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I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the fifteenth installment. You may find my efforts instructive. Or you may know a better way---if so, please let me know!

One of the things that ought to strike fear into any technologist's heart is getting your first customer. You've spent months building a product you hope people will buy and find useful and suddenly someone actually is putting their faith in you and your baby.

You're happy, of course. But most of all, you're scared. What if something doesn't work? What if it doesn't scale? What about feature A, B, and Z that we haven't built yet? What about the shortcuts you took here and there to get it done? What about...

I've done this a couple of times now and I'm convinced of two things: (1) you're going to sell your service before you're ready and (2) you should have sold it even earlier.

We're at that stage with Kynetx. We've signed up several good pilot customers and we're actively courting the indirect sales channel. These are sharp, demanding folk with good ideas and little time to waste. That scares me.

Don't get me wrong. I've never built a product or service that has been more ready to scale and that I'm as confident works as promised. We've spent months automating infrastructure. I've written thousands of tests. Still, it's scary. If you asked me, I'd take another couple of months. Of course, at that point, I'd still take another couple of months. You're never ready.

That leads nicely to my second point. Since you're never ready, you might as well start selling even earlier. There are big advantages to having real people kick the tires and give you feedback. The product becomes better faster through that process than anything else you can do. And you invariably plug some of the holes that have crept into things.

But wait. There's more. The best part of selling your product early is that it helps you understand what you do and how you're different from your competitors. These are two key pieces of information when you're going out to raise money.

You may think that it's weird that you could start a company and not know what you do, but in fact it's quite common. Oh, you know what you do on many levels, but telling other people about it can present some challenges. In an earlier post in this series I wrote about finding your story. Same idea.

When you start to tell others about your product or service, they invariably try to understand you by comparison. "Oh, so you're just like [insert company name here]" or "Oh, so you're a [insert product category here]." Often these are the very companies or categories you're trying to distinguish yourself from. You need to understand how your different in ways that you can easily explain.

Going through some VC meetings and pitching events helped us refine our story, but we're reached a whole different level talking about what we do with clients. They're usually more willing share, explore, and engage in a dialogue than VCs who typically hold their cards very close to their vest.

Clients aren't as interested in comparing as VCs because they don't care as much who you're like. They're not trying to find the next category killer. They just want to solve a problem and if your nail will secure their board, then they're game.

Besides, I don't know about you, but in client meetings I'm a whole lot more relaxed than I am in a VC pitch. I'm in my element--showing off the things I'm most passionate about right now. Clients usually want to see what you have and our demo usually wows people. VCs never want to see a demo.

As a consequence of all this, I wish we'd been positioned to start selling well before we started raising money. Unfortunately, because of various timing issues and our own understanding, things didn't work out that way. If I do this again, I'll start selling much earlier.

Tags: kynetx startup selling

I’m starting a new business called Kynetx. As I go through some of the things I do, I’m planning to blog them. The whole series will be here. This is the fourteenth installment. You may find my efforts instructive. Or you may know a better way—if so, please let me know!

Most days lately, I've been getting dressed up and talking to people about Kynetx. I'd rather be in jeans writing code, but when you're raising money you're going to dress up more and code less. Raising money is a distraction from running a business and so should be avoided unless it's absolutely necessary. Unfortunately for the kind of business I'm interested in building, there are times when it's necessary. I spoke with the CEO of one venture backed late-stage startup yesterday who said he spends 25% of his time raising money. Ugh.

Going into this process (which I've been doing seriously for several months) I knew some things about raising money, but hadn't ever done it myself. There was always someone else to do that while I made stuff. I've learned a lot and likely still have a lot to learn.

One of the things I've learned is that you're in great peril of losing the sense of magic--the very thing that made this exciting and launched you on the journey in the first place. When you say something over and over again, you get bored with it--even when it's the first time for your audience.

Another thing, like software, the second version of your pitch will be overbuilt. Last summer, based on what we wanted to do, I put together a slide deck. Based on some information we got this spring we completely rewrote it. Once we got good feedback on the second version, we ended up with a third version that was--mostly--just right and much more like the first than the second.

Steve and I went to a FundingUniverse speed pitching event last Wednesday and it was probably one of the most useful things we've done in this whole process as far as getting our story down and getting the pitch smoothed out.

If you haven't seen one, it's like speed dating, but there are angel investors sitting at the tables instead of women (or men, depending). The entrepreneurs move from table to table. You have 7 minutes at each table: 4 minutes to pitch your idea and 3 minutes for questions.

The investors expect the full pitch--everything--in those four minutes. When we first heard this, we thought it was impossible. Turns out you can do it. And when you're done refining your pitch to four minutes and then giving it a dozen times (after practicing it dozens more) you'll have be very good at explaining what you do.

That last point is important. Explain what you do. That's the most important thing you can do in any pitch--long or short; Guy Kawasaki is right: the most important thing you can do with any audience is tell them what you do. When we first started practicing the four minute pitch people would say "I'm still not sure what you do" when we were done.

Of course we told them in the first slide--or thought we did. But what you think you said and what people hear when they're unfamiliar with the idea and bringing their own assumptions to bear are two different things. You need to them over and over again in many different ways before they'll really understand. All in four minutes.

Of course, the primary idea is to generate interest and get a chance to sit down in a more relaxed atmosphere to really get into the details. We were pleased to get 5 or 6 people express interest in another meeting from the group and we'll be following up in the coming weeks. If you get a chance to speed pitch do it. It's a great exercise--even if it doesn't lead to funding.

Tags: startup kynetx venture+capital

I’m starting a new business called Kynetx. As I go through some of the things I do, I’m planning to blog them. The whole series will be here. This is the thirteenth installment. You may find my efforts instructive. Or you may know a better way—if so, please let me know!

Sooner or later when you're starting a new venture, you need more money than you can raise with your credit card, a second mortgage, or selling your plane. Maybe you're tapped out personally and need to start taking a salary or maybe you need to hire help.

Whatever the reason, raising money is not very fun. Let's face it: you didn't start a business to raise money. You started a business because you saw a problem, figured out a solution, and you're passionate that your solution is going to change the world. Nothing is worse than weeks or months of meetings and legal work when you'd rather be creating.

I see three solutions to getting more money:

1. Get more clients: the is "customer funded" development
2. Extend your runway with friends and family or angel money
3. Go to a traditional venture capital firm

I'll admit upfront: I'm no expert. I've been around a lot of enterprises raising money, but never done it myself. I've always had the luxury having someone else do that part while I kept coding and solving client problems. Not this time.

Clearly option (1) is the best--if you can do it. But most startups reach a point where an infusion of cash can lead to more growth and better client service than you can reach with just customer money. If they last long enough, most end up at option (3) sooner or later.

So, the real question is when's the right time. Everything I know tells me that the right time is after you have traction, including at least a few good clients. You have to work to that point, either self funded or with a healthy dose of money from option (2). In parallel, you have to plan for option (1) in case the funding never happens. Pursuing options (1) and (3) in parallel--with all the energy you have--is all you can do. Option (2) is the safety value to extend runway.

At Kynetx we've focused our thinking with one simple question: what do we have to do to get five clients. Why five? No special reason. But thinking about the answer to that question--in everything from sales to infrastructure to customer service--gives special clarity in most prioritization questions. That's vital in a startup where there's always more to do than you have time for.

The good news is that if you work toward that goal, then you'll be aggressively pursuing option (1) while preparing in the best way for option (3). Heck, if you can establish that kind of traction, the VC's might start calling you and wouldn't that be a great position to be in?

Tags: startup kynetx funding

I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the twelfth installment. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

Every business makes a choice, often implicitly or by default, about what kind of relationship they want to have with their customers: will their customers be active participants or passively resentful? We all know business in the latter category. Cell phone companies spring to mind with almost no effort. You never hear someone say "Wow! I just love how my cell provider treats me!" Most of us are resentful of them.

On there other hand, there are businesses that have made their mark through the participation of their customers and users. Amazon and Google are both great examples. Neither would exist in their current form without the active participation of people--often without their even being aware--in providing the business with better information. Google relies on links. We don't link for Google's benefit, but whenever you do, you're helping Google make sense of the world. Amazon also relies on implicit participation, but also uses explicit requests of the customers to help make their service better: reviews, list, and wish lists are all examples.

With a nod to Doc Searls who taught me this, some of this has to do with language. At Kynetx, for example, we don't "target consumers." Rather we "serve customers." Even if the action you take is largely the same in either case, the words make it different. The former is impersonal, intrusive, and demeaning. The latter is uplifting and makes us think about our customers as people.

The word "consumer" brings to mind a stupid cow, carelessly ingesting whatever happens to be put in front of it. And who wants to be "targeted?" Not me. People are happy to be served, they want to be understood, they crave relationships.

This focus on nomenclature may seem silly and soft headed, but I think it's vital to developing the right culture in our business. Ultimately, I believe that culture can be a bigger differentiator than anything else you do.

I'm putting a jar at the office. Anyone who uses the word "consumer" or "target" when talking about our clients or their customers is putting a quarter in it. Maybe a buck. Along with a share of stock. Just kidding about the stock--but only because it's too hard to implement.

Tags: startup kynetx vrm

I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the eleventh installment. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

When you talk to someone who's starting a business, ask them what they do--you can tell how far along they are by the answer you get. Every business has a story and it takes time to get that story straight. If they stumble around, say "it's hard to explain," or something like that, you're talking to someone with a brand new idea. This doesn't mean it's not a great idea--it just means that the story hasn't developed yet. I imagine that if you'd talked to Tim Berners--Lee in the first few weeks after he initially thought up the Web, you'd have walked away totally confused.

You may be at that stage. You might feel like you can't explain your idea easily. This isn't just because you can't explain it. It's also a sign that your idea is still developing. There are a few things you can do to get your ideas down and get your story straight.

The most important thing you can do is to keep talking. Talk about what you're doing with everyone you can. The more you explain your idea, the better chance you have of discovering good ways to describe it to others. You'll find a lot of people just nod and say "Wow! That sounds great." Valuable because you got some practice, but the most important conversations you'll have will be with people who challenge your idea and ask questions.

If someone challenges your idea and you feel completely discouraged and ready to give up, question your ability to pull this off. Being successful at a startup requires a good blend of passion combined with enough humility to take advice and good suggestions. You have to be able to take the hits, learn from them, change where necessary and prudent and yet keep the excitement about what you're doing. The most important and valuable conversations I've had are those where someone told me something I didn't want to hear.

I've been working on the idea behind Kynetx for almost a year. In that time, I've had meetings with dozens of people from VC's to friends who I trust. While the core of what Kynetx is hasn't changed, the way we talk about it, the ideas we have for where it can be used, and the way we have thought about funding it have changed dramatically. It's amazing to me how much our thinking has changed over that time. Just last week we had an epiphany on how we explain Kynetx to others that has us all very excited.

You might find it a little discouraging to think that you're going to be a year into something and still discovering new ways to think about it. Actually, I find that to be a lot of fun. The best part, for me, is the discovery.

Let me emphasize again, that the core idea is still largely the same. We've got over 10,000 lines of code at this point--I'd be pretty bummed if we were going to have to throw out our code every time we had a new idea. Once you start cutting code, you're committing yourself in important ways. On the other hand, putting that stake in the ground is also a great way to generate new ideas as well. Since I started writing code in October our progress has accelerated in amazing ways--and the way we thinking about what that code does has changed and become clearer.

I'm lucky in knowing a lot of people in the high-tech industry who graciously agree to talk to me and give me their advice. The secret is that many people like hearing about ideas and giving advice. Don't ask any of these folks to sign an NDA. It's a waste of time and paper and just puts people off. Be respectful of their time and don't be a pest.

Knowing your story will help a lot as you design products, raise money, and explain to your friends and neighbors what you're so passionate about.

Tags: startup kynetx funding

I’m starting a new business called Kynetx. As I go through some of the things I do, I’m planning to blog them. The whole series will be here. This is the tenth installment. You may find my efforts instructive. Or you may know a better way—if so, please let me know!

I have a friend who has a business he's been working on for a while. I was helping him with email, domain names, and so on. Not long ago he called me and said "I've hired a CTO; he'll be calling you about email." I figured he was going to call me so I could set up an address for him. Not so; he was calling to get the domain names changed to a new exchange server he was standing up.

Now, I've never met the guy, maybe he's a brilliant CTO and will be just what my friend needs, but this raised some red flags for me. If you hire a new CTO and the most important thing on his plate is getting an Exchange server running, you've made a bad choice. A CTO's job ought to be adding the most value possible to the company's products. The type of email server you're using is way down on the product value creation index.

I mentioned this because I've been contemplating things I could do to offload as many of the non-code tasks as possible--not to someone else inside my organization, but to people outside my organization. Here's one example.

Did you know you can out source everything about having employees except the direct management tasks (which are where you can derive real value)? I'm not just talking about outsourcing payroll--I'm talking about everything associated with having employees: hiring, benefits, payroll, worker's compensation--the works. The companies that do this are called professional employment organizations or PEOs.

Essentially the PEO hires the employees and then lease them to you. The PEO takes on certain responsibilities and employer risks. The company manages the employee. I know some companies that use a PEO and the employees don't seem to mind since they get a professional employment arrangement and great employee benefits from the PEO and at the same time get the upside and fun of working at a small start-up. The costs are surprisingly reasonable.

The rule of thumb for a start up ought to be: Keep anything that adds competitive advantage in-house and close by. Shed everything else as quickly as you can.

Tags: startup kynetx. business cto

I’m starting a new business called Kynetx. As I go through some of the things I do, I’m planning to blog them. The whole series will be here. This is the ninth installment. You may find my efforts instructive. Or you may know a better way—if so, please let me know!

Today I got a cold call at my office that essentially went like this: "I read you blog and would like to tell you my business idea and get your opinion on it." I said that I had a few minutes to listen and so the guy launched into a description.

Actually, that's not quite accurate. The first thing he did was say that he didn't think that I'd want to sign an NDA and that he wasn't inclined to ask for one. Good thing. When people ask me to sign an NDA, I always say "no." Like I'm going to keep track of dozens, even hundreds of NDAs and who said what when. There's not enough time in the world. So, he was right and scored points with me right off.

His idea was an interesting one, if I'm being honest and I told him a few places where it intersected with some other trends I saw and thought were important. He then asked "how do I get started?"

My first instinct was to tell him to build a demo, but then I remembered something even more fundamental than that.

I asked what his background was. "Media," he says. Uh oh. Not that there's anything with media types, but how's he going to build a demo. I told him he needed a CTO and why.

"Can you recommend some people who might be my CTO?" he asked. Nope. I can't. I asked him if he thought he'd see much action from a list of folks I recommended he call and asked for money. He understood that this wasn't the best way to raise money; when you're asking people for an investment, they need to trust you--especially at this stage. That's why friends and family are the most likely investors in your early stage start up (if you don't have a plane to sell).

I explained that anyone he asks to work with him on his idea will be making a huge investment of time and commitment--especially on the margin. They need to trust you. They need to feel your passion for the idea. They need to believe that spending the next three to six years with you 14 hours a day will be fun.

This is why successful founding teams have usually worked with each in the past, gone to school with each other, or are otherwise friends. That's not always the case, but it often is. Collaborations among strangers just aren't likely to happen without a pretty significant bonding first.

Every founding team needs to have a technical member. I've seen more ideas killed by ignorance of this fact than I care to remember. I told my newfound friend to look to his friends, co-workers, and old classmates to see if he couldn't find someone to be the technical yang to his marketing yin.

Once he's got the technical founder, he can get a demo working--that will make people believe it's real. After that, you're on your way.

Tags: kynetx startup

I’m starting a new business called Kynetx. As I go through some of the things I do, I’m planning to blog them. The whole series will be here. This is the eighth installment. You may find my efforts instructive. Or you may know a better way—if so, please let me know!

I have a friend who has a way with words and has started his share of high-tech businesses. I asked him his advice on getting started and Dan said "Welp, you gotta get yourself a rude dog demo!"

What he meant is that you can't just start a business with an idea. You've got to have something to show people. The demo doesn't have to be too pretty (that's the "rude dog" part) but it does have to demonstrate your idea and your ability to execute it.

For some applications, you might get by with a PowerPoint mock-up of your UI, but I believe that to raise serious money for a high-tech company, you need to have working code. Nothing else will do.

Paul Alstrom, a friend of mine, who's also one of the managing partners of vSpring Capital talks about nailing and scaling. VCs don't won't give you money to "nail" your idea (although angels might). VCs want to put money into proven ideas that need capital to scale. The more you have that shows your idea is solid, the closer you are to securing capital.

Working code has heft. It turns ideas into action. Code makes ideas come alive. Try telling someone about your idea. Then show them a demo. Watch what happens to their eyes. I love how the lights go on when someone can see something work.

Working code also instills discipline in the founding team and forces you to "get real." Once you sit down, start cutting code, and making things work, you suddenly start finding holes in your original idea and ways to improve it even more.

This was written about open source projects, but I think it applies to start-ups as well:

The best way to start an open source project is with code. Working code. Hack away at home on weekends, maybe get a couple of friends to help you out, and don't go public until you have something to show people that does something interesting, and that other people can use to build more interesting stuff on top of. You need this for a bunch of different reasons: it establishes the original contributor's bona fides in the open-source meritocracy, it shortcuts all sorts of damaging debates about coding styles and architecture that can stop a project before it starts, and so on.

Most importantly, though: working code attracts people who want to code. Design documents attract people who want to talk about coding. I've seen what happens on projects that start with no code and a commitment to produce a design. Some of the procession of UML diagrams were really well put together, but that's about the extent of it.

From The Fishbowl: Finding Discord in Harmony
Referenced Thu Jan 31 2008 21:52:29 GMT-0700 (MST)

Working code gives the rest of the people on your team something to use for leverage in their thinking. Seeing things come to life is a sure way to spark ideas.

What if you don't know how to code? Then you need a founder who does. See my earlier post on why you need a CTO. If you don't have founders who can cut code, you have no business starting a high-tech business. That may sound harsh, but I believe it's true.

The hard part of producing "working code" is defining "working." How close to production does it need to be? For a "rude dog demo" not very. It's probably more important that the UI be pretty than the guts be complete. It may be running on your laptop and need a month of work to get ready for production. That's OK for the demo part.

Eventually you have two choices: throw it away and build the real thing or morph what you've got into the real thing. For Kynetx, I've designed the engine so that all the pieces are there, including a plug-in architecture, and the difference between the production version and the demo version is filling in the holes rather than rewriting what's already done. That took more work, but we wanted to progress from "rude dog demo" to "alpha customer ready" pretty quickly.

I'm here to tell you: nothing made Kynetx seem more real than having code we could call our own. Ideas are not assets, but code is. And assets are ultimately what you leverage to make any high-tech business work.

Tags: startup kynetx programming cto

I’m starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the seventh installment. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

Yesterday we held the first of what we call Kynetx Jam Sessions at the clubhouse. These are the meetings with some close friends and advisors who are helping us chart the initial course for Kynetx. I expect that as we get funding and ramp up, many of these folks will join us as senior management.

The discussion was incredible and we came away from the day with a much better understanding of short term directions and long term goals. Focus is the mother's milk of every startup, where every direction can seem open and inviting. We got focus in spades yesterday.

I'm grateful that there is large pool of very talented folks who I've worked with in the past who are willing, even excited, to help me flesh out this new venture. One of the best things about starting a company is that you get to pick the folks you work with. There's something about a startup that attracts talent of a very specific and useful type.

Kevin Fox announced today that he's leaving Google after 4.5 years to join a startup. Here's what he says:

Leaving Google is different than any other job I've left. Joining Google in 2003, it was the first time I took a job without knowing at the outset the reason I'd eventually leave the job (even if my employer didn't), and so it's strange to have found success there and yet feel a need for greater fulfillment sufficient to pull you away from what's generally recognized as the best workplace in America.

From Today is My Last Day at Google - Fox @ Fury
Referenced Fri Jan 04 2008 08:21:47 GMT-0700 (MST)

Kevin loves Google and yet he's willing to leave for a startup. A good idea with a go-to-market plan is a powerful elixir. It has the power to bring talented folks together to create something together.

VC's frequently say that the quality of the management team is one of the most important factors in evaluating a startups potential. As much as building a product, a good founder has to build a team.

You may be concerned about how you'll pay them. Likely the only thing you've got in abundance is equity and you may be loathe to give that up. Don't be. Good talent is worth it. Also, your passion for the project will attract folks and get them excited. Be upfront about where you are and what you expect.

Many people think the chief attraction of a startup is getting rich. Certainly people see that upside, but my experience is that people are much more excited by the shear fun of creating something new and seeing it succeed.

The moral of the story: don't go it alone. If you've got a good idea, start talking it up with people you'd like to work on it with you. Get them together and ask for their advice. You'll find that you'll get good ideas that you'd never have come up with on your own.

One last piece of advice: pay special attention to the advice you least want to hear. That's often the most valuable.

Tags: kynetx startup

I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the sixth installment. You may find my efforts instructive. Or you may know a better way----if so, please let me know!

People frequently get confused about the differences between CIOs and CTOs and even a lot of techworld business people I know can't really articulate what a CTO does. In many companies, the CTO is the most technical person on the founding team. That might or might not work out depending on that person's capabilities.

I was at breakfast this morning with a friend who has been CTO at several high-tech startups and we got to talking about what things a world class should know how to do and what role he or she ought to play. Here's what we came up with. There's probably more:

• Product - The CTO is the chief product officer. I'm at odds with many who believe that product management is a marketing function. There's a difference between product marketing and product management. I think the CTO has to, first and foremost, see him or herself as the person in charge of the company's product strategy.
• Architecture - The CTO is responsible for overall product architecture and for the primary architecture choices. Good architectural choices are crucial to future sustainability, current and future costs, and whether or not you'll even get funding.
• Finance and Accounting - A good CTO has to know how accounting practice affects products and the way the company can or can't recognize revenue. More importantly, a CTO needs to understand cash flow and how to model free cash flow for products. You can rely on others to build the models, but you have to understand them and tweak them.
• Legal - Almost all businesses have legal requirements that affect their products. How much, obviously, depends on what industry you're in. If you're in banking or health, the legal requirements are onerous. If you're building a photo sharing site, not as much. But even there, there are privacy implications, anti-pornography laws, copyright issues, and so on that you have to understand to build a product that can be sold without incurring undue liability. I learned early on that the general counsel was my friend.
• Standards - In today's world, standards are important because almost no product will operate independently of everything else. More than just knowing the standards, however, being involved in the standards process can give a company a leg up.
• Nomenclature - CTO's build language about their product. Using the right nomenclature and helping others figure out how to talk about your product builds common understanding.

When you think about this, what most of these have in common is that they build context within which others work. Good CTOs provide their company with context so that discussions about customers, products, and even finance happen with a common understanding of what the company is about and what it does. In that sense, a CTO is the heart of a high-tech business. That's why it's not unusual to see people with the twin titles Chairman and CTO in high-tech companies.

Many CEOs don't understand what they want a CTO for. They just know there's a bunch of technology stuff they don't understand. A good CTO educates the CEO about the technology and a good CEO will want to understand. Many CEOs think of the CTO as a VP of Development. Sometimes that works, sometimes it doesn't. A world class CTO might not be a world class programmer, although they often are. Here's why:

A CTO needs the respect of the technology organization to get the job done. They have to trust that the CTO is providing good leadership. Right or wrong, in the geek culture, that often comes down to a good old fashioned "alpha geek" shoot out and more often than not that means code. The CTO has to be the alpha geek.

I've run across people--not techies--who say "I just had this good idea for a Web business. All I need is a programmer. Do you know any good Web programmers?" What they don't get is that they probably need a lot more than a programmer. They need a CTO. Without a CTO, you don't have a high-tech business--you have a low-tech business with a Web site.

What else does a good CTO have to know and do? What mistakes have you seen CTOs make? I'd love to know what you think.

Tags: cto cio kynetx startup

I'm starting a new business called Kynetx. As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the sixth installment. You may find my efforts instructive. Or you may know a better way----if so, please let me know!

People frequently get confused about the differences between CIOs and CTOs and even a lot of techworld business people I know can't really articulate what a CTO does. In many companies, the CTO is the most technical person on the founding team. That might or might not work out depending on that person's capabilities.

I was at breakfast this morning with a friend who has been CTO at several high-tech startups and we got to talking about what things a world class should know how to do and what role he or she ought to play. Here's what we came up with. There's probably more:

• Product - The CTO is the chief product officer. I'm at odds with many who believe that product management is a marketing function. There's a difference between product marketing and product management. I think the CTO has to, first and foremost, see him or herself as the person in charge of the company's product strategy.
• Architecture - The CTO is responsible for overall product architecture and for the primary architecture choices. Good architectural choices are crucial to future sustainability, current and future costs, and whether or not you'll even get funding.
• Finance and Accounting - A good CTO has to know how accounting practice affects products and the way the company can or can't recognize revenue. More importantly, a CTO needs to understand cash flow and how to model free cash flow for products. You can rely on others to build the models, but you have to understand them and tweak them.
• Legal - Almost all businesses have legal requirements that affect their products. How much, obviously, depends on what industry you're in. If you're in banking or health, the legal requirements are onerous. If you're building a photo sharing site, not as much. But even there, there are privacy implications, anti-pornography laws, copyright issues, and so on that you have to understand to build a product that can be sold without incurring undue liability. I learned early on that the general counsel was my friend.
• Standards - In today's world, standards are important because almost no product will operate independently of everything else. More than just knowing the standards, however, being involved in the standards process can give a company a leg up.
• Nomenclature - CTO's build language about their product. Using the right nomenclature and helping others figure out how to talk about your product builds common understanding.

When you think about this, what most of these have in common is that they build context within which others work. Good CTOs provide their company with context so that discussions about customers, products, and even finance happen with a common understanding of what the company is about and what it does. In that sense, a CTO is the heart of a high-tech business. That's why it's not unusual to see people with the twin titles Chairman and CTO in high-tech companies.

Many CEOs don't understand what they want a CTO for. They just know there's a bunch of technology stuff they don't understand. A good CTO educates the CEO about the technology and a good CEO will want to understand. Many CEOs think of the CTO as a VP of Development. Sometimes that works, sometimes it doesn't. A world class CTO might not be a world class programmer, although they often are. Here's why:

A CTO needs the respect of the technology organization to get the job done. They have to trust that the CTO is providing good leadership. Right or wrong, in the geek culture, that often comes down to a good old fashioned "alpha geek" shoot out and more often than not that means code. The CTO has to be the alpha geek.

I've run across people--not techies--who say "I just had this good idea for a Web business. All I need is a programmer. Do you know any good Web programmers?" What they don't get is that they probably need a lot more than a programmer. They need a CTO. Without a CTO, you don't have a high-tech business--you have a low-tech business with a Web site.

What else does a good CTO have to know and do? What mistakes have you seen CTOs make? I'd love to know what you think.

Tags: cto cio kynetx startup

I'm starting a new business called Kynetx (nothing to see there yet). As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the fifth installment. You may find my efforts instructive. Or you may know a better way---if so, please let me know!

Jason Fried at 37Signals has an excellent list of all the reasons they don't sell installable software. That inspired Joel Spolsky to write about gnarly programs. Interestingly, I know people with the exact opposite response as Jason: "Boy, I wish we just sold software and didn't have to keep things running 24x7." More on that later.

There are basically four options for deployment, as far as I can tell:

1. Sell software that gets installed on customer hardware
2. Package your code onto a hardware appliance and sell the box
3. Package your code onto a virtual appliance and sell the appliance
4. Sell a hosted solution

All of these have advantages and disadvantages and each is appropriate in different circumstances. Some products, a plug-in for Outlook for example, just have to be installed. Often there are choices between these options.

As Jason points out, option (1) is difficult because you don't have control over the environment. You need technical support, sales engineers, and consultants to spend time with customers helping them get it right. Not to mention that the software release cycle means that your customers will see updates much less frequently.

Option (4) is just the opposite: you've got perfect control over the environment--avoiding all those problems--and you can release new features every hour, if you like. But when you're selling mission critical components to enterprise customers, they're often loathe to trust a hosted solution. This is especially true when you're small.

The other bugaboo with option (4) is that running a 24x7 operation for mission critical apps is hard and expensive. I'm not saying "impossible" or even "no fun." But getting support calls at 3am just sucks sometimes.

Options (2) and (3) are compromises. An appliance can be installed at the customer site but is a controlled environment. A big advantage of appliances is that in certain business models, you can charge more for an appliance than you could or the software because it seems more substantial. Hardware appliances usually require that you invest working capital in inventory. Virtual appliances might put some customers off.

Either way--virtual or physical--some products are more appropriate for appliances than others. When customers might use your product to solve problems of vastly different sizes or for very different problems, building a one-size-fits-all appliance is hard. Database appliances, for example, would be difficult for that reason.

No matter which path you choose, you need expertise. Building installable software that has as few support issues as possible, running 24x7 operations, and making appliances all have their own peculiar issues where good engineering comes into play. These are some of Joel's gnarly problems and getting them right is where you earn your salt.

Find the gnarly problem you like solving because then you'll be paid to do what you like. If you hate the whole idea of installable software, don't pick a business where that's required and then try to force fit a different solution. What ever you do, don't try look for businesses without gnarly problems. If you find something that doesn't have gnarly problems, no one will pay you for doing it.

Tags: programming kynetx startup

I'm starting a new business called Kynetx (nothing to see there yet). As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the fourth installment. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

Tuesday night, after Defrag was over, I was at dinner with Andre Durand, the CEO of Ping ID. At one point we were talking about startups, something Andre has a lot of experience in, and he spoke about commitment in a way that really rang true for me.

When you tell people you're starting a business, everyone, from your spouse to VCs, has one basic question in the back of their mind: "Is this guy committed? Is he serious?" Once they have that question answered to their satisfaction, they're with you.

The reason this rang true was because of other recent experiences I'd had. The usual reaction people give you when you say you're starting a business is mild curiosity, usually expressed in a question like "what's the idea?" You can explain it--doesn't matter how well--and they'll say "that's nice" and the conversation turns to other things.

But if somehow you can express the level of your commitment along the way, you'll get a totally different reaction. Something along the lines of "wow, you're serious, aren't you?" And then they want to know more.

This is why an entrepreneur who's willing to put their own money into the business is so compelling while one trying to get a company going without getting too much skin in the game is ignored. If you've rented space or hired employees, for example, you've shown commitment in a way that's tangible.

Piper Turbo Arrow I'm Selling (click for more)

In my case, I'm selling my plane. There are other ways to fund Kynetx, but this has some particular advantages--not the least of which is that it tells everyone how committed I am. (As an aside, this is a great plane, if you're in the market.)

Whether you just put money on your second mortgage or find some other more creative way to fund your business, do it in a way that tells the people who most need your assurance--family, friends, and funders--that you're committed. You'll see a huge change in attitude from them. More importantly, your momentum will increase with a public act of commitment.

Tags: kynetx startup entrepreneurship

I'm starting a new business called Kynetx (nothing to see there yet). As I go through some of the things I do, I'm planning to blog them. The whole series will be here. This is the third installment. You may find my efforts instructive. Or you may know a better way---if so, please let me know!

One of the things I realized pretty quick after getting serious about a new startup was that you need a clubhouse. It's fine to work from home, meet in coffee shops, and go cheap at first, but eventually you want to get real work done. For me, that means a place to go that is specifically about that effort.

This may seem like an unnecessary expense that can wait until you have more funding that your credit card, but I find it well worth the money.

First, if there's more than one of you in the startup, it's a place to show up every day, discuss what needs to be done, and help keep each other motivated. Second, I find it very encouraging to have "an office" for the company; it's a big step and makes the venture seem more real to me and everyone else.

I've found that you can rent 200-300 square feet (one medium office that you can squeeze 2 desk into) for well south of $750/month in Utah and I suspect that's true in many markets. Call in favors. Do you know someone with a spare conference room? I'm lucky to have pretty good contacts, but still worked my way through several friends looking for a deal and I finally found one.

I'm on the advisory board for Canyon Park Technology Center in Orem (the former WordPerfect campus) and I got some space there. That's not a deal they did just for me--they regularly do incubation deals and are easy to work with. Novell has a similar deal on their campus at the Open Source Business Center. Many cities have economic development centers that offer incubation space. Look around...you'll find something.

Another option is a co-working space like the one Sean O' Steen describes. There are some formal tenants who have keys, permanent desks, and so on. I see this as less than ideal since it won't feel like it's "yours" but is better than working at Starbucks.

My minimum requirements:

• Internet connection--most incubation spaces will throw it in. If not, you'll need a DSL line and you'll probably get stuck with the high "business" DSL charge even though you won't get anymore out of it.
• Comfortable chair--I don't like to skimp here. I'll be sitting in it all day.
• Desk--No need to go fancy; a door on two saw horses will suit most needs.
• Whiteboard--two if possible. I love whiteboards for planning, keeping notes, and serving as the centerpiece for discussion.
• Refrigerator--gotta keep the diet coke cold. :-)
• Large monitor--if you're writing code don't skimp on this either.

Kynetx nameplate on office in Canyon Park TC (click to enlarge)

Most landlords have old furniture from previous tenants, so be sure to ask if they've got any spare chairs, desks, whiteboards, etc. that they'd be willing to throw into the deal. Many will. There are also some great deals around from time to time. We found a few great little desks at Office Depot for $125. Not bad.

You can get away without a phone and just use cells. I happened to have a Polycom and a spare Vonage line from an earlier venture, so I moved that in for conference calls--that's come in handy a few times when I have to be on a call.

I've left computer off the list above since I live on a laptop that I take almost everywhere. Obviously if you don't have something suitable, you'd need that too. There are lots of cheap places to find serviceable computers. BYU has a surplus computer sale regularly where you can pick up something that will run XP or Linux just fine for under $100. Given the choice of fast computer or a big monitor, I'll pick a big monitor every time.

I took a few photos of our set up in case you're curious. All in all it a pleasant place to get meet and to work. I'm pretty happy with it.

Now you've got a place for your new business to call home. Invite some friends and colleagues over and talk about your company. I think you'll find that it feels good and focuses you on the business in a way that few things will. Now, to get to work...

Tags: kynetx entrepreneurship startup

I'm starting a new business called Kynetx (nothing to see there yet). As I go through some of the things I do, I'm planning to blog them. The whole series will be here. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

Obviously one of the things you have to do to start a business is actually set up the legal entity. This is actually easier than it first appears.

The first question is what kind of entity to set up. The two basic choices in the US are a C-Corp and a Limited Liability Corp, or LLC. One of the big differences is how the entity is taxed. C-Corps pay taxes on their own behalf. LLC's pass profits through to members who pay taxes as part of their personal returns.

There's lots of discussion about "the right choice" on the 'Net. Ultimately, if you get funding, you'll probably end up as a C-Corp due to the tax issues. But my feeling is you can start out as an LLC and switch later. LLCs are easier to set up and manage when you're just getting started. Pelle Braendgaard has called them the Ruby on Rails of legal entities.

As an aside, another legal entity that you might consider is an S-Corp. It is like an LLC from a tax standpoint, but like a C Corp from a governance standpoint--to my mind the worst of both worlds.

Some feel that switching to a C-Corp later is hard, but I have access to some pretty good business attorneys who have assured me it's just not a big deal. Consequently, I went with the LLC--it's easy and familiar.

The next step is to actually set it up. In Utah we're lucky to have the One-Stop Business at Utah.gov. I set up my LLC online--including getting my Federal employer identification number (EIN)--like an SSN for the corporation--in about an hour. The only thing you don't get is an operating agreement.

If you're not blessed with an online system for doing this, you probably want to hire an attorney to get it done. I've found that not all attorneys understand the subtleties of this process, so make sure you're dealing with one who does. I've gotten good results for as little as $500 before, so it doesn't have to be expensive.

The operating agreement (don't confuse this with the articles of incorporation, which are filed with the state) specifies how the corporation will run, who capitalizing the entity, how ownership works, etc. If there's more than just you involved, the ownership issues can be the cause of a lot of consternation and hard feelings, so it pays to get it right. An attorney is a great help here.

Once the corporation is registered and you have an EIN, you can get a bank account. Don't mingle the corporation's funds with your personal funds--it will make your life difficult at tax time. I went to Washington Mutual because they offer free business accounts. Even if you don't have funding now, put $1000 in the account so you can pay for incidental expenses.

Now you're set: you've got a legal entity and a bank account. The next step: getting a clubhouse.

Tags: kynetx entrepreneurship startup

I'm starting a new business called Kynetx (nothing to see there yet). As I go through some of the things I do, I'm planning to blog them. The whole series will be here. You may find my efforts instructive. Or you may know a better way--if so, please let me know!

When you start a new technology company, you're going to be talking to a lot of people. You'll want them to get in touch with you. That means phone and email at the very least. In the early stages you can get away with your Gmail or Yahoo! account, but eventually you'll need to look more professional.

The first prerequisite is a name of some kind. If you're a technology company, that means one that you can get a domain name for. In my case, we picked a word that was meaningful for what we're trying to do "kinetics" and then started spelling it funny until we found a domain that worked and seemed short and memorable.

Once you've got a domain, Google makes the rest easy with Google Apps. There's a free edition and a premier edition. When you're starting out, the free edition is plenty good enough. It lets you create gmail accounts that are addressed as user@domain.com. You also get Google Docs, Calendar, and so on. There is a 2Gb limit--just like individual Gmail accounts, but that's not likely to be too big a factor early on.

Getting things set up with Google Apps is pretty easy if you're familiar with domain names and can manage the subdomains in your domain easily. You can create up to 100 users on the free account, which should be plenty.

Want a logo? Probably. I'm fortunate to have friends who are good with graphics and I had a friend do one. You can change it later. Right now, it's just nice to have, so pick something and move on. Don't spend a lot of time agonizing over it. If you don't have a friend who's a graphical designer, you might try LogoWorks. I've not used them, but I know people there and have heard good things.

You'll want business cards. While you can probably get away without them, why? They're convenient and cheap. I've used a company called Four Square Graphics several times and always had good results. You can design a business card on the site, but I had a friend who's good with graphics do it and submitted a custom job as a PDF. $40 and 10 days later I've got 250 high quality business cards.

None of this is going to guarantee that you're company's a success of course, but it's some of the stuff you've got to get done. Using something like Google Apps is a no-brainer. I know how to configure and manage a mail server with the requisite spam filters and so on, but why would I want to when Google will do it for me for free?

Tags: kynetx entrepreneur startup

The last couple of weeks have been stressful, bittersweet, and exciting. An exciting opportunity fell upon me and the end result is that I resigned from SpikeSource and am know starting up a company. SpikeSource has been wonderful to me, and I've ve