http://flickr.com/photos/cnunciato/432992504/

[NOTE: Low-res audio from each speaker can be found here: http://www.robert.shedd.us/content/2007/03/26/startup-school-2007-2/ ]

9:00 Mark Macenka Partner, Goodwin Procter

http://flickr.com/photos/strategicpause/434014778/

Know the market, and don't underestimate the competition
Stay focused and be sure that you love what you do
Bad breath > no Breath -- Cash vs. Dilution
Build, hire and sell product, make $ and solve needs.
Have independent Board of Directors -- not friends & family better to have key industry players
Be sure to build good networks -- get strategic and tactical advice

What kind of company should you have (i.e, Capital structure)
KISS principle -- simple and straightforward, do what works
Partnership vs. LLC vs. corporation (Some makes it harder for VCs to invest)
It's important to have proper documentation -- Who is a founder? Who owns what? Don't put it off for too long

Problems in IP -- Do you Own it?
What have you been doing?
Who did you work for before that employer?
Smart to sign an inventions and Non-Disclosure Agreements [bleh]
Non-competition agreements
Non-solicitation agreements
Get sanitized & professional laptops -- not personal laptops
Look at corporate e-mail traffic to be sure that employees are communicating with competitors

You Need to OWN your code.
Need a piece of paper that says that you own it
Be aware of doing it under the auspices of a university -- rights of sponsors & non-commercial research
Joint Ownership -- Not a magic solution.  Not a good thing.  Leads to problems down the line

Third party claims of infringement -- can't use Open Source libraries improperly.
Buyers of businesses aren't allergic to open source, but you have to use the right kind in the right way.  This may make the difference between being able to sell your company -- or at least for how much the company sells for.
You have rights to using 3rd party code (i.e. licensing on specific OSs, etc.)
Protect the secret sauce of you business -- source code, algorithms must be treated as secret -- don't share w/ friends that you trust b/c you'll get burned down the road if it goes to court
Patents only allow you to exclude others -- doesn't mean that you can do it --
If you can do it, then the question is Can you really enforce it?

Founders issues -- get down in writing who owns what
Who's on the board -- all of the founders will want to be on the board -- understand succession issues
Should you have the founders sign non-competition agreements
Breaking up is hard to do -- unexpected death on day one
It's important to have people VESTED --
Value is that there is no dilution -- able to give the stocks to whomever comes back in
Transfer restrictions -- right of refusal, drag-along, right of co-sale, rights of repurchase
IRC Section 83(b) -- if stock subject to vesting, you don't own it until it VESTS (there's an important 30-day deadline here)
Loans -- don't do it -- or at least think long and hard
Do it, do it early, do it right

Be prepared -- start organized and stay organized
Find accountants, lawyers and advisers who know what they are doing -- get suggestions from your network of contacts
Someone needs to be dilligent

mmacenka@goodwinprocter.com

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
9:30 Paul Buchheit Creator of GMail

http://flickr.com/photos/strategicpause/434015714/

[This presentation was one of the most entertaining and funny ones of the whole day -- can't do it justice w/o all of the slides and only caught a fraction of the jokes]

Some advice on advice -- Where does the advice come from?
Limited Life Experiences + Over-Generalizations = ADVICE [LOL]



Gives the disclaimer that he hasn't actually started a company
Helpful advice opens your eyes so that you can see more clearly (pic of dog shit + bush flag -- i.e don't step in it)

http://flickr.com/photos/strategicpause/434016043/

We all have different parts of the puzzle -- helpful advice gives an idea of the gestalt
Understand other perspectives and the overall picture

When someone tells you, "That's impossible:" it should be translated as "According to my very limed experience and narrow understanding of reality, that's very unlikely."
Don't take advice as absolutes -- the time may have changed since the times of the people giving advice
no one has figured it all out -- we're just talking monkeys

QUIT YOUR JOB!
Leave you big job, and find something different to do

Pick a co-founder or existing startup -- even if you haven't found the perfect one
You'll probably fail anyway -- chances of succeeding is pretty low.

Secret technique for success -- REDEFINE SUCCESS
Initial Goal: Make $ -- new definition -- Learned a lot

You're investing in yourself and your future -- which seems reasonable
Spend $1000 to go to school to learn trivia -- Why not take a few years to work in a start-up -- It'll probably go bust and not make money, but at least you'll learn something

Attempt things with uncertain outcomes that you can *learn* from
Going to a startup is uncertain -- you don't know how it'll fail [LOL]

Things happen faster at startups
More opportunities to do things that you aren't qualified to do

How to create a great product
Build something fundamentally different
iPod, Google, GMail

Don't think of an MP3 player -- it's too abstract
Device that holds all of my music, fits in my pocket, and syncs with my computer
Then it was something totally new that fits people's needs

How can you tell that it is different
How do people use it?
Altavista: maybe 2 times a week
Google: at least 10 times a day

Try adding words "that actually works" when briefly describing your product.
search, that actually works
email, that actually works

Try to make order of magnitude changes
Wanted something where you could fit all of your email forever
[Great hand drawn bar chart graphic of GMail capacity vs. competitors.  Theoretical Limit = Infinity. GMail capacity = Infinity +1 -- Note: All numbers rounded to the nearest GB]


http://flickr.com/photos/strategicpause/434015378/

But remember, Being useless in new ways, does NOT make you fundamentally different

It's too SLOW, make it FAST

Quick tips for scaling your service
Overlooked point: Disks are not random access
Capacity doubles, but seek time remains the same
Relative size to seeking is decreasing exponentially

RAM is way faster, looks at odd stats like seeks/MB of transfer rate, numbers and performance characteristics, Seeking RAM

Take 100,000 disk drives to find the seeking of 1 DRAM

Solution is to think of your disk drive as a sequential access disk drive
How do you build around this?

Big data and small data are two types of data
Big = photo, videos,  -- put it on Amazon S3
small = tags, etc -- put everything else in DRAM

10 blocks of data from a disk...

dB updates must also avoid causing seeks
How? updates go to transaction log.  All write are sequential
Put all data in has tables and memory, then you won't need a dB

Questions:
How much faster will it be if you do these optimizing?
Have to figure out What are the bottlenecks? And then how do you remove them?
If you use the disk a lot, then it's not going to be fast.

Any big or significant changes that you'd do differently?
Yes, but couldn't summarize it
Biggest challenge -- have access to Google infrastructure that was geared towards web search and not e-mail -- Spent a lot of time to overcome differences
Okay to spend a few hours or few days -- e-mail demands a lot more responsive
Would start from scratch in brand new infrastructure if he had to do it over again.

No longer at Google -- Gotta keep your mind free.  Google was capturing him.
GMail isn't perfect application, it's just better

interface on GMail -- not traditional
Thinking of himself when designing it
Can't build a product for everyone -- so build a product for some people.

Started back in 2001, and GMail was very controversial b/c it was supposed to be just a search company.
There were Disadvantages in leaving Google -- like he wasn't vested fully at the time [LOL]
Challenge for startups is -- How can we trust them to hold our data
People can trust Google b/c it will be around for a while

Everyone has advantages and disadvantages
What is that you can do that Google is Afraid to do?
That's what YouTube did.  Created the company After Google video launched -- Google video is a bad product and they were worried about all of the lawsuits
Google has partners that they don't want to offend, and so you can do things that would be politically unwise for Google to do.


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10:00 Chris Anderson: Editor in Chief, Wired Magazine


http://flickr.com/photos/strategicpause/434016749/
Long Tail Companies

Startups fit well within his longtail model
Broad strategy is that things are moving away from big things and towards little things
Work for Conde Nast w/ big blockbuster products -- Grew up in the blockbuster industry
Learned that this is all wrong
March 21, 2000 -- NSYnc's second album -- No Strings Attached
Will be remembered ever more b/c it was "The END of the hit parade" -- sales volume has gone down since then -- will *never ever* come back to what it was
Music is a proxy for all industries and culture as a whole
More music is produced and consumed more than ever before
There is a lot more supply and more demand away from blockbuster

More Channels & choice, then average share of the top 10 shows declines
Deframentation and desyncronization of culture
Water cooler year -- hit shows have been declining since 1950
(i.e. I love lucy, beverly hillbillies all in the family, mash, dallis , Cosby show, ER, CIS)
More choices

20th century markets have Gaussian distributions -- most people are in the middle -- Used to try to find products to hit right down in the middle
Gaussians are a byproduct of scarcity -- Physical barrier to survival if you're too far out in standard deviations

Distribution cost money, shelf space, channels, movie screens
If it costs a lot of money, then you tend to be more conservative in what you try and what you do

21st century products -- Have a Pareto Curve
Head, Long tail -- 80 / 20 rule
aka Power law, Zipf distribution -- this is what happens when you have networks and networks tend to amplify -- supernodes, preferential tracks
Rich get richer, Word of mouth spreads, and others are ignored, and then you get the disparity

We measure our culture by what we consume -- see what sells, and then deduce that this what sells. THIS IS WRONG  It's not what we want.  It's what the economics of the megaplex wants -- They want conservative safe bets, and so they drive the market in that direction.

YouTube succeeds b/c it is so diverse -- has even more standard deviations than anywhere else

40% of sales from Rhapsody's online music store are not in Wal-Mart
3 million tracks vs 55,000 tracks

21% of Netflix rental sales are not in a Blockbuster store
65k available DVDs vs. 4k

25% of Amazon's sales are not in a typical bookstore
3.7 million books in print vs. 100,000 books at Borders/Barnes & Noble's

The latent demand for these Long Tail products is huge
Product variety or the customer variety

Long Tail of Media
1 million copies of Wired per month
In the new world that we live in, you don't measure income of cash -- it's via word of mouth, traffic, demand.

Shows the June 2006 Technorati graph of most incoming links comparing bloggers to the MSM.
Going for the wow factor of how the following bloggers are bigger than various & presumably more respectable MSM outlets
Boing boing, peter rojas, post secret, daily kos, arrina huffington, brian lamb of gizmodo, Glenn Reynolds

Landscape of media has changed -- totally free access to everyone
We don't compete with the old people of the same

Blogs and new media can focus w/ laser precision on very specific niche topics -- they can scale down
Wired can scale up, but they are at a disadvantage in the future

We're moving towards all specific and all special interest

Google is the canonical of the long tail company -- Enabled people to build business models completely around Google's adsense advertising innovations

There's a lot of room at the bottom -- Our industrial models don't scale down
We're impedance matched to other companies, broad mainstream culture -- impedance mismatched towards the niche and narrowcasting

eBay: Long Tail of hard goods

1997 -- Anheuser Bush -- launched Long Tail Libations 2007 -- non-allergenic beer
The control the distribution channel and they can experiment with these types of microbrews
There is latent demand for diversity and variety

Long-Tail talent -- brainpower distributed across the world as shown by a Google map of some Google coding contest -- pins distributed across many countries and not just Silicon Valley
We can find talent anywhere -- much more rich culture w/o focusing all on the short head

Three forces
1.) Democratization of Production
2.) Democratization Distribution
3.) Connection of Supply & Demand -- result; Drives business from hits to niches

Cost of production of lots of stuff declining
$1000/lines of code is declining
Built around amplification of powerful tools.
Two people w/ Ruby on Rails can understand the whole project -- can do it w/o getting bogged down in the details.
The cost of production is lowered and you can actually do cool stuff

Cost of consumption
Going down

Cost of Search
How hard is it to find what you want
Easier to find niche open source and other tools to do exactly what you want

write
distribute
run
customize
integrate

Hosted app marketplaces, mashups, embedded hosted web apps
Lower the cost of distribution, then you can offer more stuff

TRENDS
Small pieces loosely joined
Focus on a few features
Bottom up not top down
Built around user contributions
Flexible and evolving, the constant beta

Vacuum management software
Bicycle store inventory management market
impedance match small markets will small producers

How to tell if it's a Long Tail -- plot in logarithmic
If straight line, then efficient
If not, then the quality sucks

Netflix DVD rentals -- there is a lot of latent demand for variety

Long Tail market in software -- SourceForge is one of the most efficient markets he's ever seen

"The focus has been on dozens of market of millions instead of millions of markets of dozens" -- Joe Kraus, founder of jotspot

We are inheriting the Long Tail of companies, and you are here. 
It's available to everyone to go from the tail to the head of the long tail. [i.e. the rockstar dream of being the next Google]

[BTW, Chris Anderson just talked for 37 minutes]

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10:30 Paul Graham, Y Combinator

http://flickr.com/photos/strategicpause/434016918/

Why to NOT NOT start a startup -- (i.e. the two nots cancel out)
[Slides are here: http://www.zenter.com/ed/view.html?id=226 ]
[The essay form of this talk can be found here: http://www.paulgraham.com/notnot.html ]

A hackerly talk
Y Combinator Success rate = 50% 8 start-ups -- 4 succeeded -- 50% are rich now by their standard -- but there are many different degrees
Will do better than the 10%, but will go towards 25%
Closest thing to a dramatic failure, Kiko -- Google calendar came in a wiped it off the map.  Sold on eBay for $250000, and know they're doing Justin.tv
0% of the people in the startup would have traded it for the life of a cubicle -- Pretty sure that we'll able to keep that up
Why don't more people do it? 
A consequence of doing what Y Combinator does at the very beginning of the funding sequence is that they've become the World's leading experts in the psychology of people who aren't really sure if they want to start a company or not. [LOL]
The purpose of this talk is to raise your self-confidence
Analyze why you're not doing it, and then tell you which ones aren't real and which ones are.

The Anatomy of Reluctance in 16 Parts
Reason #1. too young.  Most successful person, was 19. Sam Alton -- but he's an outlier.
How do you know if you're old enough or not.  How can you tell if you're an adult?  What makes people seem old?  
* Check whether whether or not they have the "kid flake" reflex -- i.e. "I can't do it, can you do it for me?"
* How do the respond to challenges from the adult -- Do they recognize the authority and listen to discouragement from an adult? Or do they rebel and acknowledge their dominance?

2. Too inexperienced -- Used to be right age should be 23. But should do it anyway.  Kiko failed, but they're much fiercer now.

3. Not determined enough -- this would be a problem. Determination is the single biggest predictor of success in a start-up

4. Not smart enough -- not a problem.  Not if you worry about it. Long tail for opportunities.  If you're not smart, then write enterprise software [LOL -- lots of laughs through the presentation not fully captured here]

5. Don't understand business -- not the hard part anyway -- build a good product that people need and will use.  Build something great, and then worry about that later.  Reason why people buy startups is because of strategic value -- they are acquiring something that people wanted.

6. No co-founder -- this is a real problem. Investor prefer co-founders.  If you can't find a co-founder, then change your idea so that you can get a co-founder.  Preferably someone you know and trust

7. No idea -- It's not the idea, it's the team (or at least the Alexa numbers and then the team)  No Problem!  Apply to Y Combinator, and they''ll figure out.  Try figuring out what's Missing in your life?  No matter how narrow or specific to you, then that's a lot better than nothing.

8. No room for more startups -- a fallacy. Google is not stupid.  Because there is value in the products that are being created.  A market will evolve to buy them eventually.

9. Have a family to support -- a real problem.  He's not going to advise you to do it.  Get a consulting firm.  Get people to pay you.  Maybe you can create a product that you can spin off.

10. Independently wealthy -- a legitimate excuse.  [Mentioned something about this being why he isn't doing it -- or something.  Missed it.  Think he may have said something like -- People who have gone through the trouble of getting one successful startup up and running rarely go back and do it over and over.]

11. Don't fence me in -- [Missed what more he said on this one]

12. Have a need for structure -- (has a series of pictures ending up with a contextually over-the-top picture of communists) -- Don't start a startup.  In a good startup, no one tells anyone else what to do.  Everyone just does the right thing at the right time.  Good soccer teams never tell each other what to do.

13. Fear of uncertainty -- I can fix that -- you're going to fail.  No more uncertainty. [LOL] It's actually a reasonable way to approach it, though.  Just expect the worst, and hope for the best. Maybe you'll get rich.  It'll probably be a disaster.  But at least it'll be interesting

14. Don't realize what you're avoiding -- Real job comes after college, and what most companies do is BORING. No choice in whether you're doing easy and getting paid more.  Go and pretend to work, b/c of social pressure -- Ask your friends about the corporate life

15. Parents want you to be a doctor -- All people who are laughing are not Chinese. [Some gasps of shock & nervous laughter of people thinking -- "Was that just racist?"]   Treat it as a feature request. [LOL]  Parents are too conservative on behalf of their kids.  Risk is always proportionate to reward.  If protect from risk, then they're also protecting them from rewards.  Used to be thought of as rich and prestigious to become a doctor.

16. A job is the default -- If need money, then get a job.  But only about 100 years ago, people used to farm.  Working for someone else seemed weird.  Another change happening where people are going to start their own companies.  A lot more people will be starting start-ups.
[Overall message is JUST DO IT!]




* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
11:15 Michael Mandel (Chief Economist, BusinessWeek)


http://flickr.com/photos/strategicpause/434018421/

He has no advice
US = mature economy that's filled w/ big companies who don't want their lives disrupted
They say they like innovation and know they need it but makes their skin crawl.
If they had a guarantee of success, then they'd like it, but it's too unpredictable and chaotic
Conventional economics is uncomfortable w/ innovation
50% of productivity growth comes form new stuff, but a small number takes them seriously
No mention of start-ups in economics start-up book -- [INSERT SHAMELESS PLUG HERE]  about to have a new economics book about to come out that has technology innovation built into the DNA.  In the same position, doesn't know where it'll come from
Innovation is invisible to economic metrics
R&D is the lifeblood of economies, but it doesn't show up -- Shows up either as consumption or not at all.  Not as investment
Other countries have higher savings rate, and have access to same technology.
Key US advantage is that we have a unique opportunity to provide a good environment for start-ups.
We're (i.e the startups in the room) the center of real growth in this economy
There are three pieces to US advantage
1.) Encourage people to take challenges
2.) We reward people well if they succeed
3.) We allow business that are not succeeding to go under. -- Important, b/c it frees up people's talents to go on to the next thing

Venture capitalists give out $, but they're able to wrest control away from founders who have good ideas, but can't manage their business. 
It's vital for the success of VC-funded businesses.

Economic context, we live in a global world, China & India
These are great success stories. Two countries figured out how to industrialize
India has a lack of infrastructure
China is in a boon phase, where everything comes easily.
Possible and enormous big bust coming down the ride
Chinese debt range up to a trillion dollars, and about a trillion dollars in reserve
1st world economy, and 3rd rate industrial system and a communist government

Business press: Been at Business Week since 1989. 
Hard to know what's being innovated. 
Look at how Cisco was covered in 1990 by the business press. 
Even today, peering through a fog of uncertainty.  Hard to see what the next big innovation is going to be

What are his Fears?  Not worried about subprime loans -- product of pack journalism.  Not worried about trade deficit.  Budget deficit.  Social Security or medicare. 
He's worried about slow down in productivity Growth.
[<rant>No mention of global warming, GWOT, Iraq debacle, etc. -- has his narrow reductionistic economic goggles on</rant>]

We need as much innovation as we can.
What would it take to get more innovation? -- more startups for one
1.) need more R&D from the government
2.) Love to have a political system where the politicians were REALLY in favor of innovation.  Governments can stop innovation  They could provide a framework where innovation, rhetoric and moral force were supported. Think about how sympathetic they are to innovation.  Probably the most important thing a politician can do
[<rant> Oh, that and not spend billions of dollars on useless wars -- This guy's narrow focus on the economy grates me since it seems he favors Bush b/c of economic reasons.  But maybe I'm making too many assumptions here </rant>]

He encourages anyone to e-mail him:
michael_mandel@businessweek.com

Has a blog.  Google his name.
[Mandel's blog = http://www.businessweek.com/the_thread/economicsunbound/ ]
Innovation is at the heart of what drives the economy forward, and that shouldn't be denied.

What do you do to find out to find interesting stuff going on?
What is he interested in that not being written about.
Can't cover everything, but he looks for the cracks -- sometimes it is not very interesting
Thinking about whether overspending on health care is a good thing. [WTF? -- maybe for the f'ing health industry racket] Conventional wisdom is that that's a bad thing.
Interesting place to look for stuff.

Number of CS students dropping in universities across US -- importing slave code monkeys -- mentions some random law code like HDV1 (?)
Does it really matter whether code monkeys are there or here -- doesn't matter that much.
There are Two aspects to programming --
1.) It's a commodity.  Not valued very highly
2.) As a stepping stone towards providing something new -- rewarded just as much as it was before. 
You want to move up the food chain -- meaning starting up a company.  Adding new information is not a commodity.  Adding new information is valuable and will be rewarded.

China increase from 1 million to 4 million college students in a short time
Be Innovative, take risks

Were you Influenced by Austrian school of economics -- not referring to Keynesian's?
Financial markets are important.  [... blah, blah]

Why is productivity important?
Marker of how much you can produce w/ your resources.

Deprogramming at the post-college level is easier than existing educational system.  You have no embedding costs, so it's a worthwhile idea to try out.

What is the contributing factors towards productivity?
First burst from the Internet ran out.  Obvious applications ran out.
At the point where you need another wave of innovation that unlocks more possibilities. 
It never stops and must be renewed and it's really important.

Someone asked about his previous bashing of Sarbanes-Oxley
[He's backtracking from his previous pooh-poohing of Sarbanes-Oxley after all that has come to light regarding corporate corruption, etc]
Now it is pretty clear that people did unethical things b/c government wasn't looking closely enough. 
Pendulum was swinging too far [i.e. he's not so libertarian about having no government oversight as he was before]


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11:45 Max Levchin (Founder, Slide; Founder, PayPal)


http://flickr.com/photos/strategicpause/434018977/

max@slide.com

PayPal founder
He's tired of talking about Anecdotes and Entrepreneurship re: PayPal

A Crash Course Product Management
Screencap of The Office movie character: "Need you come in to come in Saturday"
Product management -- ignore that name -- it's a placename
Usually working w/ other engineers in a startup

When you build something, you're trying to create value
You need a guiding light, a vision.  Who are you doing this for?
W/ engineers, there is some clarity as to WHY you're doing this
80% of startups fail in the first year
Should be able to get to IPO very quickly, but most will go down.
Why?  Because most engineers aren't good at sorting out the details to get from A to B -- B being a far distant part in the future of where the product needs to be at

BEST UI EVAR [i.e. some UNIX-looking command line prompt]
The world isn't stuck in 1976.
Have to design the UI -- which is 80% of what product management is

First known picture of founding team of PayPal
*You have to iterate*
Whatever first product is, you're going to have to redo it.
The idea is probably good.
The UI is what is usually wrong

PayPal used to be called "Confinity, Inc." = Confident Infinity
The C & O were going to form an infinity sign. Awesome! [LOL!]
Remembers going to Buck's Woodside VC (?) -- $4.5 million first round financing

Be Recursive -- don't despair
If you feel really good about it -- then recurse DEEPER.

Hackers make the best product managers.
Most Google product managers have CS degrees
Know what's possible, and then think through the problem

Must have an out of body experience (i.e. put yourself in the user's shoes)
If you're designing MySpace, then you have to think like a 15-year old girl.
It's a job, not a passion. [LOL]

If you're under 18 years old, then you're probably on Ritalin -- or will be tonight.
[Lots of snarky jokes throughout this presentation -- only capturing a fraction of them]
They're really distracted.
Need a right hand on mouse
Need a Big button that says, "Get Yours Now"

When designing a product, must think about the person you're designing the product for.
You need to honestly feel what that other person is feeling.
Must observe the user that you're trying to build something for.

You should replicate the user experience.
His favorite stress test for a website was to sit next to an engineer giving a demo and try to distract them while trying to explain and navigate the site

Need a user study group
You should take at least one statistics class -- 20 people is not a statistically significant sample
You need to model the user experience

Don't believe me

Flip side of being a product manager -- measure EVERYTHING
Your way you find out whether you're product is working or not
Must roll your own metrics system b/c Google Analytics isn't nearly enough -- [which is done on purpose evidently]
Measure everything you can about the product, and you'll start seeing patterns
Mouseovers, incoming, outgoing, aborts, [lots of other jargon I've never heard of], etc.

Graph them out, don't be a bum.
Find the anomalies in the chart -- you'll find what the users are trying to do.
Definition of an Entrepreneur -- Don't care what company they're starting, they want to start

Something Confusing about "Hard"
It's tempting to think that if it's hard, then it's valuable

Most valuable things are hard
Most hard things are completely useless -- (picture of someone smashing their head through concrete blocks kung-fu style)
Hard DOES NOT EQUATE TO BEING valuable

Remember Friendster back in the day?
You'd sign in, invite friends, have 25 friends, go to their profile, and then it'd show how you were connected to each one.
That's an impressive [some geeky CS jargon] Cone traversal of a tree - 100 million string comparisons per page -- it won't scale.
Used to take a minute per page to load, and Friendster died a painful death.

MySpace -- not interested in solving problems
They use the shortcut of "Miss Fitzpatrick is in your extended network" (i.e. even when you're not even signed up for MySpace)
They didn't solve the hard problem. But they make the more relevant assumption that you want to be connected to hot women. [LOL]
Shows Alexa graph showing that in early 2005 Myspace took off, and quickly bypassed Friendster and never looked back.

Paypal circa 1999
Idea number 1 -- enterprise security
idea number 3 -- Palm 3 functional IR port to do securely pass data from palm to palm.  Sign in. Click pay, and split lunch.
These both were scraped -- they ignored the previous 1357 years of how people settled their split lunch -- paper money

Lots of Web logos, tabs, and links are BLUE due to R/G colorblindness -- Lots of males are R/G colorblind

Old Skool Yahoo! and big companies still think that if you scroll, then you're asking the user to do too much.
(shows MySpace page of Playboy playmate that goes down at least 19 pages)
But now its okay to design for scroll wheeling.

Seven Deadly Sins
Most valuable thing you can study [Oy -- A bit sad to see how glibly he's suggesting that people just exploit people's weaknesses for profit]
Seven deadly sins are very powerful motivators
"It's Free" -- greed
"Nude Kendra Williams" -- Lust
For an A+ on designing your website, think about how can put it in a seven deadly sin sound bite.

Couldn't think of how the Internet does one of the Seven Deadly sins and asks the audience, which one they thought.
Someone says Sloth, and Max replies that the entire Internet is based upon Sloth [LOL]
Couldn't figure out how to exploit Gluttony for profit over the Internet
Seven deadly sins are powerful motivators -- ENVY is the best one
[All seven are: Lust, Greed, Sloth, Wrath, Envy, Pride & Gluttony]

There's not enough commitment online.
Worthless to have Big Red Buttons for people that don't do anything.
You should let the user do some work.
Let them invest themselves so that they'll stick around.
If too simple, then they're not going to believe it is worth it.

On the other hand, with the eBay application form, it is so overwhelming that there is a huge drop-off rate at that point. 
So there are issues with making people over commit to what you're doing.
Why haven't the changed form in so long? Complacency -- Hallmark of natural monopolies

If you see inefficiencies, then you can build to improve on the inefficiencies in your own company, but then you're dependent upon that inefficiency.

Why Slide after PayPal?
Mined data at PayPal, trying to find patterns of fraud in tons of data.
If you do crypto, then they're aren't a lot of jobs in crypto
Crypto people switched Machine Learning trying to find data
Slide is not about MySpace at all.
Slide = content delivery network.
Trying to track specific patterns of data distribution.


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
12:15 Hadi Partovi & Ali Partovi -- iLike.com

http://flickr.com/photos/strategicpause/434018352/

[Yes, Hadi & Ali are twins]

They boiled their presentation down in order to get Startup School back on time.
They will cover
* How to tell if my idea a winner?
* Top 12 Do's and Don'ts for Startups

Hadi worked at Microsoft, Internet Explorer,Tellme, MSN, iLike
Ali worked at Oracle, LinkExchange, Mac(?), Garageband, iLike

The following are some general guidelines that Hadi and Ali give to startups, but it is also the metrics they use when deciding whether or not to invest in something.

* Is my idea a winner?
Quality of the people is better than the quality of the business idea.  
Easier to get acquired b/c of school.
Crappy people can screw up the best idea in the world.

* Can I easily explain need in one or two sentences?
Can you explain what people want
Google = Finding stuff online
Worth spending the time to get down a set of words what actual customers want from your startup

* Does the business scale?
Can you double revenue w/o doubling staff and all of your costs?
Hard to scale up companies that are based upon human time -- like a law firm has to double all of its staff to double revenues
But then again, you can still have a success w/o scaling to huge

* Am I creating added value?
Co-opetition definition of added value comes from the following equation:
(Size of the pie when I'm In) - (size when I'm out) = Added Value I have to offer
Don't be highly dependent upon one supplier or one customer -- then they take on a lot of your added value.
Record labels used to have a lot of added value -- but what's happened over 10 years, then the retail & radio market has consolidated and so they don't have as much added value as they used to

* Will the users naturally recruit new users?
People will talk to other people about it.
The pure use of it will also recruit other people use it?

* Will the value delivered to customers increase as the number of customers increases?
Like the Network effects of eBay.  People use it because they have all of the buyers.  Then sellers go there. And vice versa. 
Value correlated to number of users already there.

* Am I passionate about it?
Thomas Edison quote: Success = 1% inspiration, 99% perspiration
Must love what you're doing in order to hang in there and to motivate your team.
Need to feel in your gut that you LOVE it, even when things are going badly

Top 7 DOs
* Do LISTEN to the customers
Know their top 5 complaints and top 5 favorite features
Read discussion boards and email lists
Foster communication among your customers
Mentions a company where all employees Must spend 4-6 weeks taking customer support calls -- as a result everyone in the company knows the customer

* Do stack rank the top problems that are core to your success, and get your top people operationally focused there.
Don't split out work assignment tasks according to site functionality, instead assign according to top problems

* Do make frugality and profitability part of your culture.
Avoid a luxurious environment
Cut spending anywhere you can -- Don't spend $ on paperclips or paper cups
Not just b/c of the $, but b/c you want to have a culture of thinking about how to save money
They had raised $13 million dollars for a project, which was in some ways bad b/c they didn't need it all.
Told employees to think about it as if you've BORROWED this. 
Have to think that you have to give it back or you won't see any of it.

* Do Move quickly.
Make decisions fast!
Avoid commitments.
Avoid 12-month development projects
Speed is the single most important things
How fast can you decide how to make decisions. -- Pre-agree what roles and sections people are responsible for
One of their VC firms counted how fast they could decide whether or not to take their money as a criteria as to whether to really it give them the money -- went to parking lot, and made the decision on the spot and went back and told them yes.

* Do Have a strong CEO
If you have a group, then you should pick someone to be the CEO.
It makes a huge difference.
Pick the best outward speaking person as the CEO  
Not as important on the inside, but on the outside it makes a difference.
Ego is involved, and so it is not easy.
They have actually advised some companies to compensate the CEO w/ LESS stock to compensate for any inflated ego.

* Do FOCUS!
Don't do too much.  Ideas are a dime a dozen, and they are abundant. 
Can't afford to spread yourself too think across too many companies.

* Do Hire great people. 
Put hiring and recruiting at the *top* of your priority list
Three pieces of advice: Hire great people. Hire great people. Hire great people.
Don't teach you in school how to judge people in an interview.
It's the most important skill you can have in a business
Good practice is to Watch "The Apprentice" and try to guess who is going to be fired.
Not ideal, but it's a good practice set for improving your character judgment skills.

Top 5 DON'Ts
* Don't be distracted by the press.
The press should be a tool -- an means to an end for helping nudge strategic partnerships
PR press not correlated to actual success
Don't make decisions to just get press
** Top goals of PR are recruiting & strategic partnerships ***

* Don't take your company culture for granted
Fun, entrepreneurial. Natural tendency is to become political and bureaucratic. 
This usually happens at around 20 people. 
Don't take it for granted, b/c it'll bit you in the ass. 
Take responsible for maintaining a fun company culture when your young and early.
If you can hold off politics until 30 - 50 employees, then you'll e in a better position to pay attn to customers.

* Don't be greedy in business negotiations.  
Let the other company get the bigger piece of the pie in return for SPEED.
Don't wait too long for the perfect deal.

* Don't ignore your gut feeling about an employee or candidate
Better to have false positives than false negatives (i.e. Better to miss the good guy, then get a bad apple.)
Then you're dealing with 6-8 months of dealing with a bad hire.
It's critical for morale to get this right.
Get rid of bad employees quickly.

* Don't forget to have fun. 
Am I passionate about it?  Should be willing to take risk to have fun, because a large corporation won't let you take the big risks.
Anecdote for having fun: Internet Explorer -- Had a launch party.  After corporate party, dropped off large "Internet E" and dumped it on the lawn of Netscape at 2 a.m.
[Someone from the audience says, "Oh, that was you guys"]
Couldn't find a rental truck, and finally found someone, but wouldn't do it without a permit.
Keep laying down $20 bills onto the table until they said it was a good enough permit.

[These guys were super efficient and powerful with their time.  It was probably the most densely-packed and useful presentation / advice so far]

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

2:00 Rahoul Seth CFO, Adteractive



Startup Finance

Why raise professional money?
Financing Strategies
Equity Financing: Dilution, Valuation, Liquidity Events

Why raise *PROFESSIONAL* money?
B/c you never know how much you need.
It's More than just cash: Advice, what mistakes to look out for, recruiting, etc

What are the prereqs?
People don't know what they need before they go

An explanation of the different Financing Stages

Seed Round:
You've figured out who are you selling to the problem that you want to solve. 
Focus on the Plan, strategy, market requirement, cash reqs, (possibly business plan) -- Not a lot of visibility at this point, but make a best guess.
Team: Founders -- you and everyone else that you need.  Don't need to hire them, but need to at least get them as consultants

First Round (A Round)
Customer has a strong expression of interest -- built a beta and have a referenceable customer interest. 
Don't have to buy yet, but at least be interested
Plan: Beta Product: Go To Market plan
Team: Initial Team

Second Round
Successful client deployments -- customer say that you rock & you handle their problems well.
Road map to growth and profits
Compete team

Third Round
Expansion of Business.  Significant risk taken out of the business.  Adding distribution and sales

Mezzanine
Working capital needed for liquidity event.  Cleaning up balance sheet right before you do an IPO

IPO
Financing -- Have some liquidity for investors

Type of Investment
Ways to get Cash
Debt -- Borrow money, pay interest, have to repay -- People are looking for a return on the investment [shy away from this one]
Equity -- Sell a share of your company. Investor makes $ from liquidity event

Equity Financing
Too risky to get a loan

Common Stock -- Founders (Stock) & Employees (Options)
Options = right to buy shares at a fixed price over a fixed point of time
Preferred Stock -- Have preferences over liquidity event-- If liquidation, they stand first in line before others get any money back
Participating preferred -- Avoid Early rounds -- Cap
Do not give this away for the 1st or 2nd round in the company.
If they get it first, then they have to give it to other investors other too
Get right to Board representation, dividends, redemptions, anti-dilution
Be informed b/c market doesn't change.
The key is to Get the right Seed and A investors

An Pie-Chart Explanation of the Dilution of Equity through the various stages of investment.

http://flickr.com/photos/strategicpause/434019418/

* The initial Value of the company is $2MM
TOTAL VALUE: $2MM
    Owner: $2MM, 100%  (Blue)

* Seed Investor then pays $500k
TOTAL VALUE: $2.5MM
    Owner: $2MM, 80% (Blue)
    Seed Investor: $500k, 20% (Yellow)

* Business Growth of $7.5MM Happens
TOTAL VALUE: $10MM
    Owner: $8MM, 80% (Blue)
    Seed Investor: $2MM, 20% (Yellow)

*Team Expansion (total value of company stays the same, and cuts into the owner's value & seed investor's value)
TOTAL VALUE: $10MM
    Owner: $5.6MM, 56% (Blue)
    Employees $3MM, 30% (Black)
    Seed Investor: $1.4MM, 14% (Yellow)

* First Round Investment of $5MM
TOTAL VALUE: $15MM
    Owner: $5.6MM, 38% (Blue)
    Employees $3MM, 20% (Black)
    Seed Investor: $1.4MM, 9% (Yellow)
    First Round: $5MM, 33% (Red)

When you talk about the amount of capital that you're going to give up, understand what your cash requirements are
Goal For Founders is to own 5-10% of company shares at Liquidity

How to value shares
Founders get to buy the shares at a fraction of a penny for a share ($0.001)
They purchase stock before investor money is received

Investors pay Fair Market Value
Angels -- Preferred Common
VC-Preferred

Employees
FMB of common in early-stage example
overtime process
[I should note that there is a huge disparity from what all of the info jam packed in his Power Point slides vs. what he's actually saying, which makes it pretty hard to follow the essence of what he's trying to communicate here. If the rest of these notes are incomprehensible, it's because I didn't understand]

EQUITY: Liquidity Events
Have a strategic relationship w/ VCs
Deal Structure -- tax free exchange
Large potential upside w/ stock
stock for cash

IPO is also a liquidity event
Sarbanes-Oxley impact = $2.5 - $3.5 annual cost to comply with Sarbanes-Oxley
Senior Executives have a high-risk in today's legal environment
Difficult to get liquid

Debt financing
Available Financing
Fixed assets -- hardware software
Security deposits for facilities
accounts receivable -- factoring
Working capital -- usually available once profitable

Other considerations
Must have angel funding
Financial Covenants

9 times out of 10, it's a really bad idea to fund an early stage company with debt.

GETTING HELP
Legal -- Corporate, IP, employment, licensing / customer (consider part-time in house counsel)

Accounting -- Big 4 firms
Deloitte, PWC, E&Y, KPMG
Other international firms

There's a growing pool of "Rent-a-CFO" that can help with making business plans and advise how much money to raise

QUESTIONS:
VCs don't sign NDA. Can you give some tips or advice for working w/ VCs in terms of dealing smartly with this & crown jewel of IP?
Word gets around pretty quickly if a VC would give your IP to one of their portfolio companies.  Shouldn't fret too much about this.

You say that seed money from debt is a bad idea. But what about using convertible debt to raise a small number of people?
It's kind of complicated
In general, want to make sure that they're as committed as you are.
Should get someone not looking for an interest rate like a bank would.
Preferred shares do have a redemption & dividend rates.
Go for equity -- particularly in the seed round
Borrow money from your family if you want, but look for professional help if you're looking for any significant amount of money.


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
2:30 Mitch Kapor President, OSAF; Founder, Lotus


He's honored to get this much time with the audience (i.e. an hour)

Personal history
Grew up in 60s wanna be flower child
1st job = 1971 fascinated w/ radio -- became professional DJ @ $110/week
Exploring meditation & certified as meditation teacher

Then worked in Human services
Worked in psych unit of hospital
Decided to make a huge contribution to human services -- by getting out of it [LOL]

Apple II was the analogous web 2.0 -- things started to move then
Words first spreadsheet was Visicalc -- can't take any credit to creating it - Dan Bricklin
Spreadsheet was an unexpected innovation
This was a legitimate reason for business to use a computer after spreadsheet came around

Mitch shares a personal anecdote for how he got started on his tech career path
He drove to NH to save on tax so that he could buy the Apple II on a credit card, which was very near being maxed out.
Hung out in Boston, and observed/eavesdropped on an Ophthalmologist customer who was telling a sales person about how he'd like to use a computer for his business.
Kapor went up to the customer and said, "Excuse me sire. I'm a consultant, and I believe that I can help you with your problem." [cheers]
That was his first consulting client, and his life changed from that point on.
The point is that it doesn't matter where you start, it just matter that you get started.

Technology Adoption Curve
A Gaussian distribution w/ Early adopters & Pragmatists in the early majority & Conservatives & Laggards in the Late Majority
Early Adopters -- Motivation and passion to try things that others don't.
Pragmatists -- If value in the early adopter technology, then others follow it
Conservatives -- Enterprise people and others who get dragged along
Laggards -- Some businesses have done very well serving the laggards

Mitch Kapor is looking to invest in the tech companies that are 2-3 standard deviations before the early adopter stage

Disruptive Technologies
No one was expecting the PC -- It was widely dismissed as irrelevant to computing in the 70s --
Transformative innovations like the spreedsheet made the PC ubiquitous
PCs were bad at mainframe tasks
* "Everyone" knew this
NOT everyone knew the converse was true
PCs were uniquely good at new applications
And eventually got better at the old ones too

Disruptions I have Known
Lotus 1-2-3
the Internet (UUNET)
Streaming Media (Real Networks) -- Told the 1996 General counsel of FCC that people are starting to do radio on the Internet, which the FCC person refused to believe.
Open Source (Firefox) -- Former board chair of Mozilla -- 15% market share of all browsers worldwide.
Social Production (Wikipedia) -- collaboratively generated content. High-value knowledge products
Virtual Worlds (Second Life) -- Virtual worlds will become very large.  Will be as profoundly prolific as e-mail and websites once they mature and grow up
Riding the wave of disruption is not the only way

Shows a Lotus retrospective / promo video shot on VHS on 1988 commemorating the first 10 years of Lotus
"1983 was the summer of love for personal computers"
[Entertaining retro look at a company that comes out of no where w/ huge growth and impact on the business world]
The point of the video was that the dynamics of rapid growth are not that much different nearly 25 years later
1st year at 1983 -- $53 million
2nd year tripled revenues to $150 million year
Went from 0-2000 employees in 2-3 years
Example of a high/rapid growth company

** What is success in a startup?
Easier to define NOT success than success
No product
No customers
No money
No business plan

All efforts have to be directed at moving towards something that gains TRACTION
Must think forward and visualize ourselves as being successful

For some folks, Financial Success = Overall Success -- Sometimes it maps w/ some folks -- sometimes it doesn't

There are multiple dimensions of success
Have been as proud as culture of company as of ....
Proud to hear that Lotus was run the RIGHT way.  It was an inspiration for what others went on and tried to do in other places.
Can affect and inspire a lot of people that you work with

PEOPLE CULTURE
Tech startups see themselves as more inviting workplace cultures than big business
People WANT to work there because they WANT to make a difference. 
Contributions are respected. 
Work will make a difference out in the world. 
Not a huge amount of bureaucracy and politics

But it is not true across all dimensions that startups were better places to work
Survey data says startups have more bullying
58% people reported that they experienced some sort of public humiliation, being sworn at, and even having a chair thrown at them

COMMON DYNAMICS IN STARTUPS
Valuing face-time more than productivity
People w/ family would spend time family, and then did some more work.
People w/ families felt left out of companies that valued face-time

Another problem is that people often have trouble getting facts & info needed to do job
Reliance on rumor mill as best source of Info -- 42% of people report that

MERITOCRACY OR MIRRORTOCRACY
Tech startups see themselves as meritocracies -- "we got funded because we're the best"
Arrogance can be pretty legendary

There is a big confusion between people with Talent and "people like us"
Research shows diverse teams are more innovative
Anecdote of a start-up -- founders were Young male & unmarried, and they had a point system for evaluating people -- Points off if people were married & Points off if >35 yrs old.
It is easier to hire people who look and think like you than it is to have a truly diverse working environment, which can be more innovative.

Startups are hard
Attention is finite and scarce
Every day you make choices for what you attend to and what you don't attend to

The most successful ones who took culture VERY seriously.

WHAT CAN YOU DO
Take culture seriously -- every action & inaction sends a message
Walk the walk yourself -- mind the gap between stated values and actual practice
Hold people accountable -- are you tolerating abusive behavior by star performers
Has seen over-the-top VC legalese in paperwork committing to working for a startup.  He suggests taking language out of the offer legal paper that says that people can be fired any time for no reason w/ no notice.
[QUESTION: How do you suggest dealing w/ bad apples then?]
Kapor suggests that you Advise a performance issue, and give an action to address -- and give them opportunity to improve, but make sure you advise them that they have been warned.  Want to make sure you treat your employees correctly and don't have them walking around in fear that you could fire them at any time without a clear or good enough reason.  It's bad for morale to do something like that.

Entrepreneurs and Investors
3 Dynamics that you'll run into

1.) INFORMATION ASYMMETRY
Experienced investor knows a lot more than a young entrepreneur
Ask yourself, How might an investor take advantage of this?
Think about What is the investor's responsibility to the entrepreneur?

If capital-intensive startup, then you have a lot of pressure to produce results
Not uncommon to have Cramdown
Common stock folks get wiped out, and the preferred stock comes in [Didn't catch all of the financial jargon here, but basically VCs can screw you if you're not careful]
Investors don't have any mercy

2.) ALIGNMENTS OF INTERESTS
Investors can be great partners
But interests can and do diverge
At the end of the day, VCs have to keep their limited partners happy. They're interested in their returns  They're not interested in your well-being. [mentioned Sand Hill Road as being where a lot of the VCs are located]
Be very clear about success and planning
There are some difficult issues to figure out -- Who is CEO -- Unanticipated events -- Stay private sell, merge, go public
Trust MATTERS a lot -- If you feel uneasy and unsure about taking money from someone, then you should pay attn to that.  If you have choice in investors, then go with your gut for who is the most trustworthy.

3.) VENTURE FUND ECONOMICS
Venture funds have a very asymmetric distribution of returns
It usually only takes 1 or 2 big winners to substantially provide all of the returns within a 30-company portfolio
Therefore, there is an incentive to push companies to be the BIG winner -- b/c its not interesting to them for you to be MODERATELY successful. 
They want you to swing for the fences even though you're more likely to strike out.

FINAL THOUGHT
Entrepreneurs, 1984 -- Bill Gates, Mitch Kapor & [someone else I've never heard of]
It's very exciting for him to do this -- even after 30 years.
Wishes everyone success

QUESTIONS:
Talk about the Open Source Foundation -- Working on calendar and personal info manager -- close to having a chandler version available soon
"Dreaming in Code" by Scott Rosenberg -- Book that details why is software hard -- author lived with Kapor for three years
Two Takeaways from the Experience of this particular epic software project
1.) It's very important to calibrate the scope of the vision of what you're trying to do to the realities of the situation. 
His eyes were bigger than his stomach -- replace outlook, and reinvent personal information management. 
It was too big to do.
You must sequence things incrementally.
2.) He learned not to MicroManage -- don't hold things up because not to let details go astray.

[Someone asks him to comment about why he finds Second Life so fascinating, and he gives about a 5-minute response that I didn't transcribe.]
Essentially thinks that virtual worlds will eventually be as prolific as e-mail and websites.
Encouraged Linden Labs to open source their back-end protocol because the thought that it was vital that someone this potentially big shouldn't be held back by proprietary software [applause]


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

3:45 Greg McAdoo Partner, Sequoia Capital



Jessica introduces the presentation by saying that Sequoia is the Best VC in the Valley and therefore the Best in the World

The Skinny on VC funding
How does Sequoia think about the companies they fund?

History: 1972, us, china, india, israel, seed, early, growth
550+ companies, 150+ companies, 100+ M&As
Gave Yahoo! a $800,000 seed

Invest up and down the IT ecosystem
Google, Yahoo, YouTube
Services  
Software
Systems
Semiconductors

Not bashful for moving outside of IT, Starbucks-like coffee chain in India / eHarmony -- help find a spouse

How Sequoia evaluates start-ups
Elements of a Sustainable Company
* Clarity of Purpose -- Cisco
* Spectacular Market -- Flextronics
* Alleviate Customer Pain -- Network Appliance
* Team DNA -- PayPal
* Incredible Product Focus -- NetScreen
* Real Operating Margins -- Linear Technologies
* Frugality -- Google
* Infernal with a Single Match -- Yahoo!


http://flickr.com/photos/strategicpause/434021383/

* CLARITY
Yourself - to believe -- BE SUCCINCT -- communicate to 7-8 contingencies -- management, employers, customers, bankers, service providers
[NOTE: This was one of the most succinct and efficient presentations of the afternoon -- he provided a ton of useful info quickly and then got to the audience questions]
Manage - to focus
employees - to hire / motivate

* KNOW YOUR BUSINESS
"Cisco Systems Networks Networks"
Consolidate what you're doing into 5-6 WORDS

*DEFINE THE PROBLEM AND THE SOLUTION
Guys who founded YouTube
It's difficult to share video with friends and family
Solve own problem, and the solution is truly meaningful
Take selves out of own shoes and into shoes of customers

* GET OUT EARLY AND ITERATE
You're not going to get it right for the right market one the first change
Put it out there and iterate.
Aim at a good enough problem that people care about

* KNOW YOUR COMPETITION
Be intellectually honest
You're going to know and respect that sumo wrestler
It's a market worth knowing about
Know about the competition, and be very specific about how you're better
Don't make vague assertions about how you're better.
Like to hear a Founding team say something like, "We're going to beat Cisco, because we're going to disrupt their market at this specific area..."

* UNDERSTAND THE MARKET
Ecosystem, trends, dynamics, leverage, speed, distribution, customers.
You ride large waves with big companies. It is better to ride a wave than to create one.
Confluence of market forces often create waves NOT intentional R&D.
YouTube understood that video compression has arrived -- and that they could ride on the backs of video capture on cell phones [And, ahem, pirated video]

* SIZE OF MARKET
TAM -- Total Available Market
SAM -- Served Available Market
SOM -- share of market
[Looked up definitions of these buzzwords at: http://windowmanager.blogspot.com/2005/05/wth-is-tam-sam-som.html
  Scenario - You market a widget for the cellphone camera market. Your widget is only used in phones that have cameras embedded in them.
  TAM - Total Available Market - In this example this would be the total cellphone market.
&nbsp; SAM - Served Available Market - This would be cellphones with cameras since your product is only used in them.
  SOM - Share of Market - this is just the market share you have in your SAM, or in this case your total volume versus the total SAM volume ]
Who is your customer?
And who is NOT your customer?

* KNOW YOURSELF
Are you a Functional contributor or Interim executive
Should know if you can Go the Distance or not
Most founders know that they're not good enough for the long-term as whatever position they're starting off as (i.e. CEO, CTO, CFO, etc)
Some know that they won't go the distance -- be honest and discuss this early
Some are able to do it the long well, but most aren't (i.e. Gates, Dell & Jenson )

Most successful startup wasn't the one who executed the best of all of the companies
The world of startups is about how to find and know which corners to cut
Look for customers for whom you are the ONLY solution

SCRATCHING ITCHES
If your hair is on fire, you want to sell them the firehose.
If you're a little leaky, that's okay -- especially if their hair is on fire.


http://flickr.com/photos/strategicpause/434020470/

Make money selling Aspirin vs. Vitamins -- [i.e. he's saying to not worry about preventative products, rather focus on the cash cows]
Nutritional supplements -- $5billion 
Pharmaceuticals -- $163 billion
[<rant> This is where looking at just the financial benefits of a product doesn't mean that it is better for the society as a whole. Of course, it'd be better to focus your energy, marketing and resources towards creating a more healthy society -- rather than exploiting and in some ways propagating a quickfix or short-term solution to an underlying disease </rant>]

Questions?
Can you give some examples of failures of startups -- what can we learn from that?
Webvan -- asked people to do something different in the consumer community.

What do you do when a VC tells you that the Total available market of $500,000 was not enough
Look for TAMs of >$1 billion on software & >$2-3 billion on services
IF you have a ton of traffic, then don't be scared about established money-making mechanisms
Yahoo & Google didn't know they were going to be profitable, but they created a brand new advertising platform
Mentioned success of the RockYou.com - slide show website as also doing this

Someone asks about the legal grey area of a "Napster" [I think they were really referring to YouTube w/o really saying it as there were some chuckles throughout the room]
If the company can convince the VC that the law is on a trajectory towards a direction of disruption, then it may actually be beneficial to be in a grey area [i.e. YouTube] -- it's a disruptive area

What do you suggest if we have a site that is getting 500,000 page views a day?
There may be something going on, but not quite sure. 
VCs can help figure out what was going on and how to monetize it.
Ask around for an angel

What is different about investing in Indian?
Different VC processes in India -- but it is largely the same type of things that they look for in the potential for sustainable companies
There are some differences like in the "turn sheet" -- this means that a deal is done w/ a VC in US -- not so in India

Do they do fund stuff outside the valley?
infoblocks lived outside the suburbs of Chicago
It is good to have the management team within the Route 128 corridor
But it may be advantageous to have the engineering team in low-cost areas in the midwest.

What about cash-infusion for clout purposes, low development costs?
If a customer is reticent to buy from a young company because there isn't enough cash with the startup, then that's really scary to VC funds.
Implies that their hair is not on fire and they don't really need your product/service
There's also not much evidence that raising more money is going make that much of a difference
May need to go up a different vertical.

Can you talk about the differences between the strategies between if the company is going for an IPO vs. to be acquired?
The real trick is to become a profitable standalone business that can grow -- not to worry about the IPO
These days you can't go public on $5M-10M of revenue -- You need at least $100M of revenue
Generally difficult to fly underneath the radar screen for too long, but there are examples like IceLAN (?) -- not competing with ECM (?) -- only cared about
You also should watch out if you are threatening to a large company because they can undermine you
Must have some marquee customers to have stability -- Competitors will try to disrupt your marquee customers by infusing them with free products, etc.
Generally, go where the big guys aren't

Can you talk about how VCs only invest in industry stars?
That is a MYTH -- Jerry Yang wasn't a star.  Larry and Sergey. 
Track record of entrepreneurs doing it twice isn't' really that good
There is no such thing as a "VC business"
Michael Dell started
Gates moved to Harvard
It's actually hard to think of someone who built something very good, and came back and did it again

Are you going to invest in virtualization?
Don't know.
Software development can be a sloppy discipline -- Virtual machine is better than an operating system.


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
4:15 Mark Zuckerberg Founder, Facebook


http://flickr.com/photos/strategicpause/434022059/

Two things that are really important
1.) It's important being young
2.) Important to being technical and building things

On Being Young:
When you go build stuff, people are going to tell you that these things aren't as important as they really are.

On Being Technical
First business partner, Sean Fanning -- co-founder of Napster. He was an engineer
Another employee wanted some metrics on the site, and asked Mark to log in, open up the database to run some SQL queries against it
Customer support reps --- were hackers
First lawyer was someone who codes.

Read a lot of Paul Graham's essays on why it's important to know how to write code and be technical

A broader trend that is more important is to focus on iteration and development speed is increasingly important.
Usually had product specs and project management -- be sure not to don't add them superfluously
Just give power to the people who can actually iterate.

About expansion growth of Facebook
Millions of users -- More than 50% of users use it every day.
Have been doubling in size every 6 months
Passed 20M users -- more than 10M users every month
They iterated -- and gave power to the people who needed it to make decisions
After added the poorly launched News feeds, the traffic went up 30-40% and it just stayed there
They get 1.5 billion pages views a day.
They produce more news -- 3 million story news and clips every day -- more than all news orgs in all of their existence  [Insert Arrogant Tone Here]
[NOTE: I guess his intention here is to street the importance of iteration, but kind of feels like he's just trying to inflate his own ego here]

YOUNG PEOPLE ARE JUST SMARTER -- just kind of kidding.
One bedroom apartment w/ a mattress -- focus on making the world a more open place -- & better place.
First investor, Peter Tiel -- Young and Pretty inexperienced

Everyone you work with who isn't young or technical are probably going to underplay these two things.
Experience gives you value -- not having experience also gives you value

Talk to Facebook & CTO -- Facebook API to develop on top of.

QUESTIONS
[NOTE: This was probably the most inefficient presentation so far considering he took nearly 30 minutes to make three basic points (be young, technical and iterate), and then was given an extra 15 minutes of questions because the timekeeper must thought he had more time than he really did.]

How has his role changed as the company grew & other growing pains?
Scaled up pretty quickly -- Mark made site
Co-founder joined him
Keep priorities straight
Make sure that the company stayed a technology company.
[No mention of any growing pains]

What are your benchmarks for hiring people? -- How do you tell if they suck or not?
Don't compromise intelligence for experience
They just try to ask them hard technical questions.
Make sure that they really care about what you're doing.

Do you write tests for code? Do you have automated tests?
[Questioner sort of implies here that the code on Facebook sucks and Mark says, "What are you trying to say?"]
No.  Would rather write stuff, and get it out there.
Would rather break things.
If you don't break things, then you're not rapidly developing and innovating.
And no, they don't use any type of automated tests for their code.

Talk more about how Facebook creates a more open and connected world?
[Insert standard Facebook pitch to VCs here]
We help people communicate more freely.
They want free flow of information on the Internet
They create tools to Share info and tools to control who you can share with other people
They have over a billion photos on the site, and so they must be doing something right -- part of which is controlling who gets to see your information. 
People also list their cell phone numbers on their site.
The network effects of this are allowing people to communicate more efficiently -- more is shared, more accessible, more transparency, more free to do what they want.

How is he able to do all of this and maintain his relationship?
His girlfriend has been at Harvard, and so it's worked out really well so far.
She is coming out here soon, and we'll see how it works out
[He mentioned being a bit of a workaholic earlier in the presentation]

What has it been like working with close friends?
You want to work with people with more trust and can communicate with
If you're not friends by the time you're half-way done, then you're screwed

Talk about building facebook when there was MySpace & Friendster already out there
Most useful thing was not to worry about MySpace or Friendster
Focused on building something cool.
Put energy into focusing how to scale this thing as quickly as possible
Next challenge is to make the world understand that Facebook isn't just a college thing

Someone asks what it was that Facebook beat out the competition like CampusBook and others -- why were you successful?
Mark glibly says, "I've never even heard of most of those companies you just mentioned. So obviously we weren't worried about it"
They were not focused on competition -- just focused on extended quickly & being iterative -- figure it out as you go along.

Are you sponsored by Adidas? [b/c of your sandals]
No. Bought 10 pairs b/c they stopped making them. [Wondering how much longer this tortured Q&A is going to go on]

How do you enable the free flow of info on the Internet?
Humanity organizes itself into networks, which is how information gets filtered
Photo sharing on Facebook was so big because of the social context --

What type of tracking do you do?
Engineering was difficult to measure
Just hire smart people -- and it's evident that they're doing a good job

Final Plug
If you're going to build something, then it make sense to build it on top of a platform like Facebook.
Talk to the CTO of Facebook about their APIs



* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
4:45 Joel Lehrer Associate, Goodwin Procter


http://flickr.com/photos/strategicpause/434022271/

Do's and Don'ts of Patents for Micro-Startups
jlehrer@goodwinprocter.com

Could've used the Federal patent rules as an outline for this presentation, but didn't want to bore us to tears

Setting expectations  -- Stats can be good or evil - can twist, and be shown with an agenda [Shows some graph of how the number of patents accepted for each year is rising]
Business methods are patentable -- Diverse thoughts on it: some think it's silly.  Some think it is great
USPTO.gov -- one of the most efficient profit centers of the USG -- 2-3x money comes in than they spend.  PTO office is a government cash cow

Allowance is a a patent that actually issues
[Graph showing the Allowance % -- 20 year history 1975 -- 2004]

Infamous example of patent absurdity is the patenting of a Peanutbutter & Jelly Sandwich via the Sealed Crustless Sandwich patent

Issue patent...
[THIS WAS A FAIRLY BORING TALK]

WHAT IS THE THRESHOLD FOR GETTING A PATENT?
Must be something inventive (relatively high bar) and useful (relatively low bar)
Must not have been publicly disclosed for one year (for US patents) -- includes explaining to a VC about your invention
You should be the inventor
In order to get a patent, it'll take a long time (~ 4 years) and can cost a lot of money ($~15,000)
Does not guarantee that you can actually practice the invention -- a very subtle point. 
EXAMPLE: Jones invents windshield wipes.  Mr. Smith does Intermittent Windshield wipers.  That precludes each other from doing it. A patent only gives you the right to exclude others from doing it.

Very soon the Supreme Court will answer -- WHAT IS OBVIOUS?

Patents get released into the public domain, and so a lot of companies just opt to keep the info as Trade secrets -- not submit it as a patent.

Why does anyone care?
* Wall out competitors
* Defense
* Potential Income
* Value on Exit
* Credibility to Investors
* Articulated Description of Market Differentiation -- forces you to sit down and think about what it is that you are doing differently

[Thinking that Patents are a bit of BS and that they can stop innovation from small businesses and help maintain huge monopolies]

IBM makes a lot of money licensing patents

JOEL on PATENTS
Work on your own time and equipment
Understand your current obligations
Document contributions form others
Document code provenance -- this is a veiled reference to OPEN SOURCE -- good for open source, bug tracking, operating system.  Don't use the wrong open source in the wrong way.  It is even LESS of an issue when you use software as a SERVICE and not as a distributed software package
Get assignments -- from anyone else that contributes any part of the invention, they get named on the inventor -- NOT THE COMPANY of the inventor
File something before you launch (provisionals)
Do some (but not too much) searching
Focus on the product, not patents
Do not worry about the big boys (for patent infringement, that is)

If it is something that you probably can't even enforce, then it is probably not a good idea to get a patent on it -- not worth your time, energy and effort.

PATENTS ON $500 A YEAR
Monitor blogs and bulletin boards ($0) -- But be sure to read the LAST pages of a patent to get to the MEAT of a patent's claims
Monitor newly issued patents and publications ($0) -- Patents are published 18 months after it is accepted
Hire a search firm (NERAC, INREA) ($500 or less) -- Sometimes give you a couple of searches for free.  Try to get you hooked The first one is always free.
Learn how to write a provisional ($0)
Draft and file your own provisional ($100)

POSSIBLE CHANGES
Accelerated Examination
Peer Review
Post-Grant Opposition
Changes to Continuation Practice
First-to-File

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

5:15 Recent Founders Panel


http://flickr.com/photos/strategicpause/434022066/

Briefs statement from a number of recent Y Combinator Startups

Weebly.com
At Penn State -- decision points
Featured on Tech Crunch 6 hours before interview with YC
Taking on extra

WoFo - online HTML form builder
Surprising difference between beta testers and early adopters vs. the first paid customers
Send out 7000 emails
Got 3500 accounts
100 people gave feedback -- gave them free lifetime accounts
Then sent out 7000 e-mails at launch and only 50 people replied [Digg users have shallow pockets]
0.7% Conversion rate
But they have a high rate of 5.9% conversion rate at the moment
The industry Average conversion rate is between 1-3%

Advice in general
Be wary of Out-of-Context advice
Goal is copy hash table from the head of whomever is giving you advice, and so when you find the situation in your life, then you can apply it
If you find a talk you like, then burn it to CD and listen to it over and over again.
Listen to 10x until you internalize it
It's really useful to hear the whole story -- When X, do Y.  Much easier to remember
Recommends two books:
1.) Justin Livingston's "Founders at Work"
2.) Microsoft frontpage book "High-stakes, No Prisoners"
Best thing to do is to get in context advice
Surround yourself with good investors and good advisers (like Paul)
In terms of investors -- 3 pieces of advice for raising money
* Pitch BIG -- We're the Google of personal information -- For any documents with more than 2 authors, then they're going to use our tool, and here's how we're going to get there.
* Draw a Tree -- Paul is the Root -- It is going to be friends of friends that are going to get $ and advice from so you're going to be constantly pitching self
* They're hiring, so go work for them if you want to do something interesting

Justin.TV
Believe in yourself
Don't be afraid to go with your craziest idea
1st app was Web calendar, which was made irrelevant by Google so do something that no one else is doing [laughs since he's the only one broadcasting this life on the Internet 24/7 at the moment]
Justin.tv is hiring too.

Automatic
Location -- Moved from London
Read Paul's essay
Three points
1.) Have list of reasons why you're going to fail -- can't force people are going to give you money -- You CAN come to Silicon Valley. Location is something that you have tangible location over
2.) When you're young, you have a lot ....  Don't have to educate people about Internet in London
3.) Have other people around you that are going through the exact same thing
So there is no other option other than to come out to the SF Bay area if you're going to be doing a startup.

Reddit folks give an entertaining and very visual history of their company
[Filled with laughs throughout, and you have to see this one with the audio to fully appreciate it.]
How to build a popular website without ever being on TechCrunch
Met other founder on Facebook -- poke -- j/k
MIT of the south -- not true
Paul Graham -- Spring break in Boston
[This was a good and fun note to end the long day on. It was more like stand up comedy than anything else.]


Send any comments or corrections to kent@kentbye.com and I'll post them down below.
1.) Andreas Gerads says, "Great work, thank you very much!"
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