I couldn’t believe that WebRoot raised $108M in VC…

I couldn’t believe that WebRoot raised $108M in VC funding. See CNET article. I mean, what does a startup DO with $108M? I know it’s a hot space, but all the startups I know who have raised that kind of money have spent it on, well, who knows what. Today I found out that most of that money went to the founders, who are not staying on with the company. The investors more or less bought them out. From what I understand, the post money is around $200M. Really seems more like a private equity deal than a VC deal – but what a deal.

Have you tried Google SMS? It’s pretty cool.

Have you tried Google SMS? It’s pretty cool.

Hard to believe it, but Thanksgiving is practicall…

Hard to believe it, but Thanksgiving is practically here. Fall has flown by. Mid-terms seem like so long ago and now finals are just around the corner.

My company is up to 10 employees (wow!) and we just closed on an awesome CEO. I saw the new office when I was up last week and it’s great. Plenty of open space for cubes in the middle, and some offices and meeting rooms on the edges. I am a big fan of having people sit together and work together. As one of the guys told me today, “now we actually have to build the product!”

Among the many things I love about this team is their ability to execute. They made recruiting a priority and totally focused on it — and now, just six weeks later, they are staffed to plan. We put our minds to recruiting a great CEO — and here we are. I have no doubt product execution and delivery to customers will be similarly successful. It’s a wonderful feeling to work with a team that’s “done it before.”

I’ve been meeting with a lot of first-time entrepreneurs at Stanford. Everyone asks for advice. My first piece of advice is go read John Nesheim’s High Tech Startup, which, while a little dated, has some great advice on everything from coming up with an idea to what to look for in a term sheet and a management team.

What do venture investors look for?

1) Big market

2) Great team

3) Sustainable competitive advantage

4) Customers

5) Good technology / idea

These are all critical. You have to have a big market otherwise no matter what you do or how great your team is, there just isn’t that much potential for your company to be really big.

A great team not only executes flawlessly but can change direction quickly and efficiently as the market changes (and it will). Experience matters.

Sustainable competitive advantage means you can build a defensible position in the market you’re going after. You are building something unique and protectable.

Customers. The vast majority of successful venture funded companies have these! You can of course have a strategy where you build a team and technology and try to get that acquired, but I don’t recommend that.

Good technology / idea. There are really two approaches here. I generally look for a market need, talk to customers, try to understand the pain, and then go address that by building a unique product. The other approach is simply to have a great idea and go build, in the absence of customers. People who succeed using that approach are few and far between.

Well, the mid-term results are in (most of them an…

Well, the mid-term results are in (most of them anyway). Despire my best efforts, it looks like they will be keeping me around! For now, anyway.

Half Moon Bay is one of our favorite spots to get away to for a few hours on the weekend. The beach is dog-friendly, and the drive there is usually a quick one. Check it out if you haven’t already.

Mid-terms are over — good thing for partial credi…

Mid-terms are over — good thing for partial credit!

Speakers. One thing I love about Stanford is the amazing speakers we get on a regular basis. These are people I have heard about and read about — but never before seen in person. Within a single month, I’ve seen Bob Nardelli, CEO of Home Depot, Vinod Khosla, world famous venture capitalist, and VC and pundit Guy Kawasaki. Today, we heard from serial entrepreneur and CEO of AuctionDrop, Randy Adams.

Randy seems like quite a remarkable individual. He’s very passionate about what he does, and a lot of what he said really resonated with me. Here’s a guy who just loves starting companies. (I know the feeling!)

He’s started six of them, selling them for hundreds of millions of dollars. He’s a self-described “risk junkie.” He loves to find the holes in big companies and build businesses that address what they’re too slow or too risk-averse to do. This strategy has been extremely successful for him.

Three other things he said are worth mentioning:

1. Take action. Don’t put it off till tomorrow. Too many good ideas are lost because no one implements, no one takes action.

2. Ignore “that’s a bad idea.” When you start a company, lots of people will tell you it’s a bad idea. Ignore them! This is so true.

3. Never give up. Failure is good — it’s a great teacher. Better to try 10 times and only to succeed once than not to try at all.

My new company has gone from three people (the fou…

My new company has gone from three people (the founding team) to four as of today, six next week, and seven the week after. Startups are such rollercoasters — one day you think hiring is going to be really difficult, then you suddenly double the company’s size! I can’t wait to meet the new team members. Now we can get down to working on specs, product, and customer feedback. Wow.

On the school front — I’ve come to notice that there are two distinct teaching methods. I’ll call them Frustration In Frustration Out (FIFO), and Learning In, Learning Out (LILO). Those of you familiar with accounting, computer science, or both will recognize my sad misuse of these abbreviations.

In FIFO, you work on material on which the professor has not yet lectured. The advantage of this approach is that you are challenged to figure things out on your own. This is most like the real world of business; rarely do people say, “do it this way,” and then you follow the instructions. The disadvantage, as the name implies, is that this can be a frustrating experience — you don’t yet know the “right” way to work on the material.

In LILO, you read the material before class but you may or may not prepare particular problems. The professor lectures on the material and you work through sample problems in class. After several lectures, you do a problem set based on the material covered. I call this method Learning In Learning Out because you take the learning in as the professor educates you; then you cement and demonstrate the learning as you work it out on the problem set.

I don’t know which way I learn better yet — just that they’re very distinct and interesting styles of teaching.

Mid-terms: two down, two to go! It’s not just a qu…

Mid-terms: two down, two to go! It’s not just a question of do you know the material, but rather, can you handle three hour exams, day in and day out? Can you be disciplined enough to study for them in the time you have? The professors provide the 2002 and 2003 mid-terms. They’re good practice and they give you a very definite feel for how well you know the material (read between the lines). It’s good to take the mid-terms seriously — just not too seriously.

A friend of mine is one of the organizers of the Open Source Business Conference. He’s looking for interesting topics, speakers, and companies for the 2005 conference. If you know of any, please contact me.

We tried two new restaurants in the last week.

Fuki Sushi had great fish — fresh and a good assortment. But it’s a huge place. We’re still trying to find a sushi place that has great sushi and is a small, intimate place we might want to go to a few times a month.

Cafe Riace was just OK. It was somewhat romantic sitting outside (you don’t get those outdoor heaters in Seattle), but the main courses and the wine were OK at best. We would go back just for dessert, however: the tiramisu was amazing.

It’s great to see some discussion. I don’t underst…

It’s great to see some discussion. I don’t understand why anyone would make a $100K+ and two year investment in something, and then speak negatively of it. That’s not to say you should paint everything rosy, but it’s easy to forget that it’s a real privilege to be here. It’s easy for me to be happy here – my wife is tremendously supportive, we have a wonderful home in Palo Alto, my school experience is challenging and fun, and I just got a new company up and running. Oh yes, and the Boston Red Sox just won the world series!

Mid-terms are HERE! If I sound excited, it’s becau…

Mid-terms are HERE! If I sound excited, it’s because I am. It’s hard to believe that the quarter is half over – it seems like we just got here. But we’ve certainly covered a lot of material in a short amount of time. Although everyone I work with in the work-world still asks me who I’m meeting on the back nine and how my b-school “vacation” is going, the reality is I haven’t had much time to do anything but study. There are certainly a number of people for whom this quarter isn’t hard — folks who majored in economics or math, for example. But for those of us who are taking our first econ and stats classes, and who haven’t been in a classroom situation in years, it’s a learning experience. I could imagine that if you’ve never seen a derivative or a balance sheet before, this fall could be really painful. As it is, the studying is more time-consuming than anything else. But I really feel like we’ve settled into our regular life again — camping one weekend with new friends from the GSB, out to dinner with other friends.

As I look ahead to the next two and a half quarters, my goals are:

1) Spend less time studying!

2) Get to know even more of the people in my class

3) Get to know more people and opportunities outside of the b-school

On the company front — we hired our first two employees! Wow. We’ve gone from a founding team to a company with a founding team and two employees. It just gets easier from here. The very first person – you have to get them over the hump of being the first person. But every employee after that – they’re joining something that already exists. I miss being involved day to day — but I love the experience of being in the weekly calls, on the Board, helping with strategy and recruiting. I suppose it’s a little like watching someone lose weight — you don’t notice the progress so much if you see someone every day – but if you only see them once a week — you really notice. Every week I see the progress on hiring, product strategy, and product development. It’s nothing short of amazing.

Also, AUSTIN is here! Who’s Austin? The newest member of our household, of course — our (now) 14-week old yellow lab! He’s fun, makes us laugh, and he’s unflappably (except for his ears) happy!

HIRING. Good news! One of my companies is hirin…

HIRING.

Good news! One of my companies is hiring. Experienced software developers are the company’s #1 priority, but program managers and product managers are critical as well. The company is an early stage, well-funded Seattle startup. If you’re interested (or know someone who is), please email me a brief summary of qualifications and your resume.

We’ve been in Palo Alto for a little over a month now. The thing I miss most about Seattle is not the place itself, but the bonding experience taking place in the founding team of my new startup. The early growing pains. The resume reviews. The day to day product discussions. The customer interaction. The search for office space. All the little things that give a startup and its people a unique identity.

As the founder, it’s an amazing experience to see a team turn an idea and plan into a reality. I heard the magic words just yesterday. “We may make our first job offer as early as Friday.” That means that there will be people to implement the plan, to execute, and to deliver on the company’s strategy. Seems like a simple thing to do, but so much goes into being able to make that first offer. Investors. A founding team. Infrastructure. Hiring the second person always seems easy once you’ve hired the first.

To give you a sense of how important I consider hiring to be, I recommended that the team spend 2/3 of its time until it hires its first two employees (one engineer, one program manager) working on recruiting. That’s right. The rest is on the product. Because if you don’t spend time early on doing recruiting, then:

1) People you hire won’t be as bought in as they could be – because they won’t have been part of the early product specification process and

2) It takes a long time to hire good people; if you wait until you have everything nailed down, then you risk a two or three month delay while you then go hire people to do the work.

I also told the team that next to hiring, the most important thing to do is to ship early and often. That is, get a product defined (even if it’s not perfect for customers), get that out to customers as quickly as you can, get their feedback, and then go back and rev the product. The sooner you get product to customers, the sooner they can give you feedback. The sooner you hire people, the sooner you can deliver product.

It has been proven time and time again that an entity that grows a technical team and delivers a product has a much greater market value than the sum of its parts. Accomplish that, and you have an asset that will be purchased by the markets, whether public or private. Sell the developed product to customers and your value can only go up.