Planning Startup Stories - Palo Alto Software

I’ve done business with my wife, daughter, son-in-law, and various mixtures of those. Of course the classic advice on this is not to mix business with family. 

But people do. I read somewhere that 62 percent of the gross national product of the Western world is produced by family businesses. 

Furthermore, I don’t believe (much) in general rules or best practices. 

But here are some suggestions that might help you manage the mix between family and business relationships.

1. Beware of the crossover. The cause of most family business problems is the crossover between different relationships. You don’t mix boss and subordinate relationships with parent-child or siblings or husband-wife. People who are successful working with family separate the roles so you don’t get into family behavior when you’re talking about business. You have business discussions and personal life, and never the twain shall meet. That’s really hard to do, but it’s also vital. 
2. Use physical location to help. Make a rule not to talk about business at home and not to talk about home and kids and relationship problems at the place of business. 
3. Use physical presence to help. Don’t talk about business in front of the kids. Or the parents. 
4. Recognize communication triggers. Often what started as business discussion is suddenly husband-wife or sibling-sibling or parent-child, stop. Call time out. Have a signal. Adopt a safe word. We spend years in patterned habitual behavior based on the family relationship so stopping it for business is hard. We have to work on it. 
5. Don’t forget to acknowledge the advantages of family business. You are working with people you know and trust who care about the same things you do. You share the problems. You share the rewards. 
6. Don’t pretend it’s all arms length and objective. Family factors influence decisions. It’s naive and distracting to pretend they don’t. Try to be aware of how and when they do and manage the long-term objectives accordingly. 
7. Never stop learning.

(image: bigstockphoto.com)

I completely agree with Steve King of Small Business Labs, in Is the Venture Capital Industry Broken? He says:

The news here isn’t that the VC industry is broken. This has been actively discussed for years. The news is who’s saying it’s broken.

Which is, in the flap this month, the Kauffman Foundation.

The Kauffman Foundation has long been a close friend of the VC industry.  In addition to investing many millions of dollars with VCs, Kauffman’s mission of supporting entrepreneurs and high growth companies has resulted in them closely collaborating with the VC industry.

The foundation recently published We Have Met the Enemy and He is Us, a blistering critique of venture capital and its role in startups.

Here’s the problem in one simple business line chart (why I like business charts). It shows how the rate of return on venture capital looked great during the first big Internet boom. It’s not a pretty picture.

On the other hand, those low points in the last few years aren’t uncommon, are they? How is your industry doing since the great recession? The chart shows pretty much what Steve summarizes as follows:

Kauffman has many reasons why the industry is broken.  But the quick summary is the industry simply hasn’t performed well.  Only 38% of the funds Kauffman invested in over the last couple of decades beat public market small cap indexes.  This is primary due to the expensive fees VC firms charge.

So does this mean hard times for startups? I doubt it. I see is a shift towards smaller seed rounds and more angel investment as a web and software technology have reduced the capital needed by the average high-end web startup to get from nowhere to proof of concept and validation. In an oversimplified general sense, what took $2.5 million in 1998 takes probably $250,000 today.

Business comes in cycles. Suppose the huge camelback hump in returns in the late 1990s (the boom) were a temporary aberration. The hard times afterwards (the crash) are probably a temporary aberration too.

Steve recommends this story in GigaOm and this one by Fred Wilson of AVC for further reflections on the Kauffman findings.

Today I’m answering, with this post, a lot of similar questions I get often in email, where somebody is asking me how to get connected to or hooked up with or recommended properly for angel investment. Here are some unpleasant and unpopular facts about startups and investment.

1. Only friends and family believe in you and invest in you because you’re you. And that’s if your friends and family do believe in you; that’s not true for everybody. Outside investors, in sharp contrast to friends and family, either believe in your business prospects, your market, and your team, or they don’t invest. They’re doing it to make themselves money. (back story: I get a lot of emails from people asking how they can get investment for their business when they have pretty much nothing to offer investors. The answer is: You can’t.)  Or not at all.
2. About that great idea you have that’s worth $5 billion for which you need $500 million to get started: unless you’re already a startup star, or an oil prince, or family wealth princess, just forget it. Mark Andreesen or Mark Cuban or Paul Allen could maybe get $500 million for a new idea. You can’t. (If it makes you feel better, neither can I). Give it up or scale it down to a $5 million idea that takes $5,000 to get started; or just forget it.
3. All of you newbies – new to entrepreneurship, no successful startups, no traction — asking how you start your business with no money: Please, get real. Once in a blue moon a foundation or government agency will grant some money, and usually that’s just a low-interest loan, to some proposal that has social and economic value that fits government priorities. We see this in special development zones, some scientific or defense-related research areas, and occasionally with private money committed to social good. But it’s rare. If you aren’t one of those special cases, forget it. And if you are, do your homework, find out what really happens with grants and such.

If you’re still interested in a startup, stop looking for some pie-in-the-sky solution. Get a job in the business area that interests you, and learn the business. Partner up with people who’ve been there already. And do your homework, look up all those web pages full of good advice about startups, including this one, bplans.com, which is full of information about what you can and can’t do. If you’re in the U.S., connect with your local Small Business Development Center, or Women’s Business Center, or Small Business Administration (SBA) office. If not, find the equivalent in your country. Get some real info, and then do the work: do some research, develop a realistic plan, take real steps.

Starting a business isn’t a right. The government doesn’t owe you your startup. You have to make it happen. 

Whoops. It suddenly occurred to me: the old Mac-Windows rivalry is dead. There goes a bit of industry history. 

It used to be fun, back in the old days, when it mattered. If you’re old enough you’ll remember the famous 1984 Macintosh ad. I was generally forgiven by the Mac zealots for my weakness for Windows, but only because I also used Macs and recognized their superiority. My Mac friends treated my sympathy for Windows systems as a forgivable flaw in my character. 

I used to tell this modified version of an old joke: 

Somebody dies and goes to heaven. On arrival, St. Peter gives him the quick tour of the place. As they go through heaven from place to place, they look at the mall, the school, the park … and they keep seeing a high wall on one side or the other. Finally, the new arrival can’t resist asking: “What’s with the wall?” St. Peter Answers: “That’s where we keep the Mac users. They like to think they’re the only ones here.”

I like Apple. I consulted with Apple from 1982 to 1994. Apple loaned me an Apple II in 1983 and a Macintosh early in 1984. I wrote the first book laid out on an AppleLaserWriter (at least according to me and McGraw-Hill Microtext, the publisher). As a consultant to Apple, I worried as Windows started to effectively imitate the Mac — not that it was as good, but it was good enough to fool a buyer in a store. And it was personally painful to me when the Windows system so dominated business computing, the late 1990s and early 2000s, that we (temporarily) dropped our Mac business plan product. We really had to. By 2000 a Mac product was costing ten times more than Windows to develop, and its market was about ten times less than Windows. Business is business.  

By 2004 my computing was all Windows. And at that point my computing was all Windows. It wasn’t torture. Windows worked. I use a computer to get things done, and Windows did. I may have still preferred Mac, but hey, business is business. 

And then the Mac came back. We saw them first in airports, the MacBooks, silently gaining strength and visibility. Then there was the iPhone, and more MacBooks. And then the gorgeous new iMacs. I taught an entrepreneurship class at the University of Oregon from 1998 through 2009. In the beginning all my students had Windows laptops. By the end, 80% of them were on Macs. 

Once again, being Mac literate is good business. At Palo Alto Software, our LivePlan SaaS app is browser-based, operating system neutral, and developed mostly on Macs. And Mac software, and the Mac software market, are growth markets again. The app store works. Happy ending. 

So now I’m almost all Mac again. I have two iMacs at home, a MacBook air, and iPhone and iPad, and I love it. An old friend. Isn’t computing great? And my Windows 7 desktop, in the office at the company, still works just fine too, thanks. It’s not good and evil, just computing. 

But don’t tell the Linux geeks. 

I’ve watched dozens of TED talks online and never seen a bad one.

TED stands for Technology, Education, and Design. It started in 1984. Since 1990 it was located in a conference center outside of Monterrey CA. Since 2001 it’s been curated mainly by Chris Anderson.

Most TED conferences were amazing. I’ve never been, but what I’ve seen is a collection of excellent presentations about compelling ideas and information delivered by the best and the brightest in the world. If you’ve been reading this blog you’ve seen TED talks off and on. Since I first discovered the online TED talks at TED.com I’ve been back to that well regularly. And what I’ve found has been consistent highest quality of thought, communication, and, specifically, presentations.

For more than a dozen of my favorites, from previous posts on this blog, use this link.

So far, so good. Can anybody blame TED for wanting to branch out and expand? Not me. TED is now branching out to TEDx talks that are way less exclusive. Look around for TEDx on the web and you’ll see the TEDx talks popping up everywhere. Here’s what TED says about TEDx:

Created in the spirit of TED’s mission, “ideas worth spreading,” the TEDx program is designed to give communities, organizations and individuals the opportunity to stimulate dialogue through TED-like experiences at the local level. TEDx events are fully planned and coordinated independently, on a community-by-community basis.

In theory that’s great, but what if the end result is that TED talk no longer means guarantee of high quality? I hope the TED tradition continues. But here’s the concern I have:  Does that mean dilution of quality? A lower bar? More people presenting to more people on more subjects in many more locations?

TED says that 231 TEDx conferences were held last month.

And meanwhile, just to make that a bit more real, this morning I clicked a TEDx link in my email to end up with this disappointing result: