How to convince people to give you money

I spent last night in Berkeley and drove in from there to work in Palo Alto this morning. As I took the highway 84 exit. I realized that I would have to pay toll to cross the Dumbarton Bridge, and that I only had 1 dollar in my wallet (the toll is $4). A part of me thought that they would just let me pass, because would the seriously make me turn around and find an ATM and how does one turn around in a place like that anyway. So I just kept driving towards the toll and at the last second (literally the last exit off of 84 before the bridge) I took the exit and ended up in some random industrial/marshy place.

I pulled into some parking lot that looked promising (read wasn’t completely empty… and there were many of those) and before going to ask for the whereabouts of an atm, I decided to see how much change was in the car. I found $2.35, so including the dollar in my wallet, I only needed 65 cents to pay the toll. I went to the receptionist (actually security guard) and asked her if there was an atm nearby. She proceeded to give me directions and then asked my why I needed it. I answered truthfully (with minimal exaggeration) and then asked her if she had any change she could give me because I needed to get to work soon. Somehow the combination of my sob story, and my sincere frankness worked and she ended up giving me a dollar.

So, this is how you properly ask a stranger for money (from personal experience… because I have so much of it):

1. Come off as desperate: present an intricate story that is both interesting and slightly humorous while not being to farfetched (it helps if the story is true…).
2. Be subtle: demonstrate that you’re financially stable (lie if you have to). At the same time, make sure that they’re aware of your need. Take what I did, first ask for the location of an ATM (shows that I have money), but then ask if she could just give me a little change.
3. Be friendly: Don’t antagonize your “customer,” it’ll just make them less likely to cooperate
4. Don’t ask for a lot of money: you’ll be much more successful if you ask for change as opposed to asking for like hundreds of dollars obviously

On a more serious note. Some of these principles can be applied to entrepreneurship. Nobody wants to earn revenue purely from ads. If you could somehow convince people to pay you for your service, you could theoretically make a lot of money. So here’s how you do it (for simplicity lets say you have some website the offers some service):

1. Be subtle: your site shouldn’t come off as desperate. Don’t make the sight glaringly about money, it should be something in the background that just gets done.
2. Be friendly: Make your website really easy to use. Along those lines make it easy for people to pay you. If they have to jump through hoops just to pay, they won’t.
3. Don’t ask for a lot of money: If I charge a lot for my service, then less people will want it. (simple economics. as price rises demand declines). This also depends on who your target audience is. If your targeting enterprise customers, you can charge much much more than if your targeting ordinary people

Anyway, this is turning into a pretty long rambling post about nothing really that interesting so I guess I’ll end it.

Startup School

Another post that should have been several months ago…

In April of this year, I headed down to Stanford for something called Startup School. I didn’t really know what to expect but it’s hosted by Y-combinator so I knew it would be pretty cool. It turned out to be a bunch of talks by successful entrepreneurs, lawyers, and venture capitalists and all in all I learned a lot over there. Also it was way for entrepreneurs from all over the place to gather and meet each other, look for teammates, competition and all that stuff.

Since I wasn’t currently working on anything, and since I was one of the younger people there (most of the attendees were out of college) I wasn’t that interested in meeting a lot of other people, except to find out what they were working on, which I always think is very interesting. I was there pretty much to hear the talks, and hopefully take something from them that I could use maybe later on when I do try my hand at a startup.

Of all the talks (I believe all of them are on justin.tv), the most interesting, and most entertaining on was by David Heinemeier Hansson. DHH is I think the head developer of ruby on rails (or something like that) and now he’s working for 37 signals, which is doing exactly what he recommends (which you’ll know about if you either watch his talk or read the rest of my post). Here is his talk. I definitely recommend that you watch it if only for entertainment purposes (he’s really funny). But of all the talks, I think I learned the most from his as well.

His main point was that rather than trying to provide your product for free, charge a little bit. Then you don’t have to struggle to make ends meet, you don’t have to work so hard to monetize (by ads or whatever) and you get to make money. And granted most ordinary people are no longer willing to pay for your service, but almost all companies are willing to pay you if you are providing them a valuable service and doing it really well. So the real trick is to find something that companies need, make it, and then charge them for it and you’ve got yourself a pretty good startup.

So that’s the underlying idea, but there are a couple of problems with that. When you’re charging for your product, you’re held to a much higher standard, so you’d arguably have to work harder. This is even more the case when you’re making something for companies. But arguably this may actually be a good thing. When you’re trying to get something out to users (even if it’s free), the only way you’re going to be successful is if you hold yourself to a high standard, but it’s a lot easier to let things slide when there is no external force here. For example, If your free website is of the highest quality, you’re not going to get any traffic, and you’re not going to get any revenue from ads or whatever monetizing scheme you’ve thought of, so you have to do this anyway. The fact that you’re selling your product means that there’s an external force (namely your customers) holding you to that high standard and they definitely won’t let you slip up. Charging your customers is just force that keeps you working well.

The other problem and solution is talked about here. I won’t go into much detail there, just read that.

So I’ve become a convert to this thinking, I’m now looking for things that I could sell to companies and hoping to form my startup around one of these ideas. But it’s definitely much harder to find pain points of companies than it is to find pain points of ordinary people, so I’ve been looking for awhile without much success. I’ll still look for more consumer facing ideas, but I find that they are much easier to shoot down quickly and so I’m not sure if I’ll be working on something like that in the near future.

And that was pretty much startup school. If you’re interested, watch the talks; most of them are pretty interesting and they offer a lot of different perspectives from pretty big shots (Jeff Bezos, Marc Andreesen, and others). Definitely will be going again next year.

Re: Entrepreneurship

I haven’t really had much to write recently. I’ve been way to busy with school work to spend time on my own projects (like the startup I’m supposed to be working on). But apparently Pavan has the time to write a lot and I have a lot of opinions about the last post that he wrote. Before you read this post you should read his post.

Ok pav… I’ve thought about the same things that you’re thinking about and maybe some of my opinions will be helpful to you.

First of all. It’s awesome that you have an idea that excites you enough to write about it. That’s definitely the first step. I’m sure it’s a pretty good idea and with a little inertia I think you’d be able to capitalize on it and make it successful.

1. I think you should be talking to people about it. Obviously I wouldn’t share the idea with the world, but let some of your good (trusted) friends in on the idea. The fact that they’re trusted means that they won’t spill the beans and that they’ll be brutally honest in criticizing the idea. Talk to a few different people with different backgrounds. They’ll give you different perspectives that you don’t have and that’ll provide you insight onto whether the idea is actually good and feasible. Definitely talk to some one very technical; they’ll know approximately how hard the idea is to implement, and they’ll probably have some information on related technologies and whether anyone is already working on it. Also I would talk to some people who you expect would be users of the product. See if they actually want it and how they would want to use it.

In terms of protocol. I don’t think there is one and I don’t think there really has to be one. Talking to someone about an idea does not mean that they are involved with the idea and it does not mean that you are obligated to let the join you. You’re definitely not expected (and shouldn’t) give them a share in the idea since you came up with it and are just asking them for advice. For example, Arvind and I went to talk to the guy who’s teaching ieor 190c next semester and we were very open in sharing one of our ideas with him. He gave us criticisms and direction, but we never invited him to join us and he doesn’t expect to join us. Most people who you talk to will be too busy with their own things to really join you anyway.

2. Execution depends a lot on the project and how complicated it is. Most web ideas don’t actual require that much computer science knowledge (as in theory etc.) at first. Most of the information (languages, paradigms) can be learned online and are pretty easy to pick up. If you’re that excited about the idea you’ll probably be willing to learn a lot as you go. Another option is to hire a developer, but I wouldn’t recommend it for a couple of reasons: 1. you’ll need funding and that means you’ll dilute you’re share in the company-to-be. 2. if the idea doesn’t take off (which unfortunately has a pretty high likelihood of happening) then you’re in the hole financially. If you work on it yourself (ideally without funding) all you have to lose is time and it’s not a total loss because you’re learning as you work. As a college student you don’t really need to make money so keep it simple and don’t ask for funding. I think you should do it yourself until you have enough proof that it’ll take off, then look for funding and then hire people. Maybe get a prototype out before you look to grow because it’ll be easier to get funding and you’ll be able to estimate how popular your product is. Maybe it would be a good idea to get one friend on board who knows the ins and outs of web 2.0 with whom you can split the company but that’s up to you.

3. I hinted on this before but it’ll probably be a lot easier to get funding if you have a prototype to show to the VC. Most investors will want to see that you’ve spent considerable time at least thinking about the product so you better have at least a formal design and maybe business plan with you. I don’t know much about this, but you could also consider getting an angel investor. They’re supposed to be better for seed funding (the first stage) and they won’t take as big of a cut as a formal VC. Read up on angel investors, they may be the way to go.

Talking to EE, CS, and business professors sounds like it’d be a good idea. I don’t think any of them will jump on board unless you explicitly want them (the concern you had in 1.) but they’ll definitely be able to give you guidance and/or other resources. Again I don’t recommend thinking about VC funding this early on, but if you know anyone who would think of funding you (possible family friends) then you should talk to them about getting some seed funding (that is only if you absolutely absolutely need it)

Finally, you definitely have the skill and ability to successfully execute this (well depending on what it is) and I guess I’ve given you some of my recommendations here but definitely talk to me about questions. I actually read a lot about entrepreneurship and may be able to help you out (I haven’t actually done much though so… yeah). A lot of the stuff that I’ve mentioned here comes directly or indirectly from Paul Graham. He’s a pretty techy guy who is now a venture-capitalist working for the Y-combinator. Definitely check out his essays. I’d love to hear what you’re idea is and maybe give you another perspective on it.

Hope my advice helps. Again these are just my opinions and I don’t really know that much about anything so question me, doubt me, criticize me and ignore me if you so desire. Feel free to ask my any clarification questions.

Startup Part I: how it all began

Two of my friends and I have decided to start a company. We’re still in planning stages, but we’ve come up with some interesting ideas and have discussed these ideas with several people including some successful entrepreneurs. On the whole we’ve gotten good feedback and should begin the actual development very soon. The first month was eventful and very rapidly moving, but we’ve hit a slump without much progress in the last couple of weeks. But I digress, let me start from the beginning.

The Team Formation: The current team consists of Me, Neeraj, and Arvind. We’re all engineering students and we’ve been good friends for at least a year. Since this school year began, whenever we used to get together, we always discussed technology-related ideas that we’d be thinking about. Finally we decided that we should formalize this process and ultimately work to implement one of our ideas. We’re all really good at different things, and the union of our skill sets seems to cover all the skills needed in company founders and so…

 Sometime in late September, 2007: We had our first business meeting in my small (I stress small) bedroom. We discussed all of our motives and aspirations for the start-up and then moved on to discuss some of the ideas that we’d all been thinking about. Since we’d been thinking about this for awhile (at least the ideas), we had quite a few of them, but many weren’t grounded in reality, or were otherwise unfeasible. We selected a core few, and went on to research each specific area and look for competitors. We finally pinned down one idea, which we were all really excited about (so it made for a good candidate).

Then… : We started discussing the idea with our friends and peers, met a lot of criticism and as a result morphed the idea to still fit the same basic niche, while addressing the demands of these people. Before we started working on it however, we arranged a meeting with an entrepreneur in the area and discussed the idea with him. He loved it! So it looked like it was time to get working.

Roadblock #1: Midterms… All three of us have had exams these past couple of weeks and have been incredibly busy with school work and as a result we haven’t actually started implementing the idea at all. This will probably turn out to be one of the biggest road blocks that we’ll hit, because when it comes down to it, school comes first for all of us, so the start-up will keep getting put on hold. We haven’t even been having our weekly meetings for the past couple of weeks, which is pretty depressing, saying we have a solid idea that just needs to be implemented well (that’s the easy part). I’m hoping that we’ll get a bulk of our work done during the December break. Hopefully, we’ll have a vested interest in the company after that point and so we’ll keep working on over the course of the next couple of semesters.

My Thoughts

I’m really excited about the company, it’s a good idea that I think would be fun to work on. It provides a unique service that seems like it would attract a lot of users and it’s pretty easily monetized. I’m excited to work on it, but unfortunately I’ve been too busy to make much progress on it.

I’ve read quite a bit about starting companies from Paul Graham and others, and I know that this is one of the pitfalls of trying to start a company when you’re in school. I knew this coming in, but felt like the three of us were dedicated enough to keep working on it through the busy times. Again, we’re still in the early stages, but we’ll see how things go. I’ll keep posting updates here when things happen.

What project ideas have revenue-generating potential?

I’m very fortunate to be living in Silicon Valley. Both my parents work in highly technical areas so I can bounce ideas and implementations off of them. They give me really good feedback about anything, both technical and not. What’s more, many of their friends are equally technical and entrepreneurial, so I’m in a great place to bloom as an entrepreneur. Recently I met one of my friend’s uncles, and I started talking to him about entrepreneurship and all that good stuff. Turns out he’s a venture capitalist, so he gave me a lot of advice, and input from the point of view of a VC. I’ve only known him for about a month, but I think I’ve already learned quite a lot from him.

I had a chat with him earlier today; we talked first about school, work, and music, but I asked him for some feedback on an idea that my friend and I just started working on. I won’t go into detail on the idea, but both my friend and I were pretty excited to work on it; it seemed interesting and also pretty useful to the general public. Anyway, I explained the idea, and needless to say, he didn’t particularly like it. Yet, he didn’t just rag on it as most people do, he gave me really good reasons why he didn’t like it that I can apply to other ideas.

The first point he made was that any idea that you want to profit from needs to have some “hard problem” to it. Sounds pretty obvious, but in retrospect, most of my ideas have nothing really hard to them. They’re just a lot of mindless coding, with some tricky areas. His reasoning was that if there isn’t anything challenging to what you do, competitors will just imitate you, and no one wants more competition. You need something that really separates your product from everyone else’s, something that’s not easily reproduced. If you’re product solves a problem better than anyone else can, then you’ll probably be successful. Our idea, unfortunately isn’t that hard to implement.

I agree with this statement from a business standpoint, but not having a challenging problem doesn’t mean that you shouldn’t implement your idea. It’s always great to contribute to open source projects and build free services, just don’t expect to generate revenue from them. I still want to build this project that my friend and I are working on, because I think it’s a cool idea. Even if it’s not challenging, it’s still something fun to work on and it’ll be a good learning experience. I’m not at the stage in my life when I need to be making a lot of money (it’s always good of course), so I’ll still work on my ideas that I think are cool, regardless of a challenging they are. On the other hand, things that aren’t challenging aren’t nearly as fun, and stimulating as things that are. I think that should be the real deterrent from working on certain ideas: not that others can replicate, but that they aren’t as fun.

The second point he made was about building off of someone else’s (lets call them company A) infrastructure. If you’re doing this, you better add something really unique to it that makes it significantly challenging for the owner of the infrastructure to imitate. If you’re product is trivial here, as soon as you become remotely popular, company A will devote some resources to imitating you, and they’ll do things a lot better than you ever can. While you only have access to their API’s, they can configure everything about the base infrastructure to optimize for what you’re doing and probably beat you out. This goes along with the challenging problem bit, but it becomes even more important when you’re using someone else’s work.

In thinking about this, I’ve become even more turned off to using external infrastructures. With a lot of my projects, I like to do as much as possible by myself. Rather than rely on other people’s code and API’s, I prefer to build things myself, customizing them to suit my needs. I like this for two reasons: I build a more optimized application and I learn a lot more by designing everything. The lesson here is: don’t expect to make a lot of money off of mash-ups. Don’t get me wrong, many mash-ups are really cool, but they’re not going to generate a lot of revenue.

We also talked about generating revenue from an idea. He affirmed my belief that a lot of money can be made with advertisements, but advised me not to worry so much about income, and focus on building something good that attracts visitors or users. We started talking about this site, (it’s my only project with some hope of generating income right now) and he encouraged me to just keep writing and focus on publicizing and building subscriptions. What I took from this is that you shouldn’t worry about generating revenue at the onset, but instead concentrate on building something really good.

Since talking to him, I’ve been reassessing my current projects and deciding whether I should keep working on them or not. Some of them I’ll definitely scrap; they don’t sound like much fun and I don’t think they’ll make me any money. Others, I think I’ll continue. At this point, none of my ideas really have anything “challenging” about them, but I’m still a pretty young student with a lot to learn. I still have plenty of time.

On Young Entrepreneurs

A lot of people seem to have hopes of starting their own company. What could be better than being your own boss, doing exactly what you want, and all while you still have the opportunity to get rich really quickly? It’s really common for engineers to want to start their own companies because they’re really smart and innovative, and because their fields usually allow for a lot of new ideas to proliferate. Maybe I’m just going along with the majority here, but recently I’ve thought a lot about starting something on my own hoping it’ll take off.

In my free time I’ve been reading a lot of blogs and articles about entrepreneurship and I like to think that I’ve learnt a bit about starting my own company. One thing that’s repeatedly discussed is the issue of dropping out of college to start a company. I don’t have any experience on the issue; I haven’t tried to start a company, and I haven’t even gone through much of college. Yet I feel pretty strongly that most kids shouldn’t quit school to start a company. Rather, they should take the time to work on their own projects, prepare themselves for their company, and meet people (some who may become co-founders, angels, or just really good friends).

So what if you have a really cool idea that no one has thought of and time is of the essence? You’re probably the type of person who’ll have other great ideas too, so there’s really no need to build a company around this one. There will always be ideas floating around; it’s no big deal if you don’t graduate in time to build this one. To top it off, Paul Graham, a former entrepreneur and now Venture Capitalist, points out that your idea doesn’t matter much at all (See 7: No idea). Most start-ups change their ideas anyway, so you probably won’t even execute this really cool idea.

One way that a lot of students decide to start their own company is when one of their side projects turns out to be really cool, so they decide they can build a company around it. Say you’ve designed some product, and have a pretty devoted user-base. It’s seems logical to turn it into a full scale company, right? Maybe you can (it depends a lot on the product), but do you actually have so much to do that you (and maybe a few other people) can work on the product for 40 (or more) hours a week? In my experience, I could build any of my college projects in less than a week if I worked full time. This may not be the case for you, but I feel like most college projects can’t be scaled well enough to become a company.

What about experience? It’ll be really hard to start-up a company if you have no experience building production quality stuff. Paul Graham claims that one of the biggest problems with young founders is that “they build stuff that looks like class projects” ( See Minus). Young entrepreneurs have little or no idea what separates robust products from the stuff they’ve built for school ( not to insult anyone, but it takes some experience to figure it out). But there is a solution here: get some experience. Get internship positions early on and see what having a real job is like. They’re not really the same as career-jobs, but it’s close, and you’ll start to understand what it takes to build production-level stuff. Without at least some experience under the belt, it’ll probably be hard to start your on company.

I realize that this article is really negative, but I do feel that kids shouldn’t give up their education without having some idea about what they’re getting into. Just having a college degree makes it so much easier to get a job, so you really need to decide if starting a company is that important to you? And there definitely are a kids out there who do make it big and never end up needing their college degree (Bill Gates for example), but I’m sure there are at least as many kids whose companies don’t make it.

I’m not really trying to be discouraging, but I’ve picked up most of what I wrote from blogs and articles that I’ve read (Paul Graham’s site is a great one) and I’ve added some of my own thoughts. And there are plenty of reasons to start a company when you’re young (for example, you don’t need to support anyone, you can work really long hours, and you can live really cheaply). If you still want to try it, you should, and I wish you all the best.