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fanocks2003
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How many do start-ups on this forum? I mean exclusively start-ups in order to gain cash and wealth?
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Free registration at the forum removes this block.How many do start-ups on this forum? I mean exclusively start-ups in order to gain cash and wealth?
How many do start-ups on this forum? I mean exclusively start-ups in order to gain cash and wealth?
What do you mean fanocks? Do you mean how many are starting up a business here?
If this is the case, Count me in.
What is your exit criterion?
Is it when you reach the possibility of making an X % return on your investment or is it when you get bored of the business?
For the time being I decided that I won't exit from one of the start-ups if the value of my shares in that specific start-up aren't worth at least $ 100k. Of course, hopefully they'll be worth much more by the time I actually get out, but I want to make sure that I don't exit too soon.
Hello Fanocks, since I know from your posts that start-ups are your fastlane vehicles, it would be nice if you could share some information about your start-up experience, business models and exit criteria. Thanks
Hi Fanocks,
Perhaps you could further define "Start ups".
For instance:
When you say "start up", can it be:
-Something (anything) existing that you take and change?
-Is there a market (at all), or are you creating a new product/service that has never existed before?
-Are you doing this alone, or can you employ others? What about partners?
-Is your funding totally from yourself, or can you obtain it elsewhere?
And perhaps the biggest question:
Here are examples of two businesses:
1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)
2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)
Are both/either 1 & 2 considered start ups to you?
And lastly, are your "start ups" for generation of capital (requiring lots of work, but profitable when sold), or do they focus on generating passive income for the owner (and are not intended to be sold).
You also mention the word "exclusive"-- so, again, to clarify: Are you asking for input from people who do start-ups exclusively, or are you asking for feedback from people who do start-ups as a part of their overall wealth strategy, and "exclusively" pertains to one of the defining questions above?
Thanks,
-Russ H.
I'd love to hear more detail around a few of the businesses you've "exited"...
The scenarios you give above don't necessarily jive with my experiences (except in a few small cases, like Facebook, Craigslist, etc). So, I'd love to understand the motivations and agreements around the investors/companies that allowed you to exit your business...perhaps you can post the details around two or three of the companies you've sold...
Unfortunately, I don't have a "fastlane" success story yet. Working on it, and you can follow part of it here...
My slowlane success story is not very interesting...I came to Silicon Valley about 10 years ago, worked hard, moved up the management chain at some great companies (DirecTV, Microsoft, eBay), and luckily made a little bit of money in the recent tech boom. In other words, right place at the right time...
I've done some angel investing, am friends with a bunch of VC's and entrepreneurs in the Valley, and started one company that would have likely been very successful had Google not applied for the same patent we did, only 6 months earlier (lesson: don't put all our eggs in one technology basket). So I have some experience and a good network, but no notable stories that I haven't already shared on this forum. I guess you could say that I've been on the cusp of the fastlane for several years, and have never made the leap, despite a couple good opportunities.
I've recently made the leap, and I'm trying to make my future success story much more interesting (and repeatable)...
Ryan do you specialize? E.g. do you only start e-commerce businesses?
Although it was not the case for my first two start-ups the third start-up which is in the pre-launch stage now involves a patentable (and in the meantime patent pending) product.
The anticipated fourth start-up will also be centered around a patented invention and from now on I plan to specialize in start-ups based on patented products and/or technologies.
Unfortunately, I don't have a "fastlane" success story yet. Working on it, and you can follow part of it here...
My slowlane success story is not very interesting...I came to Silicon Valley about 10 years ago, worked hard, moved up the management chain at some great companies (DirecTV, Microsoft, eBay), and luckily made a little bit of money in the recent tech boom. In other words, right place at the right time...
I've done some angel investing, am friends with a bunch of VC's and entrepreneurs in the Valley, and started one company that would have likely been very successful had Google not applied for the same patent we did, only 6 months earlier (lesson: don't put all our eggs in one technology basket). So I have some experience and a good network, but no notable stories that I haven't already shared on this forum. I guess you could say that I've been on the cusp of the fastlane for several years, and have never made the leap, despite a couple good opportunities.
I've recently made the leap, and I'm trying to make my future success story much more interesting (and repeatable)...
-Are you doing this alone, or can you employ others? What about partners?
In the beginning you are always alone, but within a month or two (sometimes it takes longer time) I usually have a CEO to manage the company according to my guidelines. I try to always position myself as the Chairman as soon as possible. Because I am not a manager. I am not suited as such. Instead I "direct" the CEO.
I usually bring on money partners. When I do end up doing my "part exits" I usually sell of small parts of my company, 1-5% per new owner. And when I do sell I usually sell expensively and when I sell I always try to find a strategic value for another company that are not in direct competition with me. The reason I choose to sell to a strategic partner is because strategic partners pay more than investors with a set ROI in mind.
Is your funding totally from yourself, or can you obtain it elsewhere? Others money
but the fun part is: You can start a company with very little money from your own pocket. One strategy to do this is by proving the concept before investing your fortune in the start-up company. What I mean is, it is better to find customers willing to sign a purchase agreement or sign up as a member before creating the actual plattform, product or service. But the agreements only come in effect if and when you can deliver. But the promise is worth money on the balance sheet. And that value is then used against the investment value the investors brings to the table. This strategy requires more legwork than actual cash payments from the founders side. And that is a good thing if you have little cash to bring to the table yourself.
The third step is proving the business team (the CEO more or less). If you find a CEO who has a good reputation you are almost set to get financing from an investor. There is very little to argue against, really.
And here we come to the great part. Say it will cost you $1 Million to finance 12 months of operations and you have receivables worth a total of $10 Million. Post value in such a situation would be $11 Million. Where by the investors would hold 9% of the company and you would hold the remaining 91%. Shares you are free to trade with (value exchange as I mentioned above).
It comes down to how you structure the financing and when you bring own financing from investors. But I do encourage you to get other peoples money to finance the company start-up. Why shouldn't you?
1. Web business scaled so that it can be sold for at least $1M? (exit strategy: Build and sell)
2. "S" type business that generates, say, $500-3000/mo but requires constant (albiet small time) attention (exit strategy: Yields semi-passive revenue, replaces a "J.O.B.", worth very little to re-sell)
I start companies in order to sell shares expensively. But I also, mainly, start a company because I want to bring something to the society. Bring in an improvement to the society so to speak. But I can say that I am not focused on living on dividents or a salary from the business. That is not my aim. My aim is to sell shares and put it into my savings account so that I can live of the interest every year. True passive income. The new owners will bit by bit own the company I founded and bring it to further success.
I was just interested in knowing how many on this forum who do start-ups exclusively. Making their wealth primarily from starting companies from scratch. Feedback is always nice. My aim was to see who start companies up from scratch and then discuss a little bit further with those people. It is always nice to read about how others do their start-ups.
I have a web/ecommerce development and internet marketing start-up. It's boot-strapped and the goal is to grow the company for cashflow and as a tool to start/grow other IT enabled businesses.
There is a growing market in the states just like everywhere else in the world. I am currently looking for sales people to operate with commission. If you are interested or know someone who would be interested, contact me at (email address deleted)
I'd like to ask you some questions since you seem pretty knowleadgeable in start-ups. Could you explain a little how you go about gathering the managerial team? You wrote that usually within a month or two you have a CEO to manage your company. How do you go about hiring them? And if one is just starting out, how can they afford a C-level pay? What other techniques you use to convince a CEO, a COO or a CFO to join your team? And more importantly, how do you find such skillful people?
How long does it usually take you to reach this level? This seems like an exit strategy for when the business is already up and running. Is this what you were trying to entice when you wrote this? I believe Facebook did not get any cash infusion from Microsoft till after almost three years from starting up and having such a viral success with the College communities.
Can you expand a little on this if you may? Thanks.
This is great advice. I have a question however, this seems to work if you have a tangible product such as a widget or a service that you can provide locally. I don't see how this strategy would have worked for a service such as Facebook to use your example? This may not work for social networking services? What about Amazon.com? Can anyone think of further ways to finance Internet ventures that look like the examples we used above?
Again any advice regarding this issue is appreciated and on how to structure financing as you explained below?
I guess the difference between the top two would be # 1 is a business system where employees can pilot the website.
#2 would be where the owner-founder does all the work 24/7 from programming to talking to customers etc... An example would be a blog. In this instance the blogger is the business. Any one cares to add something to this?
That is my friend the definition of the ultimate investor. The most advanced level of all investors. This is the Michael Dell, Bill Gates, Anita Roddick etc...
So, the three things you look for in a CEO are: 1) passing a personality test, 2) having a business degree, and 3) personal chemistry?
Perhaps this has worked for you in the past, but in general, I believe this is a bit (actually, VERY) naive...
If you want to raise capital, you'll need a CEO who has previous (successful!) experience in the market you're targeting, who has the ability to sell your vision, who has the ability to carry out your growth and/or exit strategy, who has a major network in your space to build the rest of the team, who can speak with the press, who understands your *specific* business model inside and out, etc.
As for where to find these people, in my experience (both the one company I started and all the friends/colleagues who have started companies) this is literally one of the most difficult parts. Certainly, when the company gets even a little bit successful (any substantial revenue, any press, any major funding, etc), semi-qualified potential CEOs would be pounding down your door.
But, until you get a little bit of growth, it's very hard to find someone who is qualified and willing to take the job. The problem is that there is a paradox here: successful CEOs often look for successful companies. Qualified CEOs got that way by being successful and in the process, likely made a lot of money. Therefore, they can be very choosy in what they do, and for you to entice them to your company, you need to prove that your company will be a stepping stone in their career, but because their career probably exceeded the scale of your company, that's a hard sell.
So it basically boils down to finding a potential CEO who believes enough in your company that they are willing to bet their career on it, because sometimes they are.
In my experience (and again, this is Silicon Valley, which may not be typical), many CEOs are found through VC connections. Company founders network with VCs who have lists of people that "are looking" for potential next ventures. If the VC sees a fit, he'll make an introduction.
But, from what I've seen, this can be a long, difficult process (if done right)...
This is becoming a terrific discussion. Thank you guys.
First, let me thank both Fanocks and JScott for their great advice. They both bring different perspective to this question.
Second, I’d like to tell you Fanocks that JScott did not call you naïve. As I am reading, he was referring to the process of selecting the CEO naïve because as it seems it won’t work in the Silicon Valley VC World. That process is more of a traditional way of selecting a CEO.
When John F Kennedy called for sending a man to the Moon by the end of the decade, many called his idea absurd and outright stupid, yet no one called JFK stupid. To be a president you’ve got to have a lot going for you. As it turns out, we did put a man on the moon and the idea was a brilliant one.
Now to get back to our subject, it seems to me that hiring a CEO is a very difficult process and may require launching the start up to a level that is attractive to VCs and CEOs altogether. It will require a lot of preliminary work to be done and a market to be groomed for the company and its services.
Another question here, when business plans and VCs talk about the team behind the company, what do they mean? Are they more interested in the Founders? Or do these founders need to gather a team? Would you recommend hiring bookkeepers, accountants, maybe lawyers to be on the team? And if yes how do you go about that and what requirements would you look for in these professionals?
I read somewhere before that if you cannot hire someone ask them to be on your advisory board. How would that work? And what incentive would you offer them?
Fanocks - For someone who claims to be so direct and not take things personally, I think you're taking this a little too personally...
I absolutely didn't mean to attack you, and I what I said was that this approach may very well work for you, but * in general* it is naive to think this is the way it works (at least in my experience). Perhaps I'm naive, but I've been close to companies that have never gotten off the ground (including my own) to companies that have had multi-billion dollar liquidity events.
No, I haven't started a successful company myself. And I'm completely upfront with that. I've started one company, and I've gone so far as to post my business plan for that company on this forum for others to use and learn from. I don't need to brag (and don't have much to brag about in terms of starting businesses), and have nothing to hide.
But, I've seen enough successful companies started by friends/colleagues that I recognize a recipe for success and a recipe for failure. And what I recognized in your criteria for a CEO didn't match what I've seen as a recipe for success.
That said, it's very, very possible that I'm wrong, and you're right. I'd love to get more specific detail around the companies you've started and the CEOs you've hired so that I can be comfortable that the information you are giving is actually valid (as opposed to just academic).
I'm certainly not saying that you don't have that experience, you just haven't detailed it yet. You mentioned an online poker site (that looked about half finished) and that's it. I'm just waiting to hear about the other ventures that have been successful so that I'm confident that the advice I'm getting is from someone with actual experience.
I wouldn't expect you to take my advice if you didn't believe I had the experience I claim (and if you don't believe it, you shouldn't be taking my advice). And it doesn't bother me that people want some proof of my experience before they listen to me. I think it's reasonable that I ask the same in return.
I'm certainly not saying that these things aren't important. On the contrary, these things are very important (though I'm not big on personality tests, personally). I'm just not convinced that these things are the only things that are important.
You claimed that these were the only three things that were important to you. Your exact words were:
"But the main thing I use when choosing a CEO is the Wealth Dynamic test (this is not any form of marketing). This test need to show that the CEO is a "Supporter" profile. And the CEO need to have a business degree as well (of course). That's it. The rest is all about personal chemistry (as in all kinds of cooperation)." [emphasis mine]
I stand by my assessment that it's naive (not necessarily that you are) to believe that it only takes these three things to be a successful CEO. I believe it takes these things plus lots, lots more.
Again, this is completely opposite my experience. Any CEO worth his pay has many, many options to choose from, and I've never seen a successful CEO not need some convincing about why they should join a relatively unknown startup company.
Agreed. And it only gets harder when you have that "You're lucky to have me" attitude towards your employees (and your ladies, for that matter)...
Nope, there's enough competition (and self respect) in the Valley that if I (or most of the people I know) would ever walk into an interview with someone who has an attitude like yours (or what you indicate it is in the above paragraph), they'll immediately walk out and never look back.
I'm not looking to argue point-for-point. The best way to argue against what I've said is to just post some details about your experience, your companies, your successes (and even failures)...so that we all have some indication of your past experiences and expertise.
Thank you Fanocks for that last post...that verifies my suspicions...
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