Paul Graham is a well-known character in the startup world for his past successes and most recently, the launch of Y Combinator. In 1995, Graham and Robert Morris founded Viaweb, the first application service provider. Viaweb’s software, originally written mostly in Common Lisp, allowed users to make their own Internet stores. In 1998, Viaweb was sold to Yahoo! for 455,000 shares of Yahoo! stock, valued at $49.6 million. Later Viaweb became Yahoo! Store. BusinessWeek included Paul Graham in 2008 edition of its annual feature, The 25 Most Influential People on the Web.

Graham’s Y Combinator, founded in 2005, is an early-stage investment firm and boot camp for entrepreneurs. It seeks to find the country’s most promising startups. Twice a year, Graham and his five partners invite several dozen entrepreneurs to move to Silicon Valley for three months.

Y Combinator has a reasonably good reputation for producing “interesting” companies. As such, for those startups that need funding beyond what YC puts in, the fact that they’ve been one of the chosen few likely gives them an edge over a random startup looking for angel/VC money. Paul’s network is also pretty strong and he can “draw in” outside investors. Famous investors Yuri Milner and Ron Conway have started to offer every single seed-stage start-up firm Y Combinator  a $150,000 investment with very favorable terms: a loan in the form of a convertible note with no cap and no discount, the kind of fine print that would make most venture capitalists wince.

Let’s look at the numbers: As Paul Graham shared on his website; in 6 years, YCombinator has invested in 316 startups including this summer. YCombinator has only invested about $5 million, around $15,000 each. They’ve now had 25 companies acquired, 5 of them for over $10 million. As to valuation, the combined value of the top 21 companies that YC has funded is $4.7 billion! The data used for calculation is derived from the most recent funding rounds.

As Paul Graham says, “the numbers look encouraging so far”. I think It’s proved that Paul Graham’s YCombinator has become an absolute success. Congratulations.

Many people who want to start their own businesses and many people who want to invest in others’ ideas search answer of this question: “Which is more important the idea or the entrepreneur?” .

In academic journals, this is referred to as the horse (idea) and jockey (entrepreneur) debate. The horse and jockey analogy reflects two different financing philosophies: Either you believe the idea is the key and bet on the horse, or you believe management is the key and bet on the jockey. “Another way to phrase it is to say that you either bet on an A-team with a B-idea or on a B-team with an A-idea.

People have different thoughts on this topic. Generally, thoughts on this topic may be  grouped into 3.

1. The Idea: Some think that a good-idea will turn into a successful business in any manner whatsoever. They think business world has an evolutionary side which only good ideas can survive in time. Their motto is “Having the right idea is what counts.” .
2. The Entrepreneur: Many venture capitalists operate on the assumption that even if an idea isn’t perfect, it could be made so by the right management. So they think entrepreneur is more important than the idea.
3. Both The Idea&Entrepreneur: Some people believe that a successful business starts with a good idea. But firstly, an idea must be generated  and turned into a successful business by an entrepreneur. A good idea is a requirement but it’s not sufficient to succeed, it needs a good entrepreneur too.

I also think both the idea and the entrepreneur are important at the same time. A good idea is a start point. But don’t forget, most startups fail. A startup can begin with a revolutionary idea but execute dismally. Another startup can begin with a mediocre idea but execute spectacularly. The startup which executes dismally will fail and the one which executes spectacularly may succeed. But a startup which begins with a revolutionary idea and execute spectacularly will succeed. You may have the best idea but if you cannot reach your customers or you cannot pay your bills, you will fail. On the other hand, you may have the best management team but without a unique idea, growing your business and attracting investors will be very though job.

When you have a great idea, the questions to ask yourself is

1. Now that I have this great idea, do I have the right configuration to execute and make this dream a reality?”

2. Can I convince the marketplace that I can make this happen?

Consequently, I think the entrepreneur is 55% and the idea is %45 important to achieve success in business. What do you think about it? Would you bet on the Jockey or the Horse? Please comment…

As an entrepreneur, I frequently see entrepreneurs failing. I wonder why it is so common for entrepreneurs to fail and how the successful entrepreneurs succeed. There must be a way to crack the formula of startup success and reduce the failure rate of entrepreneurs. The Startup Genome Project has an answer to this question.

A group of international entrepreneurs (Bjoern Herrmann, Max Marmer, Fadi Bishara, Aleksandra Markova) came together to crack the “innovation code” of the successful startups like the Human Genome Project’s attemps to crack the human genetic code. They released the first Startup Genome Report with in-depth analysis on what makes internet startups successful based on data from 650+ Internet startups. The list below shows 14 indicators of success from the report. You can download the full report for more details.

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.
2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.
3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.
4. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)
5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.
7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.
8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
9. Most successful founders are driven by impact rather than experience or money.
10. Founders overestimate the value of IP before product market fit by 255%.
11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.
12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.
13. Premature scaling is the most common reason for startups to perform worse.They tend to lose the battle early on by getting ahead of themselves.
14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymorebecause the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

I hope this report will help all entrepreneurs like me to succeed and thanks for the contributors.

As an entrepreneur and an editor, I really like to hear founder stories. I think every entreprenur like me want to hear about what happened at famous technology companies in the very earliest days. Where did founders get the ideas that made them rich? How did they convince investors to back them? What went wrong, and how did they recover?

Matthew Wise also wondered what it would have been like to hear stories from founders like Steve Jobs and Bill Gates during their startups’ early years. Wise felt a need for a way to get interviews of notable entrepreneurs and their success stories. Matthew Wise and Andy Saebjorensen invested co-built an open platform to enable other founders around the world to participate in FounderLY.  Any founder may film a fellow founder, so long as you follow the FounderLY roadmap, and submit the video to FounderLY. FounderLY will then package it with an intro, bumper, and a closing, and publish it to its website FounderLY.

Thanks for Wise and Saebjorensen for their visionary project. Below you can see an example video from FounderLY featuring serial entrepreneur Steve Blank.

Steve Blank Part 1 of 5 from FounderLY on Vimeo.

If you are an entrepreneur trying to introduce your startup or business idea to potential investors, you need the right “one sentence pitch for your startup” to attract the VCs or angel investors. Investors hear, on average, five to ten presentations each day from entrepreneurs. You’ve got one minute to grab an investor’s attention. Kicking your presentation off with a one sentence summary that highlights your idea and its potential value will help you get them interested.

Summarizing your business plan in one sentence is very hard but Adeo Ressi from Founder Institute can help you perfect the art of the one sentence pitch in an easy way. Ressi says “Most entrepreneurs manage to screw it up… How much better would the world be if every startup could explain their business well in one sentence?” . He has created created a rudimentary template in Mad Libs style:created a rudimentary template in Mad Libs style:

My company, __(insert name of company)__, is developing __(a defined offering)__ to help __(a defined audience)__ __(solve a problem)__ with __(secret sauce)__. You can see in the video below, how to use Ressi’s helpful tool for young entrepreneurs.

Madlibs for Pitching from Video4 on Vimeo.

Paul Buchheit is the mastermind behind Google’s Gmail and AdSense, and founder of FriendFeed (now part of Facebook). As one of the earliest Google employees. Buchheit first uttered those three words “Don’t be evil” during a meeting convened to discuss how Google should communicate its corporate values… Then “Don’t be evil” took on a life of its own, spreading rapidly through the Googleplex, and ultimately it was included in the company’s 2004 initial public offering prospectus.

As a successful developer and an entreprenur, here are 5 startups tips from Paul Buchheit:

1. Launch a scaled-back version
   It’s always possible to do a scaled-back version of what you have in mind without the need of a lot of money.
2. Notice sluggish competitors
   If your competitors are actively making their products worse, it is a really good indicator of an opportunity. When Paul Buchheit considered building Gmail, he saw that Yahoo! decreased their [email storage capacity] from 6 megabytes to 4 megabytes and Gmail started with 1 gigabytes.
3. You don’t need virality if your product is good
   “I think the best kind of virality,” he said, “is a product that people like so much that they just want to tell people about it.”
4. Follow your passion
   Instead of setting goals, he said, “I have a different approach. I look to see what things I enjoy doing and just try to figure out how to spend my time doing things that I enjoy.”
5. Sometimes you have to go off on your own
   It’s very good thing to work in a big Company like Google; but sometimes you have to go off on your own to release what you want. Big companies can limit you, because what you’re releasing can harm their brand over time.

* This post is a rewrite of an older Mashable post written by Andrew Warner.

Andrew Warner is an Internet entrepreneur and the founder ofMixergy. He interviews successful people to learn how they did it.

The first ever Gov 2.0 Summit was held in Washington,DC; in September 2009. The summit brought together leaders from the private, public and government sector to find better ways of dispensing information.

Eric Ries from VC firm Kleiner Perkins Caufield & Byers was one of the speakers at Gov 2.0 Summit. In the video below, Eric Ries is sharing his wide experience about creating “Lean Startups” by “Doing More with Less” as both a former entrepreneur and a VC advisor.

Eric Ries became a Venture Advisor at Kleiner Perkins Caufield & Byers, after co-founding and serving as Chief Technology Officer of IMVU. He is the co-author of several books including The Black Art of Java Game Programming (Waite Group Press, 1996). While an undergraduate at Yale Unviersity, he co-founded Catalyst Recruiting. Although Catalyst folded with the dot-com crash, Ries continued his entrepreneurial career as a Senior Software Engineer at There.com, leading efforts in agile software development and user-generated content. In 2007, BusinessWeek named Ries one of the Best Young Entrepreneurs of Tech. He serves on the advisory board of a number of technology startups including pbWiki, Bunchball, FooMojo, Causes and KaChing.

Aaron Patzer’s personal finance manager Mint is one of the best examples for building a successful company from nothing. Aaron Patzer started Mint.com when he was 25. Mint launched in September 2007 at TechCrunch40 and in September 2009, Mint is acquired by Intuit for $170m. Mint.com has reached over 1.5 million users and helped them of people pay debt, manage job loss in the downturn. Aaron has packed a lot of experience in a very short time and shared his experiences and advices on several platforms.

Aaron Patzer isn’t only a successful Internet entrepreneur, but he also likes to help others about Internet business development. In the embedded video below, he  tells the story of Mint and gives incredibly useful advices for Internet entrepreneurs at a startup competition event called Juice Pitcher on the Microsoft campus.

You can’t go a day without mention of the “credit crunch” in the media.  Everyday, new companies goes bust and the unemployment numbers are bleak. The unemployment rate hit 8.5 in US in March (8.1 in US in February).

Being an entrepreneur has always been a hard thing but in these tough times, it gets harder. Starting a new business or trying to expand a current business needs very much courage, when you look at around and see all those bust companies and unemployed people . We wondered and searched the net to learn how the entrepreneurs are handling the downturn.

Courage
A recent survey shows, 45% of entrepreneurs says “Yes”, 35% says “No” and 21% says “Not Sure” to the  “Is now the time to launch a new business?” question. Also in the US,69% of entrepreneurs stated that they will continue with their business growth plans despite the prevailing economic climate. Even in downturn, brave entrepreneurs are going on their ways and launching new businesses.

Resistance

Fear is a fatal feeling in the downturn; but feeling of hope is very important to take risks. Some desperate entrepreneurs won’t be able to resist the downturn but 78% of entrepreneurs expect their business to survive this downturn.

Responsibility

Companies are squeezed by the recession and the surplus of some companies reduced and become insufficient to pay salaries and bills. Some entrepreneurs cut own pay to stay alive and not to cut jobs. This is unusual even for a recession but a very responsible attitude. What a business owner tells is, “All those small-business books say, ‘Pay yourself first.’ [But] not paying myself enabled me to keep a couple of other people around,” he says. “It’s not [the employees'] fault that I bet on growth.”

You can read these, if you want to read more about this topic:

How entrepreneurs are feeling@ CNNMoney

Entrepreneurs Cut Own Pay to Stay Alive@ Wall Street Journey

Web 2.0 started as a revolution that uses the web to link people together. Web 2.0 means communicating, sharing, discussing and trading online in very useful ways never possible before. Web 2.0 simplifies collaboration and information exchange. We get used to Web 2.0 services as a part of our daily lives and these services are being more popular day by day.

Web 2.0 makes headlines, but how is it possible to make money by starting a Web 2.0 business? We are sure that there are very successful Web 2.0 companies. Google makes money based on  “free” search,  Facebook and other social networks  grow so quickly and their content is created by their users.

This concise list is prepared to explain what’s different about Web 2.0 and  to help you about how to create a successful Web 2.0 business.

1. A Simple Business Idea: Every succesful business requires a business idea.  The main problem abot business ideas is that people think a complex idea means more success. Most succesful Web businesses focus on simple problems and solve them perfectly. There were search giants before Google but Google improved search results, localized its services with a very-simple interface and for free. Don’t forget, complexity is the enemy of Web 2.0 . Think simple!

2. Create and Release as Early as Possible: The development velocity is important when you start a Web 2.0 business. Investors want to see working prototypes before they invest in your projects and don’t forget the competitors; some of them are experts about getting others valuable ideas and transform into businesses.

3. Use The Network Effect: Web 2.0 World is people-centric and there are countless free ways of collaboration with people who may become your users, investors or team-mates. Social networks and social bookmarking sites likes Digg are the best places to find volunteers for testing your products or advertising your business for free. Listen to your customers and let their feedback shape your product.Try to develop a community around your web business and hire a community manager as soon as possible. Motivated fans will be the best and the cheapest marketing staff of your company. The network effect is the main reason why leading Internet companies got so big, so  fast.

4. Use Web 2.0 Tools To Cut Costs & Save Time:The simple rule to calculate how much money you need for a startup is; ”If you plan to develop in a year, it’s going to take two; if you think it’s going to take $100K, it’s going to take $200K”. So you must find a way to cut your costs and finish your project in due time. Web 2.0 tools help you to complete your tasks in a fast and mostly for free (or at a small charge) way. For example FreshBooks offers a simple invoicing and time tracking services that help you manage your business and lets you . Google Voice gives you anumber for all your phones, voicemail and sms. Especially in the startup phase, online services save you time and money, be available 24/7 and make you look professional.

When developing your products; don’t re-create what you can source from elsewhere. Another website’s API or Google App Engine may reduce your development time. Try to source it from elsewhere before you build something up. If you’re lucky it can be for free but sometimes it’s worth buying a ready solution; your time is priceless.

5. Monetize Every Chance: Advertising can often seem overly commercial especially in the startup stage but a sponsorship or small advertising sections are good for your business to make some money. Every pageview of your web business has potential as an earning point. You can also find innovative ways.

6. Track Your Users & Rankings: Success of your web 2.0 business depends on your business’ statistics. More users mean more money. You must track how man users visit your site, how much time they spend on your site, the most popular and the least popular parts of your site, how much registered users you have and etc… There are plenty of web 2.0 services to track your user analytics and  I think Google Analytics or a similar service is adequate for this purpose. You must also track and evaluate the demographics of your users to understand their needs and level of interests. User registration and polls are good options.
Tracking you site’s ratings is another important thing. Google’s PageRank, Alexa’s Traffic Rank and other rankings show how popular your site is and enables benchmarking of your site’s performance to your competitors’. You must know who’s talking about your company and in what way,too.

7. Don’t Forget Marketing: If developing a good web service is 50% of your business; the other 50% is marketing. Most of the creative & innovative solutions become trash because they can’t become brands. New users mean new markets; having a well-planned market strategy can save your business’ life. Instead of diving into a crowded market like a red ocean full of sharks, look for emerging areas on the web and try to find niche markets.  You should read something about Blue Ocean Strategy to learn niche marketing better. Marketing and brand positioning are two important points that you can need a professional’s help.

8. Read About Successful & Unsuccessful Internet Companies: Experience means money and time. A web entrepreneur must read the success stories of Amazon, Google, Youtube, Yahoo, Digg, Facebook, Myspace, LinkedIn,  PlentyofFish and the others, once. But an internet entrepreneur must read the stories of unsuccessful Internet companies that entered the deadpool, twice.

9. Have a Revenue Model: You can have 10 million pageviews, your users can spend several hours in a day on your site but it’s possible that you earn nothing. Every business needs a revenue model. You can sell physical goods, just run ads or sell your online services. It’s your business and  you will make a decision.  Don’t forget without a revenue model, starting a web business is a business suicide.

10. Continually Improve Your Business and Develop Improvement Metrics: Continuous improvement is the key factor to stay alive in Web 2.0 World; without continuous improvement, Web 2.0 itself can’t stay alive.  Experience is important and failure breeds success. You must learn from your mistakes and not repeat them.
You should define your targets and the KPIs (Key Performance Indicators) to reach your targets. For example, ROI rate is very important if you have investors. Define your metrics and check them often and improve your strategies to improve your business.

This post is a brief of personal experience and inspired by Dion Hinchcliffe’s “50 Essential Strategies For Creating A Successful Web 2.0 Product” article.

]]> http://siteboat.com/creating-a-successful-web-20-business/feed/ 1 http://siteboat.com/google-ventures-is-ready-to-fund-your-startup/ http://siteboat.com/google-ventures-is-ready-to-fund-your-startup/#comments Tue, 31 Mar 2009 19:06:18 +0000 Erdem OZKAN http://siteboat.com/?p=1944

Google finally launched its venture capital fund. Google Ventures welcomes startups from a broad range of industries; including consumer Internet, software, hardware, clean-tech, bio-tech and health care.

The FAQ of Google Ventures tells all the vision and targets of the …