Most early stage companies feel stretched. While they don’t lack for ideas, they typically lack for resources (money, people, time, etc.). In my book this is a good thing. Scarcity of resources forces starker choices and ultimately results in better decision making. I sometimes joke with companies about the occasional over-funded competitor and tell them to use their relative lack of funding as a “competitive advantage”. What I mean is that lacking endless resources (or seemingly endless resources – in many cases even gobs of money eventually runs out) will force them to focus on what’s important, not what everything that’s possible, probable or half way interesting.

To me this discipline results in better decisions and ultimately better companies.

One thing that comes up early on in many of the companies that I work with is the question of how to build a framework through which to make decisions about product and business direction.  Because it’s easy to get sidetracked (or just blinded by all of the possibilities out there) I often suggest to companies that they come up with a “mantra”. It’s oversimplified and doesn’t work for every situation (and of course needs to be revisited as the business changes over time) but the idea is to boil the key drivers of the company down to a sentence or two – maybe some broad categories that define they most important areas of focus or possibly something that looks like a statement of purpose. When a question of priority or direction comes up you can then bounce that idea off your mantra and see what happens.  For example – “will this gain us more publishers” “will this make our advertisers more successful?” “will this help travelers share their experiences better” etc. I’ve found that doing this up front helps streamline decision making and have been in many conversations where we’re grappling with how to prioritize a series of tasks where we throw them up against our two or three mantras and what falls out is a clear priority of what needs to be done right away, what can be done later and what shouldn’t be done at all.

Like any advice, you can’t take this one to the extreme, but particularly early on in a company, or when you have a specific near to medium term goal, this kind of exercise can help provide a great framework for decision making.

Will Herman’s post yesterday on the challenges of co-CEO’s reminded me of something I’ve been meaning to get off my chest. Many businesses run loose and fast in their early days. And lets face it, the kind of people who are drawn to starting companies often aren’t process people – they are creative thinkers. While that’s part of the fun of early stage companies, don’t forget that there’s a side to what you are doing that needs to be properly documented and orderly. It’s not just Mark Zuckerberg who has founder problems – I’ve seen many business partnerships with the best intentions disintegrate, where their founders who were no longer seeing eye to eye, had to work out (or not work out as the case may be) the details of their split. And while I’m certainly not your lawyer, I’d strongly recommend that even if you are starting your company with your childhood best friend who you just got out of the army with that you put together at least a basic set of documents that will cover not only the formation of the company itself (which most people don’t tend to forget…) but also clarifies who owns what, what – if any – vesting there might be on your founders stock, what IP is owned by the company (and that the work you are doing together is company property, not individual property), etc, etc.

And hopefully things will go great and none of this will really matter. But if they don’t, you’ll be happy you have all this in place.

Will Herman’s post yesterday on the challenges of co-CEO’s reminded me of something I’ve been meaning to get off my chest. Many businesses run loose and fast in their early days. And lets face it, the kind of people who are drawn to starting companies often aren’t process people – they are creative thinkers. While that’s part of the fun of early stage companies, don’t forget that there’s a side to what you are doing that needs to be properly documented and orderly. It’s not just Mark Zuckerberg who has founder problems – I’ve seen many business partnerships with the best intentions disintegrate, where their founders who were no longer seeing eye to eye, had to work out (or not work out as the case may be) the details of their split. And while I’m certainly not your lawyer, I’d strongly recommend that even if you are starting your company with your childhood best friend who you just got out of the army with that you put together at least a basic set of documents that will cover not only the formation of the company itself (which most people don’t tend to forget…) but also clarifies who owns what, what – if any – vesting there might be on your founders stock, what IP is owned by the company (and that the work you are doing together is company property, not individual property), etc, etc.

And hopefully things will go great and none of this will really matter. But if they don’t, you’ll be happy you have all this in place.

I’ve been a *huge* fan of Techstars since first meeting David Cohen just over two years ago and have not been bashful about my love of the concept in previous blog posts.  For those of you not familiar with the program, Techstars brings together teams of entrepreneurs from across the country to participate in an intensive 3 month summer program to jumpstart their businesses. It’s heavily mentor and experiential driven – the teams work extremely closely with the program’s mentors to advance their businesses and the summer program is filled with guest speakers that cover an array of topics of specific interest to building young businesses.

Since launching in 2007 we’ve had 20 companies through the program (of which 12 have been angel or venture financed – two of whom have already been acquired – and two more are cash flow positive).  Personally, I’ve had an amazing time working with the Techstars companies. For me the program – and more specifically the program participants – symbolize everything that is great about the drive, energy, passion and commitment of entrepreneurship. I’m lucky to have been a part of a great group of mentors to the Boulder program.

Today is a big day for Techstars – they’ve announced the launch of Techstars Boston.  My friend Shawn Broderick will be running the program and already an unbelievably strong group of mentors has signed up to participate (see the 2nd paragraph here).  Having grown up in the Boston area and still having close connections there, I’m incredibly excited about expanding the Techstars footprint there.  With a strong program leader in Shawn and fantastic local support, I have no doubt that Techstars Boston will be every bit as successful as its Boulder-based cousin.

Applications for the Boston program are open (and remember that you don’t have to be located in Boston to apply).  Apply now!

[updated the stats on the 20 companies - 2 are cash flow positive]

While the financial world may seeming to be coming to its end and everyone’s natural instinct may be to baton down the hatches and not do anything to rock the boat too much, I think that now is actually a great time to start a business.  Our own experience suggests that many great companies start their lives in down markets and this view informs our belief that as early stage investors we should remain consistent in our investment pace in both good markets and in bad.

In fact, I think there are some great natural advantages to starting companies in a time when the markets are down.

There’s less competition. For money; for talent; from 10 other people who have a similar idea to yours. As a result it’s easier to to get above the fray (since the fray is smaller). 

There’s less pressure to get something out there NOW. With fewer new ideas starting there’s a little less pressure to push something half baked out the door and before its ready (for fear that someone will beat you to it) – a down market may give you a little more breathing room (real or perceived). 

You’re less likely to waste money. You know I think businesses have a tendency at all levels to spend too much. There’s nothing like a really tight market to make you look more closely at every dollar going out the door.

While it’s harder to get funded, generally better companies receive financing in down markets.  Maybe that doesn’t feel like an advantage (unless you’re an investor <g>) but actually I think both companies and investors benefit when financing is a little more difficult to come by. Fewer companies means less competition for talent, mind-share, market-share and overall less "noise" in the market. And lets face it – when markets are hot more bad ideas get funded (I was going to say "crappy companies" but don’t want to offend anyone . . . ). In tight markets more investor work goes into the front end of investments (shouldn’t this always be the case?!? A topic for another post) and fewer marginal ideas find financing. Those that do have a natural advantage.

You’ll be ready when markets turn around. Instead of starting a business when the markets being to heat up, how about having a product ready to go when the markets are on an upswing?

So go get ‘em!

A recurring theme in venture circles these last few weeks has been "Back To Basics" with VC pundits boldly prognosticating about the current state of the markets, talking about the infamous Sequoia deck and trying not to make people wince as they lay their claim to how they saw all this coming (I’m not immune to this myself and offered what I hoped was some practical advice in a recent post).

All of this gets me thinking, however – why is it that companies got away from "the Basics" in the first place. Every time people think the rules have been rewritten and that somehow "this time will be different" they are wrong.  So if we take anything away from this current crisis, for me it should be a reminder that most successful businesses are built carefully, over several (if not many) years and require a steady and disciplined approach.  At the core if this process is being realistic about what you can accomplish in any given period of time and not letting costs get ahead of where you are in both your business cycle and access to capital (see my take on that from last year – all of which still holds true).

Building businesses is in large part about the basics – let’s not get too far away from them next time.

There is nothing linear about starting and building a business. There are plenty of twists and turns along the way and successful companies are not only are open to change from their original ideas but build systematic processes for checking and rechecking their business assumptions during the early days of their company.

The idea really hit me this summer at TechStars, when I began thinking about the idea of company creation as "agile" (akin to the agile development methodology) watching how fluid the most successful TechStars companies were. They were constantly checking and rechecking the assumptions behind their businesses and reacting to what they were learning from prospective customers, early users and mentors.  These check-ins were very deliberate and occurred at regular intervals.

To me it’s the perfect model (and "agile" is the perfect analogy) for the early days of a start-up. Be flexible. Seek outside input. Be introspective. Stop and consider what you’re learning and if it effects key assumptions behind your business idea. Tweak what you’re doing.  Repeat.

I’m trying to purge the word "deal" from my lexicon – at least as it relates to investments (i.e., companies are not a "deal", it’s an "investment opportunity"; the actual transaction itself is still fair game). 

I’m amazed how often the term comes up in the venture industry. To me it seems somehow demeaning and way too generic. Entrepreneurs who put their heart and sole into a company don’t need to hear us talk about their companies like they’re a commodity.

If you’re a VC reading this, try it for a day and see how often the word comes up . . . and how difficult it is to stop using it…

My wife took me to kick-boxing class yesterday and if I was to be honest with you, I’d have to admit that I pretty much got my ass handed to me.  Kickboxing is HARD. This isn’t athletic club kick-boxing.  This is Muay Thai kick-boxing at the local Thai dojo.  My wife’s been going for months and is really good (and before you ask – yes, she can clearly kick my ass any time she feels like it).  She’s been asking me to go for a while but I’ve resisted. Not because I didn’t think it would be fun (and as it turned out it was even more fun than I thought it would be), but because I didn’t know how to do it and I was seriously afraid of embarrassing myself (although as you can imagine, none of the excuses I used to avoid prior participation included this openness of reasoning).  Finally, having run out of good reasons not to go along, I acquiesced.  And it was great.  I had fun. I sweat (a LOT). I beat the crap out of my punching bag. I learned the proper way to kick and punch.  And occasionally I put it all together and actually looked like I knew what I was doing.

This post isn’t really about kick-boxing, however.  It’s about trying.  It’s about putting yourself in situations that are uncomfortable or foreign and giving it your best shot.  I made a ton of mistakes in class yesterday.  And, as it turns out, didn’t feel stupid at all.  To the contrary, I felt great for having made the attempt. At the end of class we warmed down with a few minutes of meditation and breathing exercises.  During this quiet time the instructor read a passage that started with the line "here we leave our egos at the door" and went on to talk about the virtues of challenging ourselves to our own level of ability and experience. 

I think it’s often true in business that we are reluctant to try new things. To leave our comfort zones and branch out to new area. And – perhaps most importantly – ask for help. In business (and in life), its extremely hard to leave truly leave your ego at the door. But think about how much more we’d get done if we did…