnStartups.com. 

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Here are the six simple steps for building a startup (in this case, a software startup).

1.  Figure out what to build.  You can do this by being brilliantly insightful (which you might be), or by just talking to some people.  Ask them questions.  Would you use this?  Does this solve a problem?  Would you pay for this?  Do you know anyone that would pay for this?  Are you going to roll your eyes and laugh out loud once I leave the room?  Are you going to tell you spouse this idea over dinner this evening to demonstrate that you indeed do have a sense of humor?

2.  Build something.  It doesn’t have to be the world-changing thing you devised in step 1, but a close enough approximation.  It should do at least one useful thing from the list of game-changing things that’s on the feature-list from #1.   Oh, and it should sort of work (even if requiring the assistance of some chanting, prayer and promises to recycle more).

3. (Option A)  Release!  Get your product out there.  Even if it’s buggy (which it will be).  It is possible that everyone that sees it runs screaming in the other direction.  Mothers protect their children in its presence.  But, get it out there and work like heck to deal with the aftermath of the steaming pile of elephant doo-doo you’ve unleashed upon the world.

3. (Option B) Make Perfect, Wait, Release!  This avoids the problems with Option A because people will no longer run screaming.  But, nobody cares about your product now because everyone is flying around with jet-packs on their back and 16-core processors are embedded in people’s brain as an outpatient procedure.  Your market changed and your doohickey (however “perfect”) is irrelevant.

4.  Sell.  Sell.  Sell.  The law of large numbers says that the larger the number of people exposed to the product (see Step 3a), the more people you’ll encounter with average coordination who will trip and fall when trying to run away from your product demo.  Some of these people will buy while still in a semi-dazed state.  Voila!  You have customers.

5.  Refine.  Armed with a few paying customers, see what you can learn from them.  What are they like?  How do they use the product?  What do they say between the screams of frustration?  Figure out how to lower the pain quickly and treat them gently.  During these brief spites of happiness that you customers have, other customers will come into contact with them think “Hey, Joe seems to be happy — even though he’s got this far-away look in his eyes”, maybe the software isn’t too bad.  Let me try it out…”  Bing!  You have another customer.

And the story goes on. 

For the really, really simple minded here’s the summary:

Decide what to build, launch an imperfect version, sell unsuspecting customers, keep improving, sell more unsuspecting customers.  Lather, rinse, repeat.  SUCCESS!

—

By the way, if you haven’t joined the OnStartups Group on LinkedIn, you’re not missing much.  There’s not much functionality there yet (but the group is big).  The hope is that someday soon, we’ll have more functionality so you can collaborate more meaningfully with other startup folks.  Until then, if you’d like to request access, please do so. That way, you can say you joined the group when it was just 11,692 members.  Come on in and join.  It’s quick, painless and free.  Request access to the group.

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Chances are, if you’re reading this article, you are either involved in a startup already, or looking to be involved in one.

This article is for the folks in the latter category, the “wannabepreneurs”.  The ones that have always wanted to be entrepreneurs, but haven’t quite gotten around to it.  The folks still slogging it away in BigCo land waiting for the “right” entrepreneurial opportunity to come along.

Here’s my advice:  Stop Waiting!

If you’ve got a passion for startups, you need to be in a startup.  Either run with the best idea you have and start your own thing (even if the idea sort of sucks), or join the best people you know that are already doing something.  Just get out of the daily slog that is most big businesses.  Scratch that itch. 

Be an entrepreneur, not a wannabepreneur.

Here are a few quick points to help convince you:

1.  You’re probably overestimating the risk of leaving that BigCo job.  Chances are, that sort of job (or something awfully similar) will be there a year from now if things go miserably.

2.  Though nothing compares to doing your own thing, joining a startup team is not bad either.  It’s a great way to dip your toes in the water.  Often, half the battle is just getting out of your comfort zone and being around startup people.

3.  Regardless of what your risk tolerance is, you can likely still find opportunities that are more entrepreneurial than what you’re doing now.  There are startups with really high risk, with nothing but a dream and a developer (or two) all the way to startups that have raised several rounds of funding and are on the IPO path.  You should be able to find a startup that meets your risk profile.

4.  Unless you have some compelling evidence that things are going to get easier later to do something more entrepreneurial, chances are, they’re not (going to get easier).  So, if the question is when, not if, then ask yourself “why not sooner, rather than later?”

5.  For those that are thinking: ”Yeah, this is all easy for you to say, you’re not walking in my shoes”, I say this:  You’re right.  If you truly don’t have the situation or circumstances to take the leap, that’s ok.  I just implore you to at least think about it and decide for yourself whether your obstacles are real or perceived.

I’ll close with a quote that’s been on my list of favorites for a while:

“Regret for the things we did can be tempered by time; it is regret for the things we did not do that is inconsolable.” -Sydney Harris

Cheers.

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A few days ago, my startup HubSpot, launched a new app called Press Release Grader. It’s not our core product, but a free tool for marketers and PR folks to analyze a press release and provide suggestions.

The launch has gone exceptionally well for us (and by that, I mean, the uptake in the community is much, much better than we were expecting). Would put some stats here, but it’d seem a bit like bragging and the focus of this article is not on press release grader or its specific results, but things I learned from putting it out there.

Warning: As noted in the title, I have an uncanny knack for the obvious, and I like to focus on the fundamentals (which is a polite way of saying that you’re unlikely to find any brilliantly insightful lessons here).

7 Uncannily Obvious Lessons From A Product Launch

1. It’s Not Too Early To Release: I’m a really, really big fan of the “release early, release often” mantra. But, even I fell prey to the “let me just get a bit more done” mind-set. I could have released the product a few weeks earlier, and I should have done exactly that.

2. Be Ready To Iterate: I intentionally cleared my schedule of other major distractions so I could focus on the software and iterate, iterate, iterate. In the days after the release/launch, I iterated like crazy with multiple production updates a day. Not a day should go buy that the software doesn’t get better for the users. Continue this as long as you can (maybe even weeks and months).

3. Provide Simple Feedback Mechanism: You don’t need anything fancy. Just a place for users to click a link, type in some feedback and send it to you. That’s it.

4. Respond To Feedback: This goes back to #2. You should be ready to fix the “obvious” bugs and add the enhancements based on user feedback (as long as they make sense). The magic of immediate user responsiveness is underestimated. I’ve had a couple of noteworthy bloggers write about Press Release Grader simply because of the rapid response-time. It’s just good, clean living.

5. Track As Much Data As You Can: For a web product, I’d suggest that at a minimum, you track all the standard web data (this can be done via a web analytics tool) + any “inputs” that the user is providing.

6. Don’t Waste Time Coding Reports: Although you should track/store as much usage data as you can, don’t waste time creating fancy (or non-fancy) reports just yet. Just capture it. Some simple mechanism to get a sense of usage is fine, but don’t try to build ways to look at all the data you’re tracking. It’s a distraction. Focus on what will make the users happy. You can work on reports later.

7. Watch It Spread, Nudge It Along: You should be spending half of your time not just on coding, but on promotion. This includes watching who the product is getting picked up by across the web and who’s writing about it. When people do write about it, thank them and offer to do something about their ideas and feedback. This works wonders. Even if you’ve got the luxury of business people (marketing, PR, etc.), stay involved. There’s no replacement for being “plugged in” to the community.

On point #7, here are places I check to see what’s being said:  Google (mostly blogs), Twitter, delicious, StumbleUpon and digg.  (I have a wee bit of an advantage because I’ve got some internal tools to help with this stuff). 

What lessons have you learned from releasing a product out to the wild? What will you repeat and what will you change the next time?

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First off, let me begin with a disclaimer:  I AM NOT A LAWYER, I don’t play one on TV and I don’t play golf with lawyers on Sundays (I don’t play golf at all). 

None of the content from this article or any other article on this blog should be taken as legal advice.  If you have a situation that does require professional legal advice, please seek legal counsel. 

The following are some tips from my own personal experience working in and around startups.  Clearly, your situation is different, but I have found that there are often “patterns” in early-stage startups.  These tips are written from the basis of an early-stage startup with just one or two founders.  It’s based on startups in the U.S. (I’ve never started a company anywhere else).  It’s not meant to be exhaustive or detailed, but to just provide some of the core elements that startups usually consider when contemplating whether or not they need to hire a lawyer.

When You Need A Startup Lawyer (and When You Don’t)

1.  Company Formation:  Usually, the early process of formalizing your company (creating an Inc. or LLC) does not require a lawyer to get the paperwork done.  The decision of what type of company to form (C-Corp, S-Corp, LLC, etc.) is situational but there is plenty of information on the web to help make this decision yourself, in most cases.

2.  Operating Agreement:  This one’s a bit more complicated.  If you need to have an operating agreement (that defines the rules by which the company will be run), you’ll probably need some legal help.  Operating agreements can be complicated (though a fair amount is boiler-plate).  Usually, single-person entities don’t need a sophisticated operating agreement, but as the team grows and you need to structure control and governance better, this will likely become necessary.  Even if it’s not a full operating agreement, you’ll likely need something that defines how big decisions get made, the terms for anyone that holds stock in the company, vesting periods, termination clauses, etc.  Once the company consists of more than just one person, it becomes increasingly important to define these things.

3.  Employee Agreements:  It may be advisable that you have each of the employees of the company (including yourself) sign some basic agreements such as non-competition, non-soliciation, etc.  These are usually pretty straight-forward and samples can be found online.  Common things to see here are what an employee can’t do after she leaves the company for some period of time (often a year or two).  Examples include:  Not working for a competitor.  Not soliciting other employees to leave.  Not taking client lists.  Not revealing company secrets.  The documents can range from reasonably simple and boiler-plate to pretty complicated (based on what your needs are).

4.  Trademarks:  If you intend not to hire a lawyer in the early days, you should probably at least do a basic search for your company name to see if the trademark is available.  This can be done at the U.S. Patent and Trademark Office website.  I generally don’t worry about registering trademarks in the early, early days of a company as it’s rarely the case that trademarks have been an issue.  At some point, you’ll likely want to trademark your company name, product name, etc.  On a related note, I’d advise against trying to find an available trademark — registering it, and then trying to use it to get a domain name from someone that owns it.  This is painful.  When picking a name, just find a domain that’s already freely available (or available for sale).

5.  Patents:  Patents in the software industry are still hotly debated but can be an important asset for you in certain situations.  I’m not going to tell you when you should or shouldn’t patent.  But, if you do decide to try filing a patent, you’ll likely need a lawyer to help work it through the system.  Also, do some basic reading on the web on what not to do should you intend to file a patent (like talk about the basics of the patent publicly too early).  You may also want to consider filing a “provisional patent” which is much easier and helps lay some groundwork should you decide to file a full patent someday.

6.  Financing/Investors:  If you’re going to raise money from outside individuals (particularly VCs), you’re going to need a lawyer.  Probably a really good one that has experience executing financing transactions for startups.  In most cases, you (the company) pays for all legal fees — including theirs.  Prepared to be annoyed/irritated/offended at the high costs for executing what you would think would be a “standard” transaction with lots of boiler-plate terms.  I don’t know why it costs so much, I just know that it does

What I would do (though this may seem out of order to some):  Have the idea.  Find suitable domain name and company name.  Create the entity (either S-corp or LLC).  Work like heck to build something.  Attract team members and/or co-founders.  Then, engage a lawyer that has tons of experience dealing with startups and have her work on the basic corporate docs we need.  If done right, this same lawyer should be able to help with the legal side of the first round of financing (if there is one).

A couple of things in closing.  When you’re hiring a lawyer for your startup, it’s important to remember that the she represents the company — not you.  In most (but not all) cases, the company’s interests and your interests are aligned.  But, as the company evolves and grows, interests can diverge. 

 This article was prompted by an email from a regular reader of OnStartups.com.  If you have topics that you’d like covered, please leave a comment.

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