I want to do a startup?

What is all of this bullshit about "doing" startups?

In the last few years I've had this same conversation over and over, where someone says something along the lines of, "I want to do a startup but I don't have an idea yet."

What?

That is (I'm sorry) complete bullshit.

I recognize this: I'm an artist and I've found that EVERYONE wants to be an artist because of the fun parts - the "everyone bow down to my greatness" parts.

But almost no one want's to do the work.

Because if you're an artist your life is going to be spent at 2AM in the morning alone in a dark room. That is the life. 

That is the life because to be an artist you have to DO THE ART, and that is grinding, difficult, emotionally exhausting work.

It's not just about wearing the beret and looking down on the idiots who don't understand your-inner being.

Startups are the same way. When you're telling me that you want to 'do a startup' I'll be looking to see if you understand what you're actually talking about, or if you're just talking out of your ass.

OKRs - Objectives and Key Results

Are you using OKR's (Objectives + Key Results)?

One question that I ask when I find out an org is using OKR"s is "What are they?". They've been trickling down from Google into the mainstream.

That story: https://lnkd.in/gZbm6wi

You can tell a tremendous amount about a companies vision or an individuals goals by finding out what they're setting as their objectives: Are they simple? Are they ambitious? Are they just junk to fill in a checkbox and satisfy someone else.

A person's goals are a defining feature of their personality that will tell you who they are and what they're going to do and what you can expect when you're working with them.

Are you using OKR's? What is your experience?

Get Notified When HireVue Labs Launches

Get on the list and we'll email you when Hirevue Labs launches.

EXTRAORDINARY INTERACTION TOOLS DESIGNED FOR BUSINESS.

Over the last 30 years, the shift has been to digitize the person. They have become a number, a profile, a keyword, a resume, a bullet on a piece of paper. It isn't anybody's fault - it comes down to scale and there is nothing scalable about live, real time interaction. Fundamentally though, people are voices, stories, experiences and personalities. 

BUILT FOR HUMANS.

The goal of HireVue Labs is to bring "human" back to "human capital". More importantly what if the way people interact could be reimagined and scaled to a point that thousands of interactions could occur instantly and they could all be consumed in 1% the time it usually takes.

We've done it with job interviews. Think about all of the other personal interactions between people. What's next?

HireVue Labs?

I'm at HireVue building new startups? How did that happen?

Since I updated my LinkedIn profile I've been contacted by a number of friends and contacts who have asked what HireVue is and what I'm going to be doing there.

HireVue is the worlds leading video interviewing company with clients that include Starbucks, GE, Dow Jones, Red Bull, Ocean Spray, Geico, Living Social and  a few hundred others. Something like 20% of the Fortune 100 are now using Hirevue to time-shift their interviews, shred their hiring costs, and improve their new hires. Hirevue's sitting a the junction of a sea-change in HR and the trend is only going to accelerate.

My role at HireVue is to build startup teams and products to expand HireVue's core technologies outside of video interviewing by building new products and - where needed - new startup teams. I'll be running an entity that's currently referred to as "HireVue Labs" which will be taking on special projects as well as another entity that will be outside of HireVue and is as of yet still unnamed. 

The goal of HireVue Labs is to utilize all of the new methodologies and tactics around lean startups, minimum viable products, business model canvas, and blue oceans to quickly discover customers, build and launch new products, and iterate. These are exciting times at HireVue and we're going to be building some incredibly interesting products and services across social networks, healthcare and education We'll also be open to helping other startup teams who might utilize HireVue's technology or who are in a market of interest where we can help with technology, team building or help financing.

I'll also be handing businesses that HireVue either acquires, or spins off. The first of these is a company called CodeEval, a 'code testing' community that came out of I/O Ventures incubator program and is based in San Francisco. HireVue acquired CodeEval to help develop HireVue's capabilities around technical 'coding' hires and turned into "CodeVue".

Of course all of this is risky and unusual. Failure to focus is a know and common killer for startups... exactly why all of these projects and teams will be built outside of HireVue, preventing distractions that could compromised HireVue's domination of the video interviewing market (where they're killing it).  Undoubtedly, we'll make some mistakes and go down a dead end or two, but we'll be trying to be smart about what bets we make, and when we'll cut bait or let the winners run. 

So, if you've got a startup or company that could leverage HireVue's technology or core competencies, we should talk.

Groupon Turns Into Nimble

Groupon wasn't exactly the same, but now it's becoming Nimble.

Oie. If only.

Many of my friends who know about my former startup Nimble and are aware of the massive growth of Groupon give me a conciliatory pat on the back when they see me.

Nimble, that I founded in 2004 allowed any local business to sell it's inventory at a discount in real time. And it worked.

(Of course we were tiny compared to Groupon and I made many typical startup mistakes. Mainly, that I didn't have the right team in place.)

Now, Groupon is actually starting to copy Nimble: CNN Article

...a new mobile application that the company hopes will change when and how society chooses to eat, shop and play.

The application, known as Groupon Now, is remarkably and elegantly simple, yet it's a radical departure from Groupon's current deal-a-day business model. When a user opens up the smartphone app, he or she will be presented with just two buttons: "I'm hungry" and "I'm bored."

Clicking either button will open up a list of time-specific daily deals, based on his or her location.

The familiar $10 coupons for $20 worth of food are still there, but they're not one-time offers. Instead, businesses can choose when they want these deals to be available.

Say a restaurant is incredibly busy on Saturdays but could use more business on Wednesdays. With Groupon Now, that business can fill its seats during slow business days using time-specific deals.

That's the beauty of Groupon Now: local businesses have never really had a simple way to manage their perishable inventory, especially labor and food. Why waste those resources during slow periods when you can bring savings-savvy consumers through the doors with a highly targeted Groupon deal?

"For merchants, the daily deal is like teeth whitening, and Groupon Now is like brushing your teeth. It can be an everyday thing to keep your business going," Groupon founder and CEO Andrew Mason told Bloomberg Businessweek in an extensive interview on the new product.

The daily deals company has been on a tear recently -- in fact it is the fastest growing company in history -- but it faces stiff competition from companies with increasing muscle.

Oh, this kills me.

If only...

Read this post on: Medical Spas & Groupon

Paul Allen: CEOs Who Code

I was reading tonight a Paul Allen post about CEO's who code.

I tried to leave a comment but I think I was unsuccessful. At least I didn't get the 'moderation' confirmation that's common on Wordpress blogs.

Paul's post was dead-on with this.

There’s an amazing feeling of satisfaction when you build something that works – and better yet, something that is used by thousands of people.

Now, I'm not a coder by any means. In fact, any mention of coding by those are not immersed in C+ or Java or Ruby on Rails or whatever is probably too much.

For myself, I've had to learn a little CSS, HTML, SEO and enough of other stuff that I can often cut and paste real code to get things to work the way I need them to.

The first 'application' that I created was cobbled together from some off the shelf shopping cart software and, what was then, newly discovered RSS feeds... but it worked. (Way before Groupon I might add.)

As soon as you have the title of CEO (and it's a real company) it's irresponsible to be coding. A CEO is responsible for the direction fo the entire organization, and that requires that a CEO's head be above the trench line and not down in the Java.

That being said, CEO's who understand how code is developed, structured and what's possible are a huge asset to a technology company. Before you can create something new you must understand what's possible and the shortest, most efficient way to get there.

HireVue: Video interviewing SaaS that rocks!

HireVue's been on a roll lately. Every time I have dinner with Mark it seems that HireVue's rolling in additional customers, and it's no wonder. HireVue's offering real value to HR departments looking for efficiencies in their hiring process.

It's great to see another technology startup here in UT making the grade and building value.

I've used HireVue to interview. HireVue made the preliminary interviewing incredibly easy, and I was able to review and share the interviews I liked best. I ended up with a perfect fit for the position which would have been very hard to do just over the phone.

If you're looking to hire anyone, HireVue's the place to do it.

And, of course, HireVue uses Sendside.

HireVue is the worlds leading video interviewing service doing business in more than 70 countries. HireVue came to Sendside looking for way to accelerate their sales cycles and provide mind-blowing relationship marketing to their existing clients that include Google, Oracle, and Africa World Bank. Within months, Sendside increased helped increase their sales by more than 35% while cutting their sales cycle in half.
Read the HireVue success story

Foodzie: Marketplace for specialty foods.

Foodzie a place for artisan foods and a really well designed online store.

Foodzie solves the marketplace and aggregation problem for niche food sellers. As an online aggregation marketplace, Foodzie gives artisan food sellers a venue, and consumers choice, which is key. Sellers can't do this on their own and everyone loves a specialist.

Since they're development with TechStars they've gone on to receive 1m in founding and are looking to become the default distributer for niche specialty foods that have distribution concerns. (That's all well and good since they won't make much as exotic dancers.)

The design of their markeplace is first rate and I'll be interested to watch and see how they keep the simplicity as they begin adding content. One of the problems with marketplaces is that often new items are hidden, replicating the very problem online that they're looking to address... namely shelf space and visibility.

Information is only found two ways, through search, in which case you already need to know what you're looking for, and by browsing, when you only know that you need 'something'. Search is a technology challenge, browsing more of an aesthetic one.

I'm guessing that one of Foodzie's goals is to make niche food sellers aware that they now have this new aggregated marketplace. They seem to be a good young team and I certainly wish them well while they try to achieve scale and prove that a big market exists for people who want olive oil that's 'Grown, pressed and bottled 100% in Sicily' or 60% stone ground chocolate (is that good?).

Earnest Shackleton & Startups

Earnest Shackleton had a problem.

He was organizing an expedition to the South Pole and he needed a crew for his ship the Endurance. His goal was to land on the Antarctic continent and become the first to cross it.

(He named his endeavor the Imperial Trans-Antarctic Expedition and December 5, 1914, Sir Ernest Shackleton and 27 men under his command sailed from South Georgia Island in the South Atlantic aboard the Endurance.)

He had a starup, and he needed a team.

Shackleton could have tried to sell potential hires but he didn't. He needed to have his team self-select for the troubled times, not the good ones. He had a fair amount going for him in that he was an know explorer and had some name recognition.

He ran the following ad in the Times and according to the story, he was inundated with applications.

"Men wanted for hazardous journey. Small wages. Bitter cold. Long months of winter. Constant danger. Safe return doubtful. Honour and recognition in case of success."

Startups are not for everyone.

Having just joined Sendside Networks, I was at a baseball game Saturday when my Sister in LA called. During the conversation, we talked about Sendside and it got me thinking about why I would join a company where we would need a astronomically huge exit to make it a good financial decision when you factor in the income and opportunities I'll be loosing by just running my own businesses. (It made me wonder if one of the horses had kicked me in the head and I just couldn't remember it.)

So since my income may be dropping dramatically, I've been thinking why I'd join a startup. Here's what I find attractive:

It's a big idea: I see lots of deals that the entrepreneur thinks is big but really aren't. (That's not to say that they're not good businesses) World domination is always the goal and building an entirely new communications platform that could conceivably replace email is about as big as ideas get. Those are the kind of ideas I'm attracted to.

I like William, Geoff and the rest of the team: I've know William Borghetti for two years or so. When I decide to invite some people I knew to start a group of Park City Angels, William was at the top of the list. If you're going to work with someone in this kind of environment, you'd better like and respect them. I also like Geoff, Dave, Charlie, Calvin and everyone else I've met who's involved.

It's a challenge that fits my skill set: I have a low tolerance for stasis. Startups are an opportunity to move in a lot of directions at once and get things done.

It's green: The possibility that we may have a positive effect on the environment's not lost on me. Having spent some time trying to save Polar Bears I have a soft spot for hugging trees and smiling kids.

I'm choosing opportunity over security: I just don't understand anyone who actually want's a job. The first summer in college I had a job in a chemical factory. Some of the guys I worked with just wanted to have a job, a nice truck, and keep putting more chrome on it. I just don't get that. Give me the ability to make fresh tracks every time.

It's a door: If Sendside builds into a tenth of it's potential there will be plenty of other opportunities.

It's odd to me that most people don't make decision on these types of criteria. They'd like to, but they don't. They continually choose what they think is security. But the truth is that there isn't any security. People coming out of college today will change careers on average four time over their working lives.

There never is any real security. And there never will be. 

Look at these two options:

Option 1: $100,000 salary and 50,000 options
Option 2:   $80,000 salary and 80,000 options

The real decision is this: Is the extra $20,000 a year (a total of $80,000 over a four year vesting period) a better deal than an extra 30,000 options that may be worth a total of $1,000,000. (Insert any amount)  So it's a question of a relatively safe $80k (if you're not fired which you may well be) vs a potential $1m. Is that even a question? In my mind it's not. Even if you only make $300,000 in the options it's a better deal. (Of course there's a risk that it's going to be worth nothing.)

But it's far more common to take the extra $20k.

If you'd take the $20k you're looking for a job. Shackleton would have left you on the dock.

Sendside Networks: Joining a startup.

I'm charting a new course and leaving the realm of being entirely my own boss in order to join a team.

I've decided to join Sendside Networks. (The consumer facing part of Sendside is at Sendside.com)

Why? There are a number of reasons but in short it comes down to choosing opportunity over security. It's a character flaw. I can't help it. Since world domination's always the goal I just can't afford to be risk adverse.

This blog may well become more active since there are a number of new items of interest, the Park City Angels Group as well as Sendside. Fight Club is going to become a lot more active again as well.

TechStar Companies

Don Dodge has written a post about the ten Techstar startups that have just launched.

 
EventVue - Social networking for conferences and trade shows. Works like Facebook for conferences, complete with pictures, bios, and contact info. Allows attendees to find each other and network during and after the conference. EventVue gets an affiliate fee for each new conference registration. EventVue is already in use at several conferences. You can see it in use on Brad Feld's blog. Competes with eXtreme Networking and IntroNetworks. Seeking $150K to continue product development.

IntenseDebate - A blog widget that provides threading and organization to comments. It includes a reputation ranking system, moderation tools, usage statistics, and user/topic tracking across multiple blogs. RSS feeds for comment threads or individual users. Supports WordPress, Typepad, and Blogger. Ad revenue model and up sell to premium services. Currently in use on 30 blogs, 500 more have signed up for beta. Seeking $500K.

SocialThing - A consolidated profile page for all your digital content; blogs, photos, music, friends, social networks, and links. Synchronize all your friends on all your social networks, from one profile page. Post pictures or other content once and have them appear on any of your social network sites. SocialThing is also a development platform for multiple social networks. Ad revenue model. Viral distribution through networks, and branded widgets. Seeking $500K.

StickyNotes - A post-it-note type app for Facebook. One of the top 30 Facebook apps. Over 1,700,000 users signed up in just six weeks, and have sent over 4M StickyNotes to date. They are working on several other Facebook apps in related areas. Cost Per Action advertising generating $30K per month. They will also use CPM and CPC in the future. Two developers, cash flow positive, not seeking funding at this time.

Search-To-Phone - Find local products and services by calling Search To Phone. Leave a voice mail asking about a product or service. The request is then routed to relevant local businesses, who respond back to you with information or an offer. SearchToPhone uses Microsoft's TellMe and Gold Systems technologies for voice recognition. They have just signed a deal with Excell Services to process 10 million calls. Ready to launch, looking for more partners, and a small investment.

Villij - A people recommendation engine that analyzes your online content, blogs, and bookmarks to find people of similar interests. When you register for Villij you are presented with a list of social networks, blogs, and websites. You check off the sites you use. Your profile on these sites is compared to other members to find profiles of people like you. Advertising and subscription model. Seeking $500K.

MadKast - A new way to share (push) blog posts with friends. It is a widget that can be placed on a blog to allow readers to send the blog post via email, mobile MMS, or social bookmarking networks, to friends in their network. MadKast also has a widget distribution network for other widgets, and they are working on a blog analytics service. Currently in use on 350 blogs, including Brad Feld, and mine. See the green MadKast icon next to the title of this post. Advertising revenue share model, split with bloggers, They will also charge a premium for the analytics package. Seeking $300K.

FiltrBox - A content filtering service that finds relevant content (blogs, news sites, and other web sites) and delivers it to you via RSS, email, and text messaging. Filtrbox uses topics, keywords, and context to rank relevant content.  There are sliders to adjust the sensitivity or depth of information to filter and retrieve. There is a "thumbs up / thumbs down" voting system to help refine your filter. The system learns what you like. Seeking $500K.

KBLabs - Developers of Facebook apps and widgets. They launched their first application (Wah! Cool) 4 weeks ago. They already have 100,000 users and 1.5 million page views per week. They have built several other apps called Post Secrets, Motivate Me, and Track Bot. Each of these apps has more than 4,000 users and is growing over 100% per week. Advertising model. Not currently seeking funding. KBLabs founders are going back to college this Fall, but will do consulting projects building Facebook apps.

BrightKite - Location Based Notifications via email, IM or SMS. The notifications are all about location or what they call "place-streaming". Streaming content about a "place" from a "place".  Alerts you when friends are nearby, or about great deals at nearby businesses, movie listings, etc. It could be used for conferences, events, bars, parties, or public places. BrightKite is also a platform for other location based apps from third party developers. Advertising model. Seeking $500K.

Money Magazine revels in 2.0 Startups.

Moneys 25 startups to watch.

LogoWorks in Lindon is on the list? Go figure. I gave'em a try... once.

From the story:  This year's field is chockablock with "me too" companies, and the bar for startups has been set even higher, in terms of both what customers expect and the kind of return on their investments the angels and venture capitalists want to see.

25 startups to watch

This means that, for many, 2007 is going to be a make-or-break year. "There has been enough time now to determine if there is something there," says David Hornik, a partner with August Capital and an Internet startup specialist. "For a lot of companies, the answer will be no." (Hence the rise of F---edCompany 2.0 sites like TechCrunch's DeadPool and Valleywag's Deathwatch.)

Speedpitching Boulder.

It seems that Funding Universe has made friends with Colorado Startups.

From Jeff Jordon: The event will be a variation on the Speedpitching luncheons we've held in Florida, Texas, California and Phoenix. It will be open to the public and anyone who has an business idea that wants to get feedback from a panel of real investors. There will also be some new crowd participation elements that will allow everyone in the room to "invest" in the ideas that they like the most.

 Excellent. Now we just need to bring come of that Colorado Startup pollen over here. It's not that far after all.

Techstars & Y-combinator: Exactly the right idea.

TechStars received a nice leg up from TechCrunch.

In reading the TechCruch thread I was struck by a couple of thoughts while I was reading the post and the comments.

1. Novice entrepreneurs are extremely easy to spot. They talk about ideas as having intrinsic values in the millions and they're extremely covert and suspicious that everyone will steal their idea.
2. TechStars seem to have nothing but good intentions.
3. I wish there were more adopters of this kind of setup.
   

It's interesting to note how different incubators have been initiated. Programs that take 30% or more in equity with anti-dilution clauses or personally secured venture debt don't make sense for the entrepreneur or the investor. They prevent a company who's really successful from being able to take additional capital and grow.

 
I'm going to give this some more thought. Perhaps I'll see if the TechStar Guru's will let me fly/drive out for a weekend and make friends?

TechStars: Boulder's not that far.

Boulder Colorado has a new startup program: Techstars 

Techstars (ala Y-Combinator) is a invitation program where your startup team moves to Boulder for the summer, gets 5k per founder, and works your tail off. Evidently boulder has a thriving tech startup community where everyone runs around with their Macbook Pro and meets at Starbucks.(Damn that sounds fun. I'm going to have to talk to my wife and see if she'd let me go. She could just ride the horses all summer.)  I'm not really kidding either.

The program functions along the line of Junto Partners but I actually think there's more upside for the entrepreneur and the team. Techstars is looking for a 5% stake. 

Here's a video of the Techstar instigators making their pitch.

Startup Equity Splits & Stability

Noam Wasserman, professor in the Entrepreneurial Management unit at Harvard Business School, has the best actual diagnosis of startup founding problems around. (At least that I can find.) Best of all, he makes sense and shows his empirical data.

 

Equity-Split Results, Part 1: When Do Teams Split Equally?

The table below summarizes how these factors tended to increase versus decrease the chances that the equity would be split equally.

Interestingly, the prior relationships among the founders (friends vs. co-workers vs. strangers) did not have any significant effects on the equality of the split in either direction, either because they are non-factors, or because they include conflicting effects that largely cancel each other out.

Equity-Split Results, Part 2: Implications for Team Stability

The table below shows the major factors that had statistically significant effects (at the p<.05 level or better) on team stability (defined as whether all founders were still working or not) at each 6-month milestone, with a "+" showing a significant positive effect on team stability and a "-" showing a significant negative effect on team stability.

998 founders from 326 multi-founder technology ventures.

In non-table form, the results are as follows:

1. When the team invested the same amount of financial capital at founding, the team tended to be more stable throughout the 2 years.
2. When the team had a heterogeneous (i.e., widely differing) amount of prior work experience, the team tended to be less stable for the first 12 months, after which the effect became insignificant.
3. When the team split the equity equally, it tended to be more stable throughout the 2 years.

However, this last result (#3 above) is counter-balanced by two factors:

• Teams that split the equity equally and raised a round of outside financing during a period tended to be much less stable in that period, any time during the first 2 years. (In its magnitude, this effect completely washed out the positive effect from #3 above.)
• Teams that had been friends before founding and split the equity equally tended to be less stable for the first 6 months, after which the effect was insignificant.

Designing Your Product: The sweet spot of lifetime value.

The Sweet Spot for Buying

 
Some people love the charts and graphs. They're helpful in thinking about the business you're in and how you're going to design your product offerings. I actually use a number of these same thoughts in designing medical service businesses and teach them to doctors (who also love to cram in the kitchen sink).  I would guess that the actual sweet spot moves over time.

Via: LukeW

In response to my Sweet Spot on the Curve article, Klaus Kaasgaard, Yahoo! Director of User Experience Research, pointed me toward a Harvard Business Review article titled Defeating Feature Fatigue that highlighted some additional considerations for determining the feature curve sweet spot. To paraphrase Klaus:

“Before using a product, people will judge its desirability and quality based on ‘what it does’ (i.e. the number of features). Even though they may be aware that usability is likely to suffer, they will mostly choose products with many features. After having used these products however, usability will start to matter more than features and people will choose easy-to-use products over products with many features. The dilemma is that in order to maximize initial sales one needs to build products with many features, products that do lots of “stuff”. But in order to maximize repeat sales, customer satisfaction and retention one needs to prioritize ease-of-use over features.”

Barry Schwartz echoed this situation in his talk at User Interface 11 when he articulated the capability vs. usability tension inherent in decision-making. In a test Barry referenced, participants preferred to have CD players with 21 features to ones with 7. But if they first used the 21-feature player for a while, they preferred the 7-feature one.

Elegant Design

Strive for Elegance, Not Simplicity

“Simplicity is a myth whose time has past, if it ever existed.” Thus claims Don Norman in a new article for Interactions magazine. Joel Splosky concurrs, noting

Making simple, 20% products is an excellent bootstrapping strategy because you can create them with limited resources and build an audience. It’s a Judo strategy, using your weakness as a strength, like the way the Blair Witch Project, filmed by kids with no money at all, used the only camera they could afford, a handheld video camera, but they invented a plot in which that was actually a virtue. So you sell “simple” as if it were this wonderful thing, when, coincidentally, it’s the only thing you have the resources to produce. Happy coincidence, that’s all, but it really is wonderful.

Startup Entrepreneure: 9 business selection criteria.

From Fabrice Grindas 9 business selection criteria:

 
Fabrice Gringa has an interesting history in startups. Listen to Fabrice Gringas podcast on Venture Voice and you'll see what I mean.

He also has taken the time to detail what he sees as the 9 criteria that need to be filled in order to undertake or launch a new venture. It's a great list. I've added my own views as a counterpoint. 

Fabrice details an number of points that stem from his self analysis that he has a lack of creativity so he must ride the coat tails of others if he's going to be successful. It seems to have worked so far. 

Note: The 9 criteria are all represented here but some extraneous comments are not included. Fabrice's entire post is here.

9 Business Selection Criteria

The traditional cliché of entrepreneurs is that they have an idea and vision. They build companies to fulfill that vision. I am not this type of entrepreneur. I realized long ago I lacked the creativity to come up with brilliant new ideas. Frankly I lack creative skills in general including the ability to paint, dance or sing :)

To cover up for that deficiency, I use a rational thought process in evaluating business ideas to decide which business I will create, invest in, buy or join. These are my 9 criteria:

1. At least a $1 billion addressable market
This criteria is inherently personal and depends on the entrepreneur’s ambition, but there are good reasons to target larger markets:

• It’s easier to obtain funding
• Many Internet businesses have a certain amount of fixed costs but limited variable costs, therefore the larger the business, the higher the net margin
• I find it more interesting to build larger companies

This does not mean that the market must be a $1 billion market at the launch of the company, but that it must have the potential. 

2. A valid business model understood from the get go
There is only a 5% chance that a company created today will still be around in 5 years. I have not seen official statistics, but many VCs seem to believe that only 0.1% of the company started without a valid business model succeed. It’s so risky to create a company to begin with, I would rather have all the odds in my favor…

3. Does not require more than $2 million in seed or $15 million in first round VC money
If it requires much more, the business might be too capital intensive which could lead to too much dilution and suggest that this is an idea that is easier for a large incumbent to fund rather than a new startup.

4. A business where you have a real shot at being one of the top players - at least in the region you are targeting
Avoid entering businesses where many players are well funded or where the incumbents have a sustainable advantage. That is not to say not to enter businesses where there are incumbents - just make you have a hard to replicate edge on them - after all Skype did extremely well because it entered the telephony market with a radically lower cost structure than the traditional telcos and used it to its advantage.

5. A scalable idea
This is again a very personal criteria. Walmart and Starbucks are great businesses, but I would rather not be in a business where I need to open a new store to increase my sales as it leads to slower growth and greater capital requirements. Internet businesses are magical as they give you the ability to build and grow global companies in record times - just look at what Google, eBay, Skype and many others accomplished in less than 10 years - in some cases in less than 5 years!

6. A business with little or no risk of disintermediation and/or margin compression by suppliers and/or customers
You are in a much safer position if you are much larger than your customers and/or suppliers. Walmart exerts tremendous pressure on its suppliers which are much smaller than it is and depend on its sales. eBay can also continuously increase prices on its sellers - none of which is in a meaningful position to fight back on its own. 

7. A business that is in a rapidly growing market
A rising tide raises all boats. Growing markets generate more interest from the press, consumers, customers and suppliers. Moreover, if you are gaining share in a rapidly growing market, this can create exponential growth.

8. An idea that I know how to execute on or can learn how to execute on
For now I will probably focus on technology ideas as I have a clear comparative advantage in the field as I understand technology and know how to manage technology organizations.

9. An idea that I like and want to do!
One of the keys to happiness and success in life is to do things you love and are passionate about…

A few things to note:
As you can see, I did not mention barriers to entry as a business selection criteria. While it would be nice to be in a position to have strong barriers to entry from the get go - it’s relatively rare to be in a position to have a sustainable barriers to entry from the start especially as it is becoming easier to duplicate technology or even get around many patents. I prefer to focus on building the barriers to entry with the business - the very fact of operating a business - having customers, suppliers, press attention, creating a brand - creates barriers to entry.

Googles Big Idea Challenge:

Google nips startups.

It seems that Google thinks that good ideas might be germinating in the halls of higher education. I can understand Googles motivations, they want to have the smartest people working for them rather than competing with great ideas.

Via Google Blogscoped: Sam Davyson says, “This morning in my university pigeon hole I got a flyer about the Google Big Idea challenge. They're targeting grads.” The flyer reads:

The Google Big Idea Challenge
What is Google’s next revolutionary product and why?*
Graduate Jobs at Google

We are looking for final year students and recent graduates who are creative and think differently. By answering the question posed above in the The Big Idea Challenge, you have the opportunity to impress us and get a job at Google. Your answer can be in any format you choose; this might be a business plan, schematic diagram, presentation, or just some text. The top entrants will be invited to the Googleplex in London to meet the the team and talk through their Big Idea.

How to Apply

• Visit www.google.co.uk/bigideachallenge to find out more
• Send us your application by January 5th 2007

*This must not be an existing Google product.

I am curious about what kinds of reaction they'll get. I would think that they might get some great ideas and scoop up a few crack troops, but it might be that the best startup ideas won't be attracted to working for the man. The allure of becoming a G-man may begin to wear thin. I'd think that working for Google is beginning to resemble many large tech companies (free food notwithstanding).