Your over 40 and you want to start your first company. Now what?

OK, I've been doing this for a couple of years now and I've had enough people ask me about the experience that it's worth writing up a blog post on my observations for folks like me who are over 40 who want to do their first startup. Fred Wilson's post on mid life entrepreneurs (which initially implied it was less than positive to be an over 40 startup guy, then backed away from the premise in a second post) also got me thinking that this might be useful to the people that are thinking of doing this but aren't sure of what it takes.

There's a followup blog from Paul Kedrosky about how he disagree's with Fred and how the average ages of entrepreneurs is actually pretty broad. He blogs about it here. Some interesting facts from Paul's post.

• The average age of Inc Hot 100 members is 41, but there is huge spread
• U.K. data shows that while the average of entrepreneurs there is 36, there is little age difference between that group the rest of the working population. Matter of fact, 23% of entrepreneurs there are between 45 and 54

So, here's how it worked for me (disclaimer: I'm just making observations based on my own single experience doing this to date. Take it all with a grain of salt):

1) Having a balanced life and doing a startup isn't an easy thing to do.

See my post on early stage startups and normal lives. I know this may scare some of you away (and piss off some others) but I'm sticking to my guns on this. Startups are hard work and if you want it to fly, it's going to take up your every waking moment in one form or another (actual work or thinking about actual work). This is likely to be the hardest thing you'll have to do since you've very likely gotten comfortable in life. There will be many late nights and weekends when you think: what am I doing? Is this worth it? For those of you passionate about this, the answer is, of course, yes, but you'll feel it nonetheless. Key word there: Passionate. You've got to have passion for what it is you're doing or you'll burn out long before you get to where you need to be.

2) Assume you're going to self fund the first year. Maybe longer.

If you've spent the last 20 years working in big companies (as most of you first time wannabe startup guys have) you haven't built the network you'll need to get funding (Angel or VC). It's just that simple. The good news is it takes a lot less to get a startup to the point where you can get outside funding compared to a few years ago (now: $100K-250K vs. several million a few years ago). I know of some people that have done it for a few tens of thousands. The other good news is that having been around for a couple of decades, it's likely you've got some assets to draw on. Now's the time to do it. Form a corporation or LLC, open a bank account and put $X into that account. That's your funding and it will determine your ramp (how long you have until you either start making money or get outside funding). Assume that money's spent and be disciplined about spending it only on your new companies needs. The goal here is to make it last as long as you possibly can. Then, build your team (which is an art requiring an entire post onto itself and I'll write that up in another blog entry in the near future).

3) As soon as you decide you want to do this, start talking to VC's and Angels in your local area.

If you're not in an area with VC's and Angels, consider moving. Seriously. You're new to the game and they're going to want to be close to you. Count on it. Assuming you've got a good idea, and some chops (exec for a fortune 500 company, key person in a smaller company, impressive resume of experience/accomplishments, etc) , all good VC's will find time (30 minutes) to meet in a 'no harm no foul' type meeting. The second way is you very likely know someone who can introduce you to a VC (this is the best way and how I met our lead investor and chairman, Brad). Maybe have a low key lunch. If you like them, stay in touch. That's it. Just stay in touch. Do not ask for money; you're not ready anyway. Ask for advice on your idea and people you might talk to. You need to show you can do something other than dream.

Unless you plan to fully self fund, this really is important. You really need to spend a year or more building up a list of contacts with people that can help you and that you like and who like you. No one's going to fund you cold (unless you've somehow hit the right product out of the gate and built up a real business with revenue and profit already flowing).

Chances are you don't need $3M plus (VC territory). Concentrate on networks of angels (<$1M).

4) Don't do it alone.

This is where I made a real mistake in starting my current company. I did the benevolent dictator model where I funded everything and kept a tight rein of control on everything. We built some kick ass technology and saw some market success, but we didn't really nail the business side. I'm good a certain set of things and I'm weak at another set of things. I made the mistake of thinking I'd learn the stuff I hadn't done before on the fly. The reality is: you won't have time to learn the stuff you need to know when you need to know it. Yea, to a degree you will by fiat, but not enough. Find 1-2 folks you like, respect and want to work with and who compliment your skills. Essential. It's also going to be easier to get funded. Investors like teams that are filled out (at a minimum: a technology person that can make things real and a business person that can put together strategy and develop new business).

5) Don't ask for money to soon, or too late.

You've got an idea that's been put together into a working prototype (in today's tech world where I'm focused, that's a website with at least an active base of 'beta' users-usually 'at least' ). There's a degree of buzz about the area you're focused on. You've been in touch with potential investors for a while. You're running out of your 'I'm comfortable that I can lose this' money, or you really need to expand quickly and just can't bootstrap it. Now's the time to talk to your contacts. Tell them you're at a crossroads which is, usually, go forward and get funding or shut it down. If you've got something real, you've got a team that can actually build and deliver and you've got a market that looks interesting and you've got smart potential investors, ok, cool. Ask them to lunch and give them the pitch. I won't go into the pitch, but the reality is, it's more about you, the team and your tenacity and dedication at this point. That'll show, or it won't. They'll make a decision largely based on that.

On the flip side, don't wait too long. When it's looking real, don't hesitate. Call your folks and set up a meeting and lay it out. If you wait too long (i.e. too many competitors, someone else gets in the door first, etc.) you might miss the chance. As with everything, it's all about timing. And you'll find out pretty quickly if you have what it takes. Or not. Better to shut it down now than dropping another $100K of your own money to keep it going when it's not going to fly.

6) Start with one really good investor who's known as being a really good investor.

Easy to say, hard to do. I was lucky this way. Our lead angel investor, Brad Feld, also happens to be a VC and he's known as a guy who knows how to make bets like this. He's very smart, very likable and we were damned lucky to met him and click with him. Our angel round last year was a flurry of meetings between myself and his network of angels. I think something like 85-90% invested after initial meetings with me. It wasn't really me who sold it... our lead investor being involved sold it. The people you pick to work with are going to make or break your ability to get funding beyond your own bootstrapping. Pick early, pick wisely, and sincerely develop the relationship over time. And don't forget, you've got friends that can invest as well. Maybe not at the level a professional or serial angel investor would, but some. Pull them in too. Every little bit helps. The process for us was about 60 days from go to close. The reason? Our lead investor is a rock star in his field.

7) Getting the money is when the real work starts.

Up to this point you've likely been running your own show. No more. You're now going to have a board of directors and they're going to help you run your company. This is (initially) a big shift but an essential one and something you should prepare for. Your board is going to be made up mostly of your investors and they are a true wealth of wisdom and experience. Use it. And get ready for the ride of your life.

Fred Wilson on 'older' entrepreneurs

Fred Wilson, one of the with it VC's (in my book) blogs in two posts about entrepreneurs in their 40's and 50's doing startups. He addresses it in two posts. In the first he says:

One of them asked me - do you know any 45 year old entrepreneurs?

Yes I do. But only one of the entrepreneurs in our current portfolio is older than 45. And he'll probably be starting companies until he dies. It's what he does.

But the facts are pretty eye opening. Nine of our eleven entrepreneurs are in their 30s. One is in his 20s, and one is in his 50s.

And man did he get some great comments! In the second he concludes with:

So I don't have any really good advice for the mid life entrepreneur going through a "what next?" crisis. But one thing I'd say is try to think like that late 20s/early 30s entrepreneur doing it for the first time. Don't let everything you've learned get in the way. Go for it with gusto and don't think too hard.

Bravo Fred! I couldn't agree more. The key is keep the sense of 'it's possible' in the forefront of your mind at all times. As you age, and collect the scars of war that day to day business brings, you learn to avoid things. You collect things, assets, family, responsibilities that make taking risk a little more difficult. That can be the death of having an entrepreneurial spirit.

Sometimes, 'fools rush in' is exactly what it's all about. Sometimes, a fool that doesn't know better (or chooses not to know better) is exactly what's needed to create something truly great. To have the balls to think they might be able to change an industry or maybe create a new one. To believe that they might be able to use technology to democratize some capability out to millions of people that was once controlled by only a few.

When a 23 year old Steve Job's creates Apple Computer, mostly because he doesn't know he can't and that the odds are completely against him, and again, an 'in his 40's" Steve Job's takes a has been company slowly on it's way to irrelevance that's had the shit beat out of it by big bad Microsoft and revitalizes it into one of the hippest coolest (and most financially successful) companies in the tech world, it's because he didn't let the world beat that 'it's possible' thing out of him. When he was young he was often described as mercurial, arrogant and haughty. Today... Is he older and wiser? You bet. But he never lost his sense of 'it's possible'... in his case, to change the world. To make a dent in the universe. And yes, he's still mercurial, arrogant and haughty. And for Jobs, maybe that's just what it takes for him to keep at it, to believe that it's possible.

Where did User Generated Media start? My vote: Cheap Gear.

When I look at what's happening to the old media world (disintermediation, collapse of classified ad cash cows, loss of editorial control, erosion of readers/viewers/listeners under 30 etc., etc.) and think to myself, why is this? What's the base cause for it.. I come up with alot of possible answers. Things like low cost high speed internet connection, opensource software making it reasonably easy (and cheap) to start new businesses but, more than anything, I think it's Cheap Gear my mom can use.

I know this sounds simplistic, but I like to get to base causes. What's the one thing that we had to have before all the Web 2.0 magical poofy things that sucked in millions of average people with a computer was possible? My conjecture: It's Cheap Gear.

It's that hardware interface that takes life and turns it a mishmash of words, pictures, sounds and videos.

I'm looking at around my office and I have what's really a recording and video production studio. Nothing new there, but, what IS new is that this stuff is fairly easy to use and damned inexpensive by historical standards.

Here's a partial list: USB Mixer with digital effects, $149 and studio quality powered speakers: $199. Professional quality condenser microphone $69. Studio headphones, $19. 3CCD Digital hard disk camcorder, $499. Two 22" flatpanel monitors $600. 1 dual core desktop with 2GB RAM and a 500GB HD $800. Total cost? $2336.00. Software? Free opensource recording with Audacity and basic sound processing with Levelator. Video? Drop $50 for Vegas Movie Studio and you've got the equivalent of an AVID video editing bay from 10 years ago. If you have a Mac, all that software comes with it.

Not super cheap, but I can record a band, make podcasts, create and edit a video, all at a quality level as good as anything on the internet today and, with rich media, almost as good as the quality of about 1/4 of what you find broadcast today. Print pubs? I'm on par.

And you can do it with a lot less gear than I have (take out the computer.. you've got it anyway) and the real cost of the gear to create comes down to below $1000. A few hundred if you push it. Cheap Gear.

I have a full blown 'fits in the palm of my hand' recording studio (the Zoom H4) that can record a live concert at the same quality as about 80% of the professional live recording setups today. I just hit a button and point. It encodes it as an MP3 on the fly. I just plug it into my computer, and upload it to ClickCaster, iTunes or my blog. Instant concert recording system. Cost? $299. The first step in the system? Cheap Gear.

I've got a 6 Megapixal camera (Casio Exilim) that weighs 2 oz, takes semi pro level photo's and VGA (broadcast TV) level video (a couple of hours worth per 2GB SD card) that I can shoot a video with, take some snapshots and record an interview with that cost me $200. Same as the last paragraph, rinse, repeat.

I can set up and run a blog with my friends on any subject we happen to be reasonably versed in that can rival any 'professional' publications website with relative ease. All I need is free blog software, an internet connection and a $600 laptop. Cheap Gear.

Every musician I know has the ability to record themselves at home with cheap gear, make their own podcast and use YouTube, Google, MySpace and similar sites to promote themselves.

It all started about 6-7 years ago with really usable Cheap Gear. It's accelerated in the last 24 months. The power of the microprocessor embedded into low cost tools just about anyone can buy with high enough quality to rival 'the pro's'. And the kids (literally, kids.. like, 12) know how to use it.

Imagine what would happen if groups of regular people with a passion actually started combining all this media into print, pictures, recordings and video and gave it some relevant editorial perspective? Decided they could be a hybrid local newspaper/tv station/radio station for their local town? We used to say at Apple that the power of the press belongs to those that own one (picture of a LaserWriter Printer)... the ideas been around, but the tools, finally, have caught up.

The infrastructure and software tools that give them a radio station/TV station and newspaper all rolled into one are pretty much here too. The monetization tools for incorporating advertising are getting close to being real. It's like pirate radio stations, but it's legal and it's more. It's Pirate Media stations.

And it all started with cheap gear.

The story line is getting old

I have friend who's a 24 (the TV show) fanatic. He just posted that it got boring.

The Day 24 got boring. April 23, 2007. Another 24 fanatic just came in my office and announced that to me. Unfortunately I agree. I watched it last night with Amy, Jason, David, and Jill and we all had that ho-hum look on our face when it ended. Oh well – it’s rare that a show makes it six years anyway before it loses it.

I think this is a great example of how being in a state of constant tension, regardless of how thrilling the tension is, eventually, gets old.

That's what's happening in America's political climate right now. You can say 'terrorist!' only so many times before it stops working and, man, has it stopped working. Interestingly, he infers that 6 years' is a good run. Isn't that about how long Bush has been beating a story line very much like 24?

I agree with him, it's getting old. Time for a new story.

Apologies for using his blog post as a political metaphor, but I suspect he doesn't mind.

I'm going Mac, why? DRM.

I never thought I'd be saying this but I've decided that all my computer purchases in the future are likely to be Mac's. The reason isn't intuitively obvious either because it's DRM.

From The Inquirer article: Avoid the Vista Badge, it means DRM inside.

He who controls the DRM infection controls the market. DRM is about preventing you from doing anything with the devices without paying the gatekeeper a fee. This is what MS wants, nothing less than a slice of everything watched, listened to or discussed from now on. DRM prevents others from playing there, thanks to the DMCA and other anti-consumer laws.

The article goes on to reflect on just some of the evils of DRM built into hardware. I suspect we'll see more (and more) compatibility and ease of use issues as more people buy a new PC with Vista enabled hardware over the coming years.

Oddly, Apple, a company I used to work for and adore, then lost respect for and who I've bashed more than a few times here, largely about DRM with their iTunes software, is the good guy. Also, oddly, my one Mac, a dual core intel laptop, is my favorite machine for running Windows (and Linux). And yes, I have many machines (8 between two offices and home).

Using multiple OS's on an Intel based Mac is wonderful. It's simple to set up, simple to switch between OS's and fast as hell. And, when you look at the cost, it's only slightly more expensive (the XP license) and you get a great OS, OSX, thrown in for free.

The vast majority of my time spent on computers nowadays is using something on the internet. Virtually all my productivity software lives online (currently provided, mostly, by Google via gmail, googledocs, etc.). What OS I'm using isn't overly important anymore, as long as I've got FireFox on the box.

So, thank you Apple. Man....who'da'thought that the king of proprietary hardware/software systems would be the best 'open' PC choice (at least for me) available in the market today?

Time to start a next generation local media & news portal in Chicago, LA, Balimore and 13 other cities

And the battle begins. Sam Zell is buying the Tribune Company (16 newspapers including the LA Times, the Chicago Tribune and the Baltimore Sun). In a recent Washington Post story. From the WP story:

In conversations before and after a speech Zell delivered Thursday night at Stanford Law School in Palo Alto, Calif., the billionaire said newspapers could not economically sustain the practice of allowing their articles, photos and other content to be used free by other Internet news aggregators.

"If all of the newspapers in America did not allow Google to steal their content, how profitable would Google be?" Zell said during the question period after his speech. "Not very."

Wow. I wonder if he knows the demographics of the newspapers he just bought very well? Has he asked any of his under 30 (hell, under 40) grandkids if they subscribe to a newspaper? Just one? I doubt it.

Now would be a very good time to start putting together a web based locally focused online media startup for each of these 16 cities where the Tribune is, apparently, going to turn off (or try to start charging somebody) for the online component of their newspapers.

It's too bad he's not thinking of newspapers for what they are: The best source of LOCAL content available in a community (regardless of where the community gets is- paper or online) vs. a ground up tree with ink smeared on it.

Companies have been experimenting with local online communities that were supposed to replace newspapers, radio and TV for years. I think the window to start really focusing on it may have just opened up.

Microsoft died in 2005.

I just read a great essay by Paul Graham that made me stop dead in my mental tracks and go oh yea... damn! I love Paul's writing. He's generally dead on with his observations and this one's right in line with that trend.

His claim? Microsoft died in 2005.

How?

1) Google. Need I say more?

2) XmlHttpRequest- Created by MS for Outlook, Mixed with JavaScript you get AJAX and that was the beginning of the end for desktop applications. This made it possible to move applications to the web. One of the first was Gmail. Now you can get photoshop functionality on a webpage.

3) Broadband internet. The faster your connection, the less you need the desktop.

4) Apple. Ever check out anyone working on what's next? Chances are he or she's on a Mac. Windows? For grandma.

Read the whole thing. It's here and by Paul Graham standards, fairly short. Anyone who's been around for awhile will go.. oh, yea... that's it. Damn!