Re: [Discuss] Startup?

[Edward Ned Harvey (blu)]

> From: Discuss [mailto:discuss-bounces+blu=nedharvey@blu.org] On
> Behalf Of Steven Santos
> 
> Have any of you ever pitched a big idea to an angle investor?
> 
> Any advice for pitching such a big idea?
> 
> Where do you find an angel investor for such a thing?

This is something I now have a lot of experience with.  My advice would be 
first of all, be careful what you say to anybody - The biggest surprise that 
hit me out of *everything* was the patent process.  At some point, you're going 
to need to patent stuff, and anything you disclosed prior to filing for the 
patent, is potentially at risk.  The US has just about the most lenient laws, 
where you're able to patent something up to 1 year after public disclosure, but 
generally speaking worldwide that is not recognized, and not a valid practice.  
Generally anything you disclosed prior to patenting becomes unpatentable.  
You're going to need legal counsel for incorporation - I have two good 
references I'm happy to pass along off-list - both are likely receptive to 
working on credit - allowing your bills to pile up until such time as you're 
funded and able to pay them, because they know the fastest way to destroy your 
startup is to demand you pay their bills straight away.

Reach out to all your friends and contacts, get all their advice.  Become 
comfortable with having everyone sign NDA's so you're not publicly disclosing 
anything.  Get your form NDA from your legal counsel - because if you download 
from the internet, there are lots of different ones that are valid and invalid 
in different regions.  

Understand that all your friends & contacts are going to give you conflicting 
advice.  That's not the point.  The point is, when you pitch to investors, 
*they* are also going to give you conflicting advice.  Every one of them tell 
me "what investors are looking for" and none of them say the same thing.  By 
talking everything over with all your friends & contacts, you're going to build 
up buzz, and they're going to surprise you with the contacts they can introduce 
you to.  By getting more exposure to them all, you'll be more prepared for each 
one.

Carefully manage your exposure to investors.  They are thick with each other, 
and nobody wants to feel like they're getting "seconds" on a deal that they've 
already heard about through some colleague in a different group.  Ultimately, 
you'll *need* one or more of them to personally advocate you within the group.  
Your chances are *much* better if you can get personal introductions rather 
than cold approaching them.  All different people are going to give you 
different advice about how to find and approach potential investors - Attend 
groups like Venture Cafe, and Ycombinator, and MassChallenge, Boston New 
Tech...  And a bunch of others...  Go attend those groups before you're ready, 
just so you can see what other people say and see what they present, and see 
what peoples' reactions are to them.  You'll be improving your own personal 
skills just by interacting with the community.

Be prepared to share some stake in the company to whoever advocates you.  It is 
very common practice.  Talk to your lawyer about what's legal and what's not; 
there is a fine line.  You need to be careful what you say and how you say it - 
especially in email.

Do everything you can to generate buzz.  Present at meetups and conventions, 
etc when you're ready.

Try to find some mentors who have been through this sort of stuff before.  One 
of the best things I did was to do an initial Friends & Family round of 
investment, in which, a handful of people I knew invested - and surprised me 
with the amount of knowledge they're able to contribute.  I send out regular 
status updates and solicit their input, and anytime I have to make tough 
decisions, I call them up and discuss.  Not only do they have valuable 
contributions to make - they have a stake.  You'll often hear the phrase 
"Friends, Family, and Fools," because naturally a lot of people doing this will 
not be very well qualified.  But if you do it right and get some knowledgeable 
people on board, it can be valuable.

Oh.  Definitely read this.  It helps a *lot* to understand how you should be 
incorporating and who/how to invest.
http://www.sec.gov/info/smallbus/qasbsec.htm 
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Re: [Discuss] Startup?

[Edward Ned Harvey (blu)]

> From: Edward Ned Harvey (blu)
>  
> Oh.  Definitely read this.  It helps a *lot* to understand how you should be
> incorporating and who/how to invest.
> http://www.sec.gov/info/smallbus/qasbsec.htm

Oh yeah.  This too:
http://fundersandfounders.com/how-funding-works-splitting-equity/ 
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Re: [Discuss] Startup?

[Rich Braun]

Steven Santos asked:
> So, I have come up with an idea ...
> I could spend the next 20 years trying to do this on my own, but its
> too good of an idea not to do something with.
>
> Have any of you ever pitched a big idea to an angle investor?
>
> Any advice for pitching such a big idea?
>
> Where do you find an angel investor for such a thing?

Where should I start.  Yes, I've been through this. And in fact it was even
with a big idea circa 1994. In the end it came out like the model-rocket
engine I played with when I was 12: peeling it apart, I dumped its powder on
the ground and took a match to it; luckily the fireball was only the radius of
my arm.  The Internet blew up a lot bigger than that in the late 1990s, and
though I was absolutely right about the market's potential, I wasn't
well-enough connected in those early days to maintain control of any
significant part of the business as the market developed.

A business competes not only for customers and investors, but also for every
kind of stakeholder from employees to vendors to board members to referral
connections.  This is probably the main benefit of going to a top-10 MBA
program: to get a leg up on those connections.

It was only after my startup (which did OK, I was able to triple my two
angel-investor's share prices) that I made the effort to get into an MBA
program.  The only trouble is, chances of getting in are about the same as
winning on a scratch-ticket game, and the application process is about as much
work as just doing your startup.  So...what's my advice now?  If you're 21 and
reasonably well-connected already, then just launch your business and cross
your fingers.  You'll have plenty of time to do it over a couple more times
until you get it right.  Otherwise:

Skip the MBA.  Choose your niche.  Choose which city to be in based on that
niche.  (Hint, these days the Internet of Things is not based in Boston.)  Go
to meetups, push your LinkedIn contacts list past 500 toward 5000.  Don't
write a formal business plan, but do be prepared to spell out how your project
works, how it will keep up with the Big Guys when they start to notice your
startup is making money, how it will generate free cash flow, and when the
investors can expect to see an exit strategy.  A 5-page powerpoint with a
2-page spreadsheet addendum will go a lot farther to persuade than a 75-page
formal business plan.

In 2011 I was attempting to launch a startup in the Boston area.  I already
knew that most VC firms (many of which became customers of my 1990s company)
in the Boston area are only interested in making mezzanine-level financing
deals on companies already generating cash but which need a boost to get to a
public market (i.e. those which need $20M to $500M, not $2M to $20M).  Also
there's more of a business-to-business focus among Boston investors than those
elsewhere; though my 2011 idea was b-2-b, it wasn't going to attract those big
Boston firms because the niche is closer to $100M gross sales than your
addressable-market idea of $20B+.

So in 2012 I pulled up stakes and moved to where the action is in my niche:
SoMa in San Francisco.  The move sapped my energy and my funds, so I didn't do
a startup since, but events of the past 3 years have made me believe in this
advice more strongly.  If your idea were in the health-care arena, Boston is
the place to be.  If you want investors who can understand gadgets, gizmos,
mobile-apps, continuous-deployment software, and the like: get yourself out to
SF.  (Not the South Bay anymore, the city itself is where the startups and
their investors are, since the 2007 real estate crash opened up tons of SoMa
office space.)

-rich


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Re: [Discuss] Startup?

[John Hall]

There are accelerators like mass challenge  ,
incubators and sandboxes. Call them and go to their meetings.
I found this site "angel list" that looks promising.
https://angel.co/incubators

In general to get started you need to be able to explain what
your business does, who it's customers are and so forth from a high level.
You can discuss that without going into the technical details that would
risk patent applications.
*Some advise on where that line is would be very useful to anyone with an
idea.* I struggle to understand the balance between openness and guarding
intellectual property. If you are too concerned about NDA and
non-disclosure then you are going to limit your exposure.
At what point do you need a minimal working prototypes for:
a pitch?  (as i see it you don't)
a business plan? (something - partially working - a mock up)
a patent? ( a uniquely functioning piece limited in scope compared to what
is required to start production or serving customers)
doing business? ( full minimum functionality)

By keeping something under wraps aren't you limiting the "prior art"
protection that would prevent someone else from patenting the idea?
If you want to be based on an open source patent sharing / no software
patents sort of community concept then the work needed to block others from
patenting a concept a lot less than applying for the patent and then
opening it up for innovation?

Building the business and developing the software and hardware is also
important and has value. Does every startup idea need to be patent centric?
There are also trademark, copyright and trade secret laws that can
protect intellectual property but whats more if what you are doing is new
and potentially risky there may be  a rich set of patents surrounding an
initial idea. If the initial concept itself could lead to a patent garden
rather than a single patent on "the big concept".

In general isn't that the order of business ?  What about all the expenses
for administration and legal services ? Isn't this part of why you'd seek
an "angel investor"?
Otherwise you'd best be involved in an idea that is the result
of institutionally sponsored research.

There is a type of start up, and a catchy name for it I can't remember
where the people working for it are all keeping their day-jobs and
volunteering time for equity.
Does anyone know how this works or is anyone involved?


On Sun, Mar 1, 2015 at 12:48 PM, Edward Ned Harvey (blu) 
wrote:

> > From: Discuss [mailto:discuss-bounces+blu=nedharvey@blu.org] On
> > Behalf Of Steven Santos
> >
> > Have any of you ever pitched a big idea to an angle investor?
> >
> > Any advice for pitching such a big idea?
> >
> > Where do you find an angel investor for such a thing?
>
> This is something I now have a lot of experience with.  My advice would be
> first of all, be careful what you say to anybody - The biggest surprise
> that hit me out of *everything* was the patent process.  At some point,
> you're going to need to patent stuff, and anything you disclosed prior to
> filing for the patent, is potentially at risk.  The US has just about the
> most lenient laws, where you're able to patent something up to 1 year after
> public disclosure, but generally speaking worldwide that is not recognized,
> and not a valid practice.  Generally anything you disclosed prior to
> patenting becomes unpatentable.  You're going to need legal counsel for
> incorporation - I have two good references I'm happy to pass along off-list
> - both are likely receptive to working on credit - allowing your bills to
> pile up until such time as you're funded and able to pay them, because they
> know the fastest way to destroy your startup is to demand you pay their
> bills straight away.
>
> Reach out to all your friends and contacts, get all their advice.  Become
> comfortable with having everyone sign NDA's so you're not publicly
> disclosing anything.  Get your form NDA from your legal counsel - because
> if you download from the internet, there are lots of different ones that
> are valid and invalid in different regions.
>
> Understand that all your friends & contacts are going to give you
> conflicting advice.  That's not the point.  The point is, when you pitch to
> investors, *they* are also going to give you conflicting advice.  Every one
> of them tell me "what investors are looking for" and none of them say the
> same thing.  By talking everything over with all your friends & contacts,
> you're going to build up buzz, and they're going to surprise you with the
> contacts they can introduce you to.  By getting more exposure to them all,
> you'll be more prepared for each one.
>
> Carefully manage your exposure to investors.  They are thick with each
> other, and nobody wants to feel like they're getting "seconds" on a deal
> that they've already heard about through some colleague in a different
> group.  Ultimately, you'll *need* one or more of them to personally
> advocate you 

Re: [Discuss] Startup?

[Edward Ned Harvey (blu)]

> From: John Hall [mailto:johnhall...@gmail.com]
> 
> What about all the expenses for
> administration and legal services ? Isn't this part of why you'd seek an 
> "angel
> investor"?

You'd *better* be able to swing that much yourself.  A few grand of expense 
here or there, and a year of working without pay...  Or enough taken via 
friends & family to be able to swing it.

No - your angel or VC investment (or ycombinator/masschallenge/etc) is at 
*minimum* $50k-$200k, but more typically $500k to $3MM.  These funds are mainly 
dedicated to hiring developers, licensing tools, marketing people and marketing 
expenses, manufacturing if applicable.  Things that are much larger than an 
individual would be able to take on themselves.

They're generally expecting you have some way of dealing with legal and 
administrative costs, sometimes even patenting, out of pocket yourself, and 
depending on a lot of stuff, might expect you to already have a working product 
and paying customers before taking on the investment.

I have been *extremely* pleased to see how much mileage we got out of asking 
people simply, "Would you be willing to work on credit - we'll pay you later if 
we can - or work for some vague promise of options - I promise a non-specific 
number of shares and a non-specific percentage of the company, when and if we 
create an option pool later?"  When people trust you to be honest, and they 
acknowledge the risk of the business potentially failing, and they understand 
they *might* get nothing, or *might* be able to get something much bigger than 
their normal hourly rate if the business is successful, and they're just simply 
helping somebody that they like, or contributing to a cause they want to 
support - A lot of people are willing to contribute this way.

The small investors - $50k to $200k are generally more inclined to take on 
early stage seed investments, where you might not have all that much developed 
yet, you at least have proof of concept but need more development and patent 
work done etc.  You better be prepared to work unpaid, and *really* stretch 
those dollars, to deliver a lot of bang for buck.  And then go for something 
larger, when you've got something successful and outward facing, with a proven 
business model and just need to expand development and marketing and sales.
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Re: [Discuss] Startup?

[Tom Metro]

Edward Ned Harvey (blu) wrote:
> My advice would be first of all, be careful what you say to anybody...

I've been involved with or on the distant periphery of the startup
community for several decades, and one of the fastest ways of spotting a
novice is the degree to which they are protective of their idea. Some
people even expect VCs to sign an NDA.

The first thing is to get over the concept that your idea is novel.
Chances are excellent that others have already considered and rejected
the same idea, or simply didn't have the resources or motivation to
pursue it.

After a while even you won't see much value in your original idea.
Chances are very good that if you pursue it, you'll end up changing it
several times before it becomes successful.

Get over the idea that people are out to steal it. The hard part is
*not* the idea. It's executing the task of bringing it to market. Being
willing to invest years of your time; being able to convince multiple
investors and initial hires that it is worth pursing. Almost no one you
will encounter can be bothered to do that.

The danger is not that someone will steal it. The vastly more likely
scenario is that you won't find anyone who believes enough in its
validity to put money onto it.


John Hall wrote:
> I struggle to understand the balance between openness and guarding
> intellectual property. If you are too concerned about NDA and
> non-disclosure then you are going to limit your exposure.

Exactly.


Edward Ned Harvey (blu) wrote:
> The biggest surprise that hit me out of *everything* was the patent
> process.  At some point, you're going to need to patent stuff...

In my opinion a waste of time. Patents work out well for small startups
about as well as people winning the lottery. Sure there are success
stories, but for every one there are thousands (or hundreds of
thousands) or organizations that invest the time and legal fees in
patent filings that either end up being for products that fail, have no
licensing market, or never benefit from the legal protection.

We're in a fast moving industry. Your cool idea today will be irrelevant
in 5 years. Having a 20-year patent is pointless.


John Hall wrote:
> ...if what you are doing is new and potentially risky there may be a 
> rich set of patents surrounding an initial idea. If the initial concept 
> itself could lead to a patent garden rather than a single patent on "the 
> big concept".

Right.

If your product is successful, and you have money to burn on lawyers,
you can always start building an IP "moat" around your product. Patent
things like swipe-to-scroll and one-click ordering. :-) Or whatever
novel enhancements you come up with for the 2nd generation product,
while your competitors are still trying to make knock-offs of your first
generation product.


John Hall wrote:
> By keeping something under wraps aren't you limiting the "prior art"
> protection that would prevent someone else from patenting the idea?

Yes, exactly.

The bigger concern is patent trolls. One way to combat them is to file
your patents first. But the other way is to establish prior art in the
public record. Publish the core principles of your idea.


Edward Ned Harvey (blu) wrote:
> ...investors... They are thick with each other...  Ultimately, you'll
> *need* one or more of them to personally advocate you within the
> group.  Your chances are *much* better if you can get personal
> introductions rather than cold approaching them.

True. I've seen the approach of using a well connected business coach to
get introductions to investors work well in the past.

But the investment environment has changed in recent years. An angle
investor could also get you that foot in the door, and they might be a
"softer target" than a VC. And now we have incubator and crowdfunding as
ways to get seed cash and gain visibility to 2nd round investors.


> Attend groups like Venture Cafe, and Ycombinator, and MassChallenge,
> Boston New Tech...  And a bunch of others...  Go attend those groups
> before you're ready, just so you can see what other people say and
> see what they present, and see what peoples' reactions are to them.
> You'll be improving your own personal skills just by interacting with
> the community.

Agreed.

Also think a long time about whether your idea really fits the model of
a fast-growth VC investment. Novices tend to see that as the only
approach to getting a business funded, but VC funding actually
represents a very tiny minority of startups. Very few actually fit the
high-growth model. Far more business are bootstrapped or funded through
other means.


John Hall wrote:
> There are accelerators like mass challenge  
> incubators and sandboxes.

Yes, and local ones specifically aimed at hardware startups, like:
http://www.bolt.io/

The local Artisan's Asylum makerspace (http://artisansasylum.com/) also
has a number of hardware startups affiliated with it. Its mailing lists
could prove to be a useful r

Re: [Discuss] crowdsourced labor for equity model

[Tom Metro]

John Hall wrote:
> There is a type of start up, and a catchy name for it I can't remember
> where the people working for it are all keeping their day-jobs and
> volunteering time for equity.

You are probably thinking of Hyperloop Test Technologies:

http://en.wikipedia.org/wiki/Hyperloop_Transportation_Technologies

  Hyperloop Transportation Technologies, also known as HTT, is a
  research company formed using a crowd collaboration approach (a mix of
  team collaboration and crowdsourcing)[1] to develop a transportation
  system based on the Hyperloop concept, which was envisioned by Elon
  Musk in 2013.

  The company was founded by JumpStarter, Inc., utilizing the company's
  crowdfunding and collaboration platform JumpStartFund. The company has
  assembled a team of community members, attracting high level engineers
  and contributing corporations...

  ...the development work is being done by approximately 100 engineers
  who are located across the United States. The members are working in
  exchange for stock options, and were selected from a group of about
  200 who initially applied.


And recent related news:

http://abcnews.go.com/Technology/hyperloop-crowd-sourced-company-plans-test-track-california/story?id=29270798

  Using Musk's free design plan, Hyperloop Test Technologies, a
  crowd-funded company not affiliated with the Tesla and SpaceX
  billionaire, said it plans to build a full-scale model on five miles
  of land in California's Quay Valley.


I'm not aware of there being a name for this sort of crowdsourced labor
for equity model.

 -Tom

-- 
Tom Metro
The Perl Shop, Newton, MA, USA
"Predictable On-demand Perl Consulting."
http://www.theperlshop.com/

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Re: [Discuss] Startup?

[Max Timchenko]

On Mar 1, 2015, at 14:35, discuss-requ...@blu.org wrote:

> Reach out to all your friends and contacts, get all their advice.  Become 
> comfortable with having everyone sign NDA's so you're not publicly disclosing 
> anything.  Get your form NDA from your legal counsel - because if you 
> download from the internet, there are lots of different ones that are valid 
> and invalid in different regions.  

Investors generally refuse to sign NDAs, and even raising the subject is a 
strike against the founder. It’s a potential legal liability and a hassle for 
them. Just search on the Internet:

>From the horse’s mouth (an actual VC): 
>http://www.canrockventures.com/why-vcs-do-not-sign-ndas/
>From Forbes (maybe I know nothing, but perhaps they do): 
>http://webcache.googleusercontent.com/search?q=cache:4pJxAgVhPZMJ:www.forbes.com/sites/wilschroter/2013/08/22/why-investors-dont-sign-ndas/+&cd=6&hl=en&ct=clnk&gl=us
https://medium.com/@tmcpro/why-i-wont-sign-an-nda-4193aeda7251
https://www.fundable.com/learn/resources/guides/investor-guide/why-investors-dont-sign-ndas

…and thousands more links. The same advice (don’t bother with NDAs at the 
initial stage; it’s not about technical details anyway) was given to me when I 
was getting my MBA with a startup focus, by actual VC investors and successful 
founders.

A lot of “entrepreneurs” believe their idea is precious and worth a ton of 
money. In most cases, it is almost worthless, and the execution will decide 
whether their business will succeed or fail. They may also believe patents are 
the key to their future success; but patents can be invalidated, they cost a 
year’s engineer’s salary to get and don’t bring any revenue or product in, and 
it costs a further metric ton of money to actually attempt to enforce them in 
case a competitor arrives, with uncertain chance of success - money a fledgling 
startup typically does not have.

If a friend approached me for an advice about their startup but wanted me to 
sign an NDA first I would refuse outright.

Yours,
— 
Max
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Re: [Discuss] GitHub app on OSX (previously: "os x = poop")

[Max Timchenko]

On Feb 23, 2015, at 11:12, discuss-requ...@blu.org wrote:

> The problem with the github app is the fact that it only works for github.  I 
> would recommend SourceTree instead - it's free, and excellent, and you won't 
> have to learn a new GUI when you do something that's not on github.

Seconded. SourceTree is not super stable for me recently, and quite slow at 
times, but the user interface is quite pleasant.

Yours,
— 
Max
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Re: [Discuss] Startup?

[Dan Ritter]

On Sun, Mar 01, 2015 at 10:11:18PM -0500, Max Timchenko wrote:
> On Mar 1, 2015, at 14:35, discuss-requ...@blu.org wrote:
> 
> If a friend approached me for an advice about their startup but wanted me to 
> sign an NDA first I would refuse outright.
> 

Here's one you might not find so repulsive, from
http://friendda.org:



FriendDA

This agreement is entered into this ___ day of ___ 20__ by and
between _ (hereinafter "The Advisor") and
_ (hereinafter "The Keeper of the Idea" or "I")
regarding information The Keeper of The Idea is choosing to
share with The Advisor (hereinafter "The Idea").

WHEREAS I possess a bright idea that I am choosing to disclose
to you, The Advisor, with the mutual understanding that you are
my friend and that you will not screw me.

Manners of screwing include, but are not limited to:

Adapting some or all of The Idea for your own purposes
unless I say you can.
Choosing to share some or all of The Idea with those who are
not bound to this agreement.
Failing to do your best to protect The Idea.

This is a "warm blanket" agreement with which, by requesting
your agreement to it, I am helping myself sleep at night by
placing a small amount of formality on the sharing of The Idea.
I believe The Idea will only improve as a result of having
solicited your honest and clear feedback.

Term

The term of this agreement shall continue until I or someone I
authorize makes The Idea public.

Breach

This agreement may possibly have some amount of legal binding.
However, it is likely that upon breach or violation of the
agreement, I will do no more than any of the following:

Curse you under my breath.
Publicly disclose the manner of your screw-i-tude.
Write about your transgressions in ALL CAPS.
No longer consider you a person with whom I can share my
ideas.

Sharing

Sharing of some or all of The Idea with third parties may occur
provided that you have cleared this with me and the third
parties agree to the principles of the FriendDA.

Termination

Termination of this FriendDA can be executed by either party,
but don't be a douche.

You are acknowledging and agreeing to this disclosure by reading
it. If you find any part of this agreement uncomfortable or
confusing, don't sweat it. We'll talk about something else.

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