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On Thursday I talked with Andrew Lee, who is a senior advisor for the US Small Business Administration, about some of the programs they have for high growth startups. Andrew previously started and sold an social gaming company so it was super refreshing to talk to someone in government who understands startups and wants to make the government more helpful to startups.
I was really excited about the three programs Andrew is working on so I wanted to share them with you.
- RFP-EZ – Most relevant for startups with a working product they are currently selling.
- Small Business Investment Company (SBIC) – Most relevant for early stage investors, including venture capital funds and angel funds.
- Small Business Innovation Research (SBIR) – Most relevant for pre-product startups, especially in the hard technology and science space.
This is a program to help startups get contract work from the federal government. Government agencies needing work post their projects they need help with, startups can register as a provider, and startups can bid on the projects (screenshots here and here).
Here is also some thoughts Tim O’Reilly had on the new RFP-EZ program.
Right now there are two projects that look promising for a tech startups. One the SBA is looking for a transactional email service provider. Two the SBA is looking for a new website/content management system. (hint hint an opportunity for an influential reference customer?)
Early Stage SBIC
This is a program to help give investors more capital through matching funds raised by venture capital firms with government backed debt. For every $1 raised privately the SBIC will provide $2 of government backed capital up to $150M. (hint hint potential relief for the Series-A crunch?)
This is a program to help give research funds to startups working on hard technology with the potential for commercialization. Research solicitations comes from a wide range of federal agencies throughout the year and startups can apply for grants if they are working on one of these areas of research.
Here is a full presentation on the program with more on how it works. Also here are the open solicitations for startups. (hint hint health/science/biotech startups should take notice, here’s an interesting solicitation I found.)
If you are interested in any of those programs check out the sites to learn more information about them. Also if you want to talk to someone at the SBA directly send me a note (chris.r.mccann at gmail dot com) and I’ll try to help put you in touch with the best person.
Both events were sponsored and organized by Enterprise Lithuania, an organization owned and operated by the Ministry of Economy of the Republic of Lithuania.
I’ll have to admit, being an entrepreneur I have always been skeptical of any government involvement with the entrepreneurial ecosystem. Historically I have always taken the approach that government should leave entrepreneurs alone and let them get back to real work.
However this trip changed my view a bit. It was interesting to see the ecosystem organize themselves around these two big events and bring over 1,500 students and 200 engineers/designers to these two activities combined.
Unlike entrepreneurs, governments have to big opportunity to take the long-term view on the entrepreneurial ecosystem and selectively make a difference across the whole ecosystem.
If you work in government and are reading this, here are a few things I would do & consider if I was in your position (feel free to take these suggestions with a grain of salt):
- The entrepreneurial ecosystem in your country has to form organically from the bottom up, it can’t be created by force.
- One simple thing I would try would be to bring together all of the existing entrepreneurial leaders in your country (founders of startups, investors, community organizers, developers, immigrants starting companies, university leaders, etc) and have everyone sit down over a casual dinner with beer. Let these community leaders tell you what is needed and what’s important to them. Don’t talk just listen.
- Another simple thing I would try would be to bring together all of the existing entrepreneurial leaders in your neighboring countries and do the same as above with your own national entrepreneurial leaders. Again don’t talk, just listen.
- The last simple thing I would try would be to bring together some successful founders of your national decent who have moved outside your country (to silicon valley or elsewhere) and do the same as above. The same with before: don’t talk, just listen.
One of the most important things I feel a government can do is provide long-term connections to the entrepreneurial ecosystem which already exists in your community.
You yourself will never be able to understand what it’s like to start a company (unless you decide to start one) but you can provide the connections of people who do know what that experience is like to your citizens.
Let the community leaders be the star of the show and let them help you decide how to selectively help the entrepreneurial ecosystem in your country.
Back in June 2009 I threw all of my belongings in my car after graduating college and moved up to Silicon Valley, not knowing anyone here, with the intention of joining or starting a company. Because I was new I started going events like meetups, hackathons, and workshops to meet other people like me. I noticed that being an outsider to the startup community, it was hard for me to know which events were worthwhile to attend so I started choosing the best ones for myself and creating my own list.
Some of my new friends I met were also interested in learning about these events to so in November 2009 I emailed 22 of my friends about the good startup events going on in Silicon Valley and the SF Bay Area for the week. This was how StartupDigest began.
Almost three years later StartupDigest has grown up a lot. Now we have 100 publications, spread across 43 countries, with a community of 120 curators, 230,000 email subscribers, and support by the Kauffman Foundation. Throughout all of this growing up, the past 3 months have been some of the most emotional, intense, and interesting months of my entire startup life.
Over the past three months we started exploring two new paths for StartupDigest. The first was taking our pre-existing StartupDigest VIP recruiting product for engineers, designers, and startups and applying it more generally to other groups.
One thing that has always been interesting with our VIP product is while the product was originally intended for only recruiting, a lot of other groups who have seen it have asked if they could use the same product for their groups. Most notably was my friend Danielle Strachman, who runs the Thiel Foundation’s Fellowship program.
When Danielle saw our VIP product she didn’t think of it like a recruiting product, she thought of it like a group management product she could use for the fellowship, with fellows on one side and mentors on the other side. We too this input and threw up a landing page, gave it a name – GroupTie – and talked with 80 other groups were also interested in using the product.
At the same time we also started talking to a few companies who were interested in StartupDigest themselves. Most of the companies we had deeper discussions turned out to be not great personality fits between our teams and community. Going through with this teaches you that many potential deals turn out this way mostly because of the personality & touchy-feely aspects of combining two different organizations together.
However the first person I called up while going through these talks was Marc Nager from Startup Weekend, because our communities had always been well connected. Marc and I have know each other for a long time and became good friends while we were both asking for Kauffman Foundation support at the Global Entrepreneurship Week Congress in Dubai.
After long discussions back and forth we decided that our philosophical beliefs, communities, and teams were so close together that we had to do something together. The end result of these discussions is Startup Weekend has officially acquired StartupDigest.
Here are the results broken down:
- Startup Weekend is acquiring StartupDigest. We absolutely love the Startup Weekend team & community and together we reach a huge portion of the startup & technology world through both physical events and online publications.
- Startup Weekend organizes events in more than 300 cities in 100 countries, has thousands of volunteer organizers and has had over 75,000 alumni go through their events.
- StartupDigest has 230,000 subscribers, 130 curators, and 101 publications spread across 99 cities in 43 countries.
- If you’re interested in reaching our combined audience email joey@ startupweekend.org
- Brendan McManus and Jessica Ford, two of the four StartupDigest core team members, will be joining Startup Weekend to continue to grow the combined communities of both organizations and keep benefiting the world at large.
- Chris Burnor and I will be building GroupTie, a software solution that came out of StartupDigest centered around making the group organization process easier and more effective for organizers, full time from here on out.
- If you are interested in talking about GroupTie at all send me an email anytime firstname.lastname@example.org
I am very thankful for everyone person who helped make StartupDigest what it is today, especially Brendan McManus my co-founder, Jessica Ford and Chris Burnor on the StartupDigest team, every single one of our current and alumni curators, and every person who helped and supported StartupDigest along the way!
I am super excited about the massive future potential of these two incredible organizations combined and the continuation of our fun #startuplife journey :)
*If you are going through the acquisition process yourself I highly recommend this Warren Buffet quote which helped me out a lot through the twists and turns.
** I will probably get this question so I will answer it directly. Everything with StartupDigest is staying the same and only getting better. All of your account information and newsletters subscriptions will stay intact and you won’t have to any migration at all.
Today I am starting a new group called the Society of Knowledge. I hope this society doesn’t turn into a company but this is something I really want to see happen.
Back in college, at Cal Poly San Luis Obispo, one of my favorite things I did was having intellectual discussions with my roommate Brian Riley, friends, and professors at bars downtown. We were able to talk about philosophy, psychology, politics, religion, and a whole range of discussions & debates around abstract ideas.
Since graduating and now living in Palo Alto, I feel I don’t have these kinds of discussions anymore. History in Silicon Valley consists of 1 week ago, nobody can even remember what life was like pre-iPhone, and everyone in the valley asks the question “what’s hot right now”.
There are not enough discussions around abstract knowledge, history, long term thinking, and big societal changes. There are not enough groups focused on the act of thinking as opposed to doing.
This is the group I want to create. I want to create a safe place for people in the broad field of technology to be able to come together and discuss all forms of intellectual ideas. I want to create a group that encourages people to truly think independently for themselves.
If you are interested in a group like this, join us here.
We’ll be keeping the first gathering in the SF Bay Area (first in Palo Alto then next probably in SF) to start with since I live and work out of here, but feel free to join the group and express interest if you live outside of the area too. You never know where this will go :)
In addition to the principals of distribution one thing that falls under this broad discipline of psychology/marketing is the science of habit.
The absolute best book on this subject is The Power of Habit written by Charles Duhigg. This science applies to both personal habits (smoking, exercise, etc) and habits within products (engagement, usage, retention, etc).
Habits are a series of actions that are converted into an automatic routine. A good simple example of this is brushing your teeth. You automatically put toothpaste on your toothbrush before brushing your teeth. You don’t think individually about what you’re doing throughout the process but chunk the whole process of brushing your teeth into one automatic action.
Habits are made up of three components: cue, routine, and reward.
The cue is the trigger that tells your brain to go into automatic mode and which habit to use. The routine is the mental or emotional actions you do automatically. Finally there is the reward which helps you remember the habit and encode it automatically to your brain.
The biggest secret to changing any habit is you can’t directly change a habit but you can replace it with a new habit.
To change any habit you first have to identify the routine you want to change and components that make up to habit. For example I had the terrible habit of waking up to my morning alarm, then going back to bed, hitting the snooze button on my phone, and completely over sleeping. This was the habit I wanted to change.
The second thing to do is experiment with rewards. My old reward I was the reward of getting back into bed the first time I turned off the alarm. The cue in my example is pretty easy to identify as the alarm. In a general sense a cue can be a location, a time, an emotional state, other person, or a preceding action.
The habit/reward combo I decide to use to replace my old bad habit involved doing two things.
The first was I put my phone far enough away from my bed that I was forced to stand up when the alarm came on. The second was I replaced my habit of going back to my bed with checking my email, facebook, twitter notifications on my phone. I forced myself to stand up when my alarm went off and gave myself a new reward, checking my notifications, while standing up. Because I didn’t go back to bed when my alarm went off and forced myself to stay standing with the reward of checking email, facebook, and twitter my body naturally stayed awake afterwards.
I think it would also be helpful to see one more example but around creating, not changing, a habit in the business context. Here is the story of how Claude Hopkins popularized toothbrushing with his product Pepsodent.
Instead of doing what other toothpastes companies were doing at the time, advertising the long term downsides of not brushing your teeth, he instead created a habit of toothbrushing. Hopkins discovered a thin film that naturally coats your teeth each day and advertised Pepsodent as a promise to remove the tooth film and give you beautiful white teeth if you brushed everyday. On top of that Pepsodent contained in its ingredients citric acid which created a cool tingling sensation after you brushed your teeth. This tingling sensation became the reward people craved and the reason they used Peopsodent every time they brushed their teeth.
When looking at your own habits and your companies habits, look at them in terms of cues, routines, and rewards. I promise it will be an eye opening exercise :)
We find it meaningful when an owner cares about whom he sells to. We like to do business with someone who loves his company, not just the money that a sale will bring him (though we certainly understand why he likes that as well). When this emotional attachment exists, it signals that important qualities will likely be found within the business: honest accounting, pride of product, respect for customers, and a loyal group of associates having a strong sense of direction. The reverse is apt to be true, also. When an owner auctions off his business, exhibiting a total lack of interest in what follows, you will frequently find that it has been dressed up for sale, particularly when the seller is a “financial owner.” And if owners behave with little regard for their business and its people, their conduct will often contaminate attitudes and practices throughout the company.
This is a post about secret #4 about startups by Peter Thiel. To see all 4 of the secrets start here.
These views and thoughts are all Peter’s and notes are from Blake Master’s. If you find any of these ideas intriguing I suggest reading through the full notes here.
TLDR: The biggest secret is there are many important secrets left. Tweet this.
Secrets answer the question, what important truth do very few people agree with you on? Secrets are the unpopular or unconventional answers to this question.
In a business context, the key question is: what great company is no one starting? If there are many possible answers, it means that there are many great companies that could be created. If there are no good answers, it’s probably a very bad idea to start a company. From this perspective, the question of how many secrets exist in our world is roughly equivalent to how many startups people should start.
Some secrets are small and incremental. Others are very big. Some secrets—gossip, for instance—are just silly.
The purpose of Peter Thiel’s class is to share some secrets about starting a company: Monopolies, Distribution, and Power Laws.
The biggest secret is there are many important secrets left. Everyone used to believe there was many more things to do but now we no longer believe that, its a secret again.
Why do people disbelieve in secrets?
Four primary things have been driving people’s disbelief in secrets.
- First is the pervasive incrementalism in our society. People seem to think that the right way to go about doing things is to proceed one very small step at a time.
- Second is that people are becoming more risk-averse. People today tend to be scared of secrets. They are scared of being wrong. Of course, secrets are supposed to be true. But in practice, what’s true of all secrets is that there is good chance they’re wrong.
- Third is complacency. There’s really no need to believe in secrets today. Law school deans at Harvard and Yale give the same speech to incoming first year students every fall: “You’re set. You got into this elite school. Your worries are over.”
- Finally, some pull towards egalitarianism is driving us away from secrets. We find it increasingly hard to believe that some people have important insight into reality that other people do not.
The story of web 2.0 and the information age has been the story that, on some level, many small secrets can add up and change the world. It’s easy to make fun of things like Twitter. You’re limited to 140 characters. No individual tweet is particularly important. Most are probably kind of useless. But in the aggregate, the platform has proven quite powerful. Social media has, the story goes, played a non-trivial role in great political transformation and even governmental overthrow.
The secret force behind this web 2.0 empowerment is the fact that there are far more secrets that people think. If things are very different in the increasingly transparent world, it just means that they were covered up before. To the extent that things are not transparent, they are secretive. And all these small secrets add up to something very big indeed.
How to find secrets
There is no straightforward formula that can be used to find secrets. You can’t make a list of them so the only thing you can do is develop a good method for finding important secrets.
From this there are two types of secret
- Natural secrets, involving science and the world around us.
- Secrets about people (people won’t tell you or can’t express).
There is something to be said for both approaches. But the importance of human secrets is probably underappreciated. These might be political secrets. Or they might be anthropological or psychological secrets. Here, you just ask the questions and see where they lead. What kinds of things are we allowed to talk about? Are there areas that people can’t look into? What is explicitly forbidden? What is implicitly off-limits or taboo?
On one hand natural secrets are hard but politically safe but human secrets are different, there’s usually much more at stake.
This is a post about secret #3 about startups by Peter Thiel. To see all 4 of the secrets start here.
These views and thoughts are all Peter’s and notes are from Blake Master’s. If you find any of these ideas intriguing I suggest reading through the full notes here.
TLDR: Distribution’s importance is understood least in startups. Tweet this.
Distribution is how you get a product out to consumers. More generally it can refer to how you spread the message about your company.
The distribution secret also has two sides to it. Distribution is much more important than people think. That makes it a business secret. But it’s a human secret too, since the people involved in distribution work very hard to hide what’s going on. Salespeople do best when people do not know they’re dealing with salespeople.
Distribution is the single topic who’s importance people understand least. Even if you have an awesome product you still have to get it out to people.
Distribution isn’t the same for every business
One helpful way to think about distribution is to realize that different kinds of customers have very different acquisition costs. You build and scale your operation based on what kinds of things you’re selling.
On one extreme you have inexpensive products such as steak knives where sales are a couple of dollars each. The other extreme your selling to governments or huge companies and sales are $1M-$50M each. As the unit value of each sale goes up, there is necessarily a shift towards more people-intensive processes. Your approach to these kinds of sales must be to utilize salespeople and business development people, who are basically just fancy salespeople who do three martini lunches and work on complex deals.
The truth is that selling things—whether we’re talking about advertising, mass marketing, cookie-cutter sales, or complex sales—is not a purely rational enterprise. It is not just about perfect information sharing, where you simply provide prospective customers with all the relevant information that they then use to make dispassionate, rational decisions. There is much stranger stuff at work here.
To succeed, every business has to have a powerful, effective way to distribute its product. Great distribution can give you a terminal monopoly, even if your product is undifferentiated. The converse is that product differentiation itself doesn’t get you anywhere.
Understanding the critical importance of distribution is only half the battle; a company’s ideal distribution effort depends on many specific things that are unique to its business. Just like every great tech company has a good, unique product, they’ve all found unique and extremely effective distribution angles too.
Different distribution models
- Complex Sales – Deal sizes of $1M-$500M+ per deal – Examples are SpaceX and Palantir. At this scale is relationship intensive and its important the CEO is upper management is involved in all of the sales.
- Large sales – Deal Sizes of $10K-$100K per deal – Examples are Yammer and ZocDoc. Need to have a more cookie cutter sales process that scales and build out a sales team.
- Missing middle sales – There is a large zone in the middle where there’s no good distribution channel to reach customers. If you get the distribution right in this category you may have a terminal monopoly business. Example is inuit which sells tax software. Now they they are the standard, its probably impossible to displace.
- Marketing/Advertising – Low cost consumer items – Examples Coke, Downey, Zynga, etc – Find a differentiated way to target your customer demographic online. Examples would be Zynga who built their distribution off of Facebook and Google’s ad networks.
- Viral Marketing – Create strong network effects that get every 1 customer to pull in more than 1 additional customer. PayPal got their first 100,000′s of customers through referral programs and viral growth.
Note: The hard part of viral marketing is marketing people can’t do viral marketing. You don’t just build a product and then choose viral marketing. There is no viral marketing add-on. But viral marketing requires that the product’s core use case must be inherently viral.
Usually only one distribution model wins
Power law strikes again – you probably won’t have a bunch of equally good distribution strategies. Most businesses actually get zero distribution channels to work. Poor distribution—not product—is the number one cause of failure.
If you can get even a single distribution channel to work, you have great business.