Video Of The Week: Ten Ways To Be Your Own Boss
I spoke to a group of women entrepreneurs a few weeks ago, and one asked me “why do you need to raise VC?”
And the answer is “you don’t.”
The vast majority of entrepreneurs out there don’t raise VC. Many don’t raise any money to start their businesses.
As I was answering that question, I thought about a talk I gave at the 99U Conference back in 2012 called “Ten Ways To Be Your Own Boss.”
I’m sure I have posted this here before, probably back in 2012, but I thought I’d post it again.
It makes the point that you don’t need VC to be an entrepreneur pretty nicely.
Comments (Archived):
I’ll rewatch.As someone who has thrown myself into the bootstrapping mode more that a few times, it is always so hard.I end up doing it as I am drawn to projects that are not by definition right for VCs and the process of getting straight loans from banks is unpleasant.So I wonder–bootstrap is a fallback as there are no really good options?
Make enough money at your first bootstrap to make the next easier. Edit: and live somewhere the cost of living is low
Agree with the first, obviously not smart enough to embrace the second though quite true though am moving in that direction in my own novel way.
I should have added depending on who your company serves. You made me think about that. If you are selling high end organic juiced alfa you are not going to make it out here.
Lianna keeps doing these kinds of companies and about to do it again.But never again anything that is not shelf stable. And yes, it is a big question where she produces and where the company is.Largest area of interest/confusion is that anything that touches on CBD whether hemp or cannabis is a massive issue with payment gateways, even Google ad words. Amazing opportunity and massive confusion. Equal in fact though much more political that the confusion around crypto.
I had to look up CBD. And Google ad words always amazes me. We had a office neighbor that was spending something like $250k a week on ad words for payday loans, I always ask questions. And yes they have sales reps because I had a great dinner, when the office neighbor said Phil why don’t you join us?
CBD is super fascinating.I’m both a believer in it medically from Hemp, more so when there is a CBD/THC balance.But even from Hemp it is 100% legal and almost 100% unbanked because the gateways are scared about using it from Amex to Shopify to Authorize.There are vendors but they charge between 7-15% per transaction.Regardless there a ton of businesses, many women owned, many in the body care and sports arena that are simply growing their businesses on a check and cash basis.And while certainly the $12B unbanked cannabis is a huge market to fix transactionally the $850m+ legal CBD is interesting for other reasons.My logic here:Crypto, CBD, Cannabis and the broader markets http://arnoldwaldstein.com/…
I loved this when it first came out and I love that you discuss not taking VC money. For so many people it goes: idea, raise VC, start company. For many ideas as Arnold said they are not right for VC and trying to force them to be right makes either a problem if you raise VC or most likely frustrate you as you don’t.As I said as well having low personal costs is a big advantage. I am not being ageist but that is why it is easier when you are young. When you have college and other costs looming it is tougher, not that your skill is any less.Also one great aspect of the U.S. is that you can do this fail, and go onto a career. In many other cultures, you are screwed.
When you have college and other costs looming it is tougherHonestly people are so freaked out about that college cost meme. [1] It’s almost become one of those repeatables that is magnified and that nobody ever questions. You know this because you also hear that people don’t want to become Physicians or Dentists because they will end up with $200k in debt. Ridiculous. In my first business I had to take out loans (and sign equipment leases) and in no way came close to a guaranteed 35 year career in medicine. [2] But sure if you spend $200k and end up with a liberal arts degree and can’t get a job (because you goofed off in college spending time on fun things rather than learning) you are in for a (as I think you like to say) ‘a world of pain’. The idea is to think of college not in terms of enjoyment but in terms of being best prepared to work after college.Will also say that socking away money for college years for kids in advance means that you have less money to put into a business that you want to start. People do this (sock money away) because they have read articles by freelance writers that repeat that that is what you need to do.That said I am not saying that the college cost thing isn’t an issue. Just to not take everything that is common wisdom as correct for you in your circumstances. That is not a holistic approach to decision making.Also, as we both know and often agree college is maybe not the thing for everyone there are other ways to earn a living without a college degree (says both guys who went to really good colleges ironically).[1] Even on that reality tv Selling Jets show that I watch (which as you know I love) guy in Texas wants to buy a $3m jet (which has huge carry costs) and his wife wants the smaller jet ‘you know we have to put three kids through college!’ (And you wonder why I watch? It’s comedy!). Like you have the money for a private jet but you are worried about putting 3 kids through college?[2] And that was when default meant something.
We agree. But you know you have a ton more personal monthly costs now.
Also most importantly when you are younger and in particular when you are not even married yet the Dylan song ‘like a rolling stone’ applies ‘ain’t got nothing got nothing to lose’.Way way easier to take chances when you have nothing to lose.
And it’s easier now than it was in 2012, and IMO still going to get easier (to at least get an mvp to market)
.One of the greatest tragedies in the US has been the death of community banking.I was in business when you could go to a bank and pitch them for a loan, a line of credit. Yes, a LOAN. You could start a business with a loan.Loans used to be given based on character. They used to consider capacity (could you do it), capital, collateral, and conditions (this is a fairly new addition).The big one was character and its younger cousin was capacity.Much of what we call venture used to be community banking. Community banks had to do these loans because they couldn’t touch the big loans the big banks could make. But, they could develop a good long term portfolio by identifying winners in their markets.In those days, a banker was a BACKER. Today, bankers are like actuaries. Just numbers.I hung with a bank through a series of 1980s/1990s mergers from a little community bank with a $1MM loan limit until it became part of Wells Fargo and seemed to have no limits.It was a damn good ride, but it started with a banker who made a loan based solely on character.Years later, I asked the bank president why he made us that first loan. He said, “Because I KNEW you and your partner would find a way to repay it.”That is what has died in America – that community banker who could say something like that. It is tragic.JLMwww.themusingsofthebigredca…
We agree completely on this, although there is an industry that has sprung up on the internet to provide these type of loans. BUT, they in no way come out and see you, and understand the risk.
.Many of these Internet based lenders are just brokers laying off the end product to banks. It is just as much a numbers game as banks.I always thought there would be a great opportunity for somebody like Lending Club, but that has not turned out to be the case – meaning they haven’t done well.JLMwww.themusingsofthebigredca…
This was in my email box this morning. I do know the CMO and CPO of Swift Financial that was acquired by Paypal for $183mm. Delaware company that lended out $3B. I get a ton of these offers. This one in my box this morning.FORMULA FUNDINGSmall Business Lending Made SimpleHello Philip,Does your business need funding quickly?Get a fast quote here, in 3 simple steps.Despite any credit situation, we GUARANTEE to offer the lowest cost of funds or we will make your first payment for you! That is how we stand behind our service. We understand the economic hardships that hurt small business owner’s credit.We custom tailor payment and repayment programs that can work for any business owner’s budget. Our funding is also renewable so once you are a customer; you’ll have access to additional capital on the fly without paying off your existing balance.- Rates as low as 5.99%!- NO collateral or assets required- NO hidden fees or costs- NO prepayment penalties- LOWEST COST GUARANTEE…if we can’t beat your Quote we’ll make your first Payment!Click here to get approved in 3 easy steps today or call me directly at 858-257-1111 if you have any questions.Thanks for your time and we look forward to helping your company grow! Get a QuoteSincerely,Jeremy LenzFinance CoordinatorDirect: 858-257-1111Fax: 877-240-4173www.formulafunding.com
From the Pecora Hearings 1933, Morgan on character.http://mountainmentorsassoc…
.Indeed.Well played.JLMwww.themusingsofthebigredcarcom
Okay:(1) Look at (A) what a lot of people might like, or in the word of Paul Graham of YCombinator, would “love”, (B) what means, tools, techniques, resources, etc., have to meet (A), and (C) how to get paid.(2) Now for (A), provide people with some new information they will love. For (B), provide the information via a Web site. For (C), run ads obtained from ad networks, Google, etc.For (A) and how to use (B), much of what is needed is just from between one pair of ears. Maybe can get the original stuff in 10 minutes, days, weeks, …. Whatever, the main input for between the ears is just some glucose and quiet time!Some people have good ideas right away. Some other people take longer. Apparently some other people never have good ideas.Then, of course, there is the capex and opex: The main capex is just a computer to act as a server.The huge, good news now is how cheap and powerful such a server can be: Rough prices include processor, $100; 16 GB ECC main memory, $100; powerful, efficient power supply, $100; 2 TB hard disk, $60; motherboard, $60; case, $40; etc. For the processor, one example is the AMD FX-8350 64 bit addressing, 8 cores, 4.0 GHz clock speed; right, it doesn’t have hyper threading, but apparently Intel is now dropping hyper threading from their processors (likely due to the recent, tricky security issue — I always wondered if (i) hyper threading would be much of a performance boost and (ii) if Intel actually, in reality, really, actually could get hyper threading solidly correct).Let’s add this up, with 6 of the hard disks and, “live a little”, 32 GB of ECC main memory:Case $40Power supply $100Motherboard $60Processor $100Main memory $200Disk drives $360for40 + 100 + 60 + 100 + 200 + 360 = 860dollars plus screws, fans, cables, keyboard, display, operating system, other purchased software.To be still more clear, we’re talking 8 cores, 64 bit addressing, some number of levels of cache memory, 4.0 GHz clock, 32 GB of main memory, and 12 TB of disk. In the history of computing, not even back very far, that is one heck of a powerful computer. When I was doing research in AI at IBM’s Watson lab, they had a server farm with floor space about the size of a football field with six mainframes with, in total, less processing, main memory, and disk space than that. At one time, FedEx had a central computer shop with what was then some huge farm of disk space, 7 TB!Amazing! But wait, there’s more! I haven’t even counted yet solid state disk drives. And before we do that, Intel has some new 3D memory to replace disk but nearly as fast as main memory and should connect to the processor much as main memory does now.Yes, if want to spend thousands of dollars per processor, then can get some processors with, say, 24 cores each. But the clock speeds tend to be close to 2.0 GHz instead of 4.0. For a large server farm, there are some advantages to such processors.Net, can get one heck of a powerful computer for less than $2000 in parts.Then, type in the code, get the data, create the information the users will “love”, and SEND it!For the opex, for about $60/month, can get Internet access with 100 Mbps download data rate and 36 Mbps upload data rate.Let’s see: If keep the Web pages relatively simple, should there be any other kind?, then can send them for about 500,000 bits each, that’s 0.5 Mb. So, the upload data rate would permit sending a peak of 72 Web pages a second and, say, on average 24 x 7 half that of 36 per second. With, say, 4 ads per page and, from a Mary Meeker report from KPCB, getting paid $2 per 1000 ads sent, that would be monthly revenue of2 * 4 * 36 * 3600 * 24 * 30 / 1000 = 746,496dollars. If one such processor can’t send an average of 36 pages a second, say, a peak of twice that, 72 pages a second, then as revenue grows to $746,496 a month will have plenty of revenue for more such ~$2000 computers. On a wire shelf unit 18 x 48 x 72″ for $100, can fit about 8 such servers. Put three such in a spare bedroom for 24 such servers. Use some more such rack space for IP routers and uninterruptible power supply (UPS) boxes. Install a relatively large window A/C unit, and have an electrician install a 200 A 240 V circuit breaker box in the bedroom. Put a backup generator on a concrete slab out back. If the upload data rate is the worst constraint, then get a faster data rate from the ISP and get more than the $746,496 a month in revenue — with 24 servers, several times more.”Look, Ma, all from just one spare bedroom!”.For such a project, the main challenge is (A), the ideas, ones good enough that people will like the site well enough permit sending so many Web pages.Looks to me like nearly a uniquely good time in business and economic history!
From the Pecora Hearings 1933, Morgan on character.http://mountainmentorsassoc…
I’m bootstrapping my startup!If I get $746,496 a month in revenue, growing rapidly, with next to nothing in expenses, maybe I will have what VCs want, but I’m doubting that they will have what I still would want. In particular, I’m terrified of the VC terms and reporting to a BoD.My view is that it is highly advantageous for a startup to be doing something powerful, valuable, and NEW. But, from all I can see, VCs mostly look for patterns from the past; for this, I blame the limited partners. For my project, the VCs wouldn’t like it even seeing it successful in the past, would just discount it as an inexplicable anomaly. For seeing any potential of my project in the future — no way.For the BoD, at some point they would want a presentation on the project for ad targeting. So, I’d try to make the pure math parts easy to understand, but too soon nearly all the BoD would soil their clothes, the furniture, and the carpet rushing to the rest rooms! Then they’d gather at a bar, have several, and vote to FIRE me.I’m sure I can get my startup live as I have planned. I suspect I have a really good shot at the success I have in mind. But I have no confidence that I could EVER keep a BoD happy. Since I don’t have to keep a BoD happy, I hope never to try.Yes, if my startup moves from a spare bedroom or two to a server farm in some serious commercial real estate, I may go to a bank for a renovation loan (say, take over part of a closed shopping mall) and a mortgage. Then what your link to what J. P. Morgan (ah, what did he ever know about money!) said and what JLM has already said here inhttps://avc.com/2018/07/vid…about the role of “character” may play a role. So, maybe I’d get the loan mostly on the basis of, say, what was apparently my ability to pay it back.Rarely in life have I been blessed with praises of my character, ability, or anything desirable! (A) In grad school, I totally dominated the filtering, flunk out course they put me in. I told the profs I thought I already knew the material, but they just smiled. I did already know the material: Before the course, as a review, I sat alone and wrote out quickly from memory definitions, theorems, and proofs for about 80% of the course. Actually, from a year or two earlier, I’d already written out very careful notes that amounted to a start on a book on the subject. So, I was best in the class by wide margins on all homework, tests, and exams. For the homework, the grader made a mistake on my paper; I corrected him; and he made no more mistakes on my papers!But (B) they had me in a course in computing, beneath what I’d long since done in computing and not much above what I’d taught at Georgetown, and two of the jealous profs dumped on me. Similarly for a course in statistics. Similarly for a course in probability. So four courses, each a waste of time for me.I was there to LEARN, not play filter games. So, I concentrated on the one really good course there was — best course I ever took.But I got dumped on. Later (C) I saw a problem in a course, saw no solution in the library, and proposed a reading course to investigate, maybe not solve it. A prof looked at the problem for a weekend, couldn’t solve it, so let me have the course. Right away I showed him a rough solution. Two weeks later I was done — had a gorgeous solution, a surprising new result, and also solved a problem stated but not solved in the famous paper in economics by Arrow, Hurwicz, and Uzawa — of course the first two won Nobel prizes. Later I published the work in a good journal. That two week piece of work gave me a halo and generally saved me in grad school. I already had my dissertation work well along, continued with that, …, and graduated.(D) In high school, similarly: I was in grades 1-12 in the same building, and the teachers talked about the students. So, from grade school, my bad handwriting gave me a bad REP! As I did really well in high school math and physics, my REP improved but only with a few of the teachers. What really saved me were my CEEB scores, especially Math SAT.Net, like Rodney Dangerfield “I don’t get no respect” until I have solid accomplishments others can’t argue with.A BoD? They’d treat me like the grade school teachers did or worse. If I did really well, they’d just pass it off as luck or an anomaly.Besides, as in Fred’s 10 examples today, or at least 8 of them, I shouldn’t need a BoD. There is, e.g., Trump — as I understand it, he and/or his family own 100% of that business. I’ve seen lots of successful family owned businesses, no BoDs!But maybe your post would have been more appropriate for JLM’s?
I did it without raising any money right out of college and when I sold the business 9 years later I had about 20 employees. That was a long long time ago. I owned 100%. I got 100% of the money that I sold for. It is still operating today (but smaller). I sold it in the year that I had my best year and earned the most money as well. I just got bored and wanted to do something else. Something bigger and better. Made the INC 500 (was a big deal in the 80’s even though I of fully realized it’s near make believe was great for business and helped me sell for sure).That said not having money (or partners or investors) means you have to make all decisions yourself and figure out creatively how to make things work. As JLM said bank loans and in my case equipment leases were the key. That and money that I made in high school and college (Photography, car waxing among two things I did) were the key to having enough as well as jobs working for others.But the other drawback of not having investor money is this. You have to be near 100% right on all of your decisions. There is ZERO room to make a mistake literally. You can’t iterate. You spend money on a machine and if you are wrong you are out of business. That is the way it works. As a result you will of course be more cautious and not be able to gamble and that is definitely going to stunt what you are able to do. Why only 20 employees? Well moving to a bigger location is a risk when you have already gotten to a point where you are making money and can lose what you have earned. If it’s someone else’s money no question it is not the same decision don’t kid yourself. Not even close. The guy who was my manager (and quasi friend) always was always pushing to expand. He had the upside but no downside.One of the biggest risks at the start that I ever took was signing a lease for a machine that was a multi year lease when I was not even guaranteed to get the contract that was the reason that I signed the lease. But I figured that if I didn’t get the machine I would never get the contract so it was worth it to take the risk (I needed the machine for the trial period basically). So that decision went well but by no means was guaranteed in any way. Now take that and multiply it by 365 days a year and having to be right (in smaller ways) all the time and you have a taste for what it’s like to have very little gas in the tank. And yes it’s 365 you are working 7 days. I didn’t even know what days it was sunny out. (Not complaining or suffering I still work all the time now but I know when it’s sunny outside).The other downside to not having investor money is that it will limit most likely the type of people you can hire and many things you can do if you have cash in the bank. I know Fred always talks about how companies that raise a great deal of money have issues (and spend like drunken sailors) but the truth is that that is a completely different issue going on. It’s not the money it’s the decision making and lack of maturity and will power.You think in my business I wasn’t disadvantaged because of the appearance of the business which was a result of how we had to operate because of lack of money? Well we were. We used to have people who showed up for interviews and left before the interview because our place of business didn’t look like what they expected. They were turned off by that alone. Not a fresh new ‘nice place to work’ office. Not a shiny office building office. Just a drab wholesale district place. That said after many years you manage to string together a group of people that actually show up for work and get the job done but it takes years and years of dreck.And think you are going to hire an IVY League (or top college) grad to work in your small self funded business on a salary and a prayer? Probably not. (Sure you might be able to convince them to be partners with you on a dream but you will never get serious top quality and smart employees who will leave their solid jobs to work with your self funded startup (unless of course you smoke them on a dream and give them a chunk of the business). And you need multiple people like that btw, not just 1 guy.I did all of this but I also sold into this market and came in contact with thousands of businesses doing the exact same thing (as well as large corporations which were great because they overpaid and spent someone else’s money).
Wow. You look 6 years younger in that video. What’s your secret?
Funny.
https://www.youtube.com/wat… We may all soon need to “be your own boss”.I think Fred is (was?) with Deutsche Bank. Get out while you can.