Category: GETTING STARTED

Homecourt Advantage: 4 Reasons Why It’s STILL Awesome to Have an Actual Office

Peter Cauton
The new STORM office along Escriva – do visit if you’re in the area

A few of my startup founder friends are deliberately choosing NOT to have a physical office.

Their logic is simple:

  • Smaller utility costs (electricity, water, rent)
  • No travel costs (gas AND cost of time lost to traffic)
  • No furniture costs
  • Mobile technology now allows for free video conference calls across the internet

Last weekend, we moved to our new office along Escriva Drive in Ortigas. It is the fifth office we are moving into. Our original office was in the living room of my condominium, where we used a friend’s second-hand restaurant furniture.

When I think about it, we could save a small fortune NOT having an office and going purely mobile. Here are reasons why we would probably never do this:

1) Actual Interaction Beats Mobile

I’m not talking about production here. There are actually some studies which say that production actually increases when people work from home. What I’m pertaining to is teamwork and a shared purpose.

There’s a reason why training companies (paid billions by companies around the world) do a lot of teambuilding through actual shared experiences. Have you seen any team building activity done online?

The best way camaraderie and teamwork are built? When you are working in the trenches together. When it’s the deadline in a few hours and the guy to your left and the girl on your right are downing Cobras with you and its crunch-time. It’s the pizza and drinks you share as you celebrate beating the deadline the next day. This reasons alone justifies the costs of running an actual office for me.

Hmmm. I can picture a company wiring you money to buy pizza, then you celebrating together with you on Skype – but you know what, I just think it wouldn’t be the same.

I was with a startup company before who chose to do it the mobile route. And I don’t know, there was just less energy and excitement with that route. That company has since closed down – there were a lot of other reasons why it did, but working on a purely mobile environment certainly did not help.

2) Working at Home is Tough

It’s funny. I know a ton of employees who want to work from home. But you know what, I know freelancers and founders who work from home who “want to take the next step” by working in an outside office. It’s not so surprising.

Have you ever tried working at home? Not only is your gaming console there, but there’s also your bed, your very comfortable couch, plus dozens of other distractions. There’s also perhaps your mom who would suddenly want you to buy eggs in the grocery, or maybe your 4-year old kid who needs your help in finishing a stage in Bad Piggies.

 3) There’s Something Gratifying About Having a Home

I remember when Pao and I moved STORM from my condo to our first 20-square office space. We had just bought furniture and we were carrying it in. When we were placing the last table in its proper place, we looked at each other and couldn’t help but smile. It wasn’t verbalized, but it was clear – STORM had a home at last, and this was a moment to be remembered.

4) Having an Office Enables Recruitment

Or, more accurately, not having an office cripples recruitment.

After a few months on the job, our new hotshot programmer, Angela told me that she was thisclose to not doing the interview with our company at all. She said that she was standing in front of our door for a good 15 minutes, thinking whether she should ring the bell or not. After all, it was a RESIDENTIAL room.

Angela went on to design and build our first flexible benefits systems – the lifeblood of our firm. Had she not rung, things might have been very different for us.

I remember last year when Applabs (mobile development startup) CEO Ian Atienza was working feverishly on the details of their new office in Eastwood – where every brick went, what piece of furniture went where, how the conference room looked like, how the colors went together. After a few weeks I saw the office and it was amazing. In the next few months, I saw the rewards of what Ian was sweating over: some people were saying yes to his job offer just on the basis of what the office looked like.

Of course, ultimately, what matters would be the type of work and the fit. But you know, having a nice-looking home helps plenty. Unfairly or not, an office adds legitimacy.

Ultimately, of course it will boil down to whether your startup can safely afford the costs of having a home. But as soon as you can financially afford it, don’t hesitate – it’s easier to build with a foundation in place.

Ignore These 5 Founding Team Principles At Your Own Peril

Ignore These 5 Founding Team Principles At Your Own Peril

Peter Cauton

I think I’ve written more than a few posts on founding teams already. I can’t help it, because it’s just SO FREAKING important. This very first step will make or break your startup.

A huge part of my work now is assembling founding teams. Of course, I’ve had successes and failures. As usual, the failures have taught me much more than the successes. From what I’ve learned, here are more detailed principles I now live by when it comes to founder selection.

Ignore at your peril.

1) DNA=KRA

Founder DNA should match Company KRA’S.

Once you identify the 2-3 main strategic areas your company will be involved in, find founders who can fulfill EACH area. Are you starting up a mobile gaming firm? Then you need someone who designs great games, someone who makes great games, and someone who can sell them. If you are all three, then you can actually put one up on your own. There’s a very good chance that you are not though, so fill the gaps with co-founder or two. (I highly suggest keeping it to 3)

“Why can’t we just hire someone for the gap?”

The answer can be very practical. Because that someone who is hired can leave. If the person leaves, and is occupying a position of strategic importance (say, you hired a person who will develop your games), then your whole company gets stalled. If the founders are selected strategically, then one partner can always fill the gap of whoever employee leaves.

This is one secret why STORM works. The whole soul behind STORM is HR and IT. So over the years we’ve lost IT team leaders to Singapore, or lost internal HR Consultants. Whoever leaves, either Pao (founder, IT guy) or I (founder, HR guy) can take up the slack, so no time is wasted.

This way, you ensure that the DNA of your startup will always be aligned to its core objectives.

2) NEVER Compromise on a Founder

This is corollary to the first one. Sometimes, we get too excited with working with our friends or we get too excited about starting that we end up partnering with the wrong person.

We can delude ourselves into thinking thoughts like:

Hmmmmm…this guy isn’t as impressive as I had hoped, but he’s close enough

or

This person is just okay, but I do think I set my standards too high in the first place anyway. He should be able to do the job.

No, he won’t.

NEVER compromise. Don’t talk yourself in doing so. Keep on digging. Believe me, you’d much much rather get delayed than selecting the wrong person.

QUICK TIP: 3 things to seriously ask yourself: a) CAN he do the job? (capability) b) WILL he do the job (motivation) c) DOES HE HAVE TIME to do the job? (bandwidth)

That guy you selected COULD’VE BEEN this guy instead

3) You can only gauge talent in your own DNA sphere

Scenario: you want to fill a founder post with someone with a programmer background. “I want a great programmer,” you say to yourself. Then some person comes in and shows you some stuff he’s made. It works. You’re impressed. It’s easy to mutter to yourself, “This guy’s great!”

DON’T GIVE HIM THE KEYS TO THE CITY JUST YET.

I liken the above to this scenario: let’s say you’ve never watched football in your life. You could watch some schlub in the local soccer field score some goals (maybe one with a bicycle kick) and say to yourself, “Wow, that guy is an amazing player.” And then, a few days after you get to watch Lionel Messi play. NOW you know what “great” is.

Tip: in situations like this, ASK someone who is knowledgable about an area who can discern “great” from “mediocre.”

4) You have to have someone fulltime

I guess it IS possible for a startup to begin standing on its own two feet with all of its founders doing it part-time. This is just impossibly difficult to do, I’ve found. Without someone in your founding team who can put on the hours your startup sorely needs, it’s very difficult to pull off. The most valuable thing your startup needs is not funding, or a killer strategy – the most valuable thing it needs is great people spending time on it.  

Even if it’s just one founder fulltime. You got to have someone who commits, right from the start. If not, development will be slow as hell, and somewhere down the line, your momentum and/or motivation just wanes.

This happens no matter how utterly magnificent your part-time founders are.

Don’t make equity room for these two

5) Get rid of pure talking heads

Never give substantial shares (or any shares for that matter) to people who will only assume what I call the “talking head” role. Someone who says he’s in it for merely “the strategy part.”

What characterizes the “talking head” is his lack of arms and legs – he won’t do anything. He just presumes he’s worth the equity because of the sheer “knowledge and wisdom” he will impart.

Resist his wily charms. You need DOERS who will contribute. Get DOERS who can multi-task and think as well.

You CAN, however, get these guys as mentors. It’s almost 100% they’ll agree.

Do these right, and it’s literally half the battle.

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PROJECT RUNWAY: Your eventual takeoff needs a carefully planned runway

Peter Cauton

The runway is a great metaphor often used by startups to describe the cash flow required to keep operations afloat.

Let me elaborate:

Cash is king for a startup: without it, a startup cannot exist. Burn rate is the rate we spend the money, with which we can then estimate how long we can go (the runway) until either one of three things happen: 1) lift-off (profitability), 2) crashing, or 3) refueling (raising more investment). Since startups are often fairly complex and difficult to operate, you can’t just expect to have a short runway before lift-off. You have to plan for it.

I’ve met too many startup founders who just proceed with jumping in without planning this in detail. The leap is a great one, but it has to be planned.

Hmmmm… I think the best way to describe this is by using a story. Let’s try to imagine then…

Our main character, Mario (28 and single), has been in the corporate setting for 10 years now. Mario works fulltime as a project manager for a big IT firm. He’s been planning to put up a tech startup for quite sometime now, and has been working on his startup idea part-time. His partner, uhm…Luigi (30, married with 2 kids), is a genius with Ruby on Rails. Mario and Luigi have been working on their startup concept “E-career Mo,” a new job portal concept, for 6 months now. Luigi has the beta version ready, but they have been dilly-dallying on when to actually launch, because to do so would mean someone would need to manage customer questions, someone would need to collect money, someone would need to gather feedback, etc…

Realizing Luigi would have difficulty going fulltime because of his family situation, Mario takes the challenge on and says: (to the tune of the Chariots of Fire theme) I WILL TAKE THE GREAT LEAP! FULLTIME IT IS!

Mario tells Luigi of the great news and they are both pleased. There and then, Mario and Luigi pledge 40K each as initial capitalization to E-career Mo.  Soon, the startup is launched!

Mario and Luigi agree that Mario will be paid 30K per month. Luigi feels this is a bit too much, but then thinks about where Mario came from (Mario was paid P60K a month in his day job), and then considers that Mario is his friend, so he eventually agrees. They both think, “Our concept is great! It will surely take us less than 2 months to be profitable!”

So they start. The E-career Mo makes around P10,000 in the first month. Then P12,000 in the second month.  Cash flow per month looks like this:

MONTH ONE

Initial Cash: P80,000

Total Expenses: P38,000 (30K – salaries, 8k – other expenses)

Revenues: P10,000

MONTH TWO

Initial Cash: P52,000

Total Expenses: P36,000 (30K – salaries, 6k – other expenses)

Revenues: P12,000

MONTH THREE

Initial Cash: P28,000

By the end of month two, Mario was so scared that he’d have nothing by next month’s end. He doesn’t even get to consider the modest increase in revenues from month 1 to month 2. Panicking, he quickly accepts a job at another IT firm. The E-career Mo portal goes on “We are working on the site” mode, alienates its first few customers, and dies a quick death.

Ok. So I’m sure you’re now enumerating how stupid Mario is and all the things he did wrong. You’d be surprised though at how many entrepreneurs take the leap this way – thinking about the startup and not thinking about himself. While the startup was planned, the LEAP was never planned from the onset.  You have to plan for the leap. Carefully.

YOU, the founder, are the most important part of the startup. You have to plan and think about what happens to you. Remarkably, the founder sometimes forgets about his particular role as he gets too caught up in the excitement of building. Instead of building and then creating contingencies, create contingencies AS you build.

Let’s take a look at another way Mario and Luigi could have gone.

In the alternate universe, Earth X, Mario begins talking to Luigi about his startup idea, E-Career Mo. Luigi loves the idea and agrees to partner with Mario. Mario then brings up that they should be fiscally planning for the startup as well. Mario and Luigi agree that at some point, Mario needs to go fulltime. Luigi estimates he can finish a beta version in 6 months. Mario then computes carefully what the LEAST AMOUNT of salary he can survive on will be. (he calculates this at around 20K) Mario then agrees to save 30K per month for the next 6 months. Luigi pledges to save around 5K per month as well.

In addition, Mario also creates contingencies: if at the 5th month of his leap fulltime, the burn rate is still above 15K a month, then he will have to look for a fulltime job already. If the burn rate is below 15K a month, then he will try looking for weekend tutoring work to supplement his income.

After 6 months developing the beta, Mario takes the great leap and says, I WILL TAKE THE GREAT LEAP! FULLTIME IT IS!

The initial capital raised sums up to P210,000. Mario gives himself his planned 20K salary. In this alternate reality, the runway is a lot longer – and this makes all the difference. Mario can wait it out until he hits profitability. The months look like this:

MONTH ONE

Initial Cash: P210,000

Total Expenses: P28,000 (20K – salaries, 8k – other expenses)

Revenues: P10,000

MONTH TWO

Initial Cash: P192,000

Total Expenses: P26,000 (20K – salaries, 6k – other expenses)

Revenues: P12,000

MONTH THREE

Initial Cash: P178,000

Total Expenses: P25,000 (20K – salaries, 5K – other expenses)

Revenues: P17,000

MONTH FOUR

Initial Cash: P170,000

Total Expenses: P26,000 (20K salaries , 6K – other expenses)

Revenues: P21,000

MONTH FIVE

Initial Cash: P165,000

By the fourth month of operations, E-career Mo is making close enough to cover Mario’s salary and the unexpected costs. By the end of the year, E-career Mo creates enough revenue that it hires Luigi and 2 other employees to support operations. Startup success!!!

I know the story is simplistic and leaves out a lot of detail. There are some key lessons we can learn from the two Marios though:

1)  Sacrifice

Mario took a hit and sacrificed P30,000 a month as investment money for 6 months. You can bet he tightened his belt and made lifestyle sacrifices. If you realize you are too attached to your lifestyle that you cannot sacrifice your attachments and luxuries so you can aid your startup, then this might not really be the path for you. Entrepreneurial startup founders treat their firm like their babies – they will do anything to make it succeed.

2) Account for surprise expenses

If you notice, one thing Mario 1 failed to do was account for the miscellaneous “other” expenses. From printer ink, to furniture, daily messenger rental fees, to legal notarization, these add up pretty fast. In your calculations, create a buffer precisely because you WILL spend more than you think you will.

3) Create contingencies triggered by specific fiscal milestones

This is a biggie. Mario 2 created specific contingency plans – looking fulltime or part-time work if the burn rate was below or above 15K. This contingencies help you not only mitigate, but understand the risks better.

4) Aim for Ramen Profitability

Renowned entrepreneur and investor Paul Graham describes this in his blog as:

Ramen profitable means a startup makes just enough to pay the founders’ living expenses. This is a different form of profitability than startups have traditionally aimed for. Traditional profitability means a big bet is finally paying off, whereas the main importance of ramen profitability is that it buys you time.

It buys you time. It makes your runway longer. Not only that, but it gives you enough confidence to finally say, “Hey, I don’t need some corporation to live my life!” I remember feeling this way. It was confidence-boosting, empowering, and inspiring – feelings you absolutely need to carry on.

5) Do It Yourself

I know it’s tempting to outsource services such as payroll, accounting, recruitment, etc…, especially if you think these are “non-strategic.” But for the sake of lengthening the runway, it makes a whole lot of sense to do it yourself first, or perhaps you can pursue “X-deals” with providers.

6) Watch Your Hiring Costs

If you absolutely have to hire, consider the Runway. Perhaps you could reward using equity, or a higher future salary. Startups cannot afford to get mercenaries – you need people who are in it for future benefits, not immediate ones. It is easier to explain to this type of person that you could give him much higher pay in a year – but now, you sort of need to lowball him to give the firm a healthier chance. If you hired the right person, he will understand.

Primed for lift-off? Make the runway a serious project.

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ADDENDUM: Learn How To Build Your Startup By JOINING One

Peter Cauton

Here’s an interesting thing I realized when I was thinking of the previous post :

From my stint in Chikka, I know around 7 people who have developed (or are developing) startups upon leaving the firm.

In my own startup, STORM, a company of around 12-15 people at any given time, 2 people who’ve left the firm have formed their own startups (hello Kiko Loseo and Ope Linchangco!).

Knowing how sparse Filipino startups are, this is no coincidence: working for a startup prepares you to run one.

Learn How To Build Your Startup By JOINING One

Peter Cauton

If I had not joined erstwhile startup Chikka Asia back in 2004, I most probably would not have had the inspiration and mindset to start my own firm. Back in those times, I only had one mindset – climbing the corporate ladder. My experience in Chikka broadened my career horizons and got me thinking, “hey, maybe I can do it!”

Previous to Chikka, I was working with companies which had really “corporate” cultures, where we had to go to work in ties and all. As I started in Chikka, I quickly noticed some differences, such as:

1) a hatred of formality (yep, it’s a strong word, but I’m sticking with it)

2) there were no special rooms for “Management,” everyone had the same table and chair like and with everyone else

3) there were interesting perks (beer after 6, lechon feasts during birthdays of founders, etc…)

4) LOUD meetings

5) approvals were A LOT faster

I mean, some of these might seem run-of-the-mill now, but during that time, and especially with my very corporate-conservative background these were all NEW.

And I loved it. I thought the lack of formality made for a more creative atmosphere.

Most importantly, I sucked up the entire experience like a sponge, paying attention to stuff like: how the CEO thought,  how the COO just EXECUTED, how quickly ideas were turned into action, how problems were handled, how employees were empowered, how ambiguity was handled, how open the Management team was to new ideas, and very importantly, how the company grew from its very humble roots.

Actually, when I joined Chikka, I was already talking to Pao about forming STORM. In retrospect, joining Chikka was precisely what I needed at that time – I needed to understand firsthand that a Philippine startup COULD work. (thank you, God) My experience in working for a startup solidified my intention in building one. If I had joined that apparel company which also gave me a job offer, I remain convinced that I wouldn’t be doing what I am doing now.

If you are hesitant to dive headlong into starting a startup, joining one provides a very strategic bridge. Startup life and corporate life are SO dissimilar. Corporate life does little to prepare you for the challenges of running a startup. Joining a startup can provide you with a great way to experience startup life with minimal risk (you still have a salary). You can ask some of the founders to mentor you (If they are open. If they are not, then that might not be the right startup for you – startup founders are typically quite enthusiastic with mentoring newer startups). At the very least, I can almost guarantee a great learning experience.

(7 slots remaining for JuangreatMEET on March 27! Do email me at pcauton@yahoo.com to reserve a slot!)

If you are taking the leap from corporate, SERIOUSLY CONSIDER building a B2B

Peter Cauton

I was in a startup pitch event some months ago attended by a good number of people, a lot of which had corporate day jobs. I was listening intently to the ideas being pitched, and I jotted each of them on my tablet to get some sort of idea as to what exactly people wanted to get into. Almost EVERY idea pitched was a B2C (business to consumer: a business which offers products directly to consumers). A good number of them were social networking sites. A good number of them were location-based apps. A good number of them were online marketplaces. In fact, a couple of people thought of exactly the same idea.

This is all well and good, of course – it’s very good to think big. Why not create the next cool social network? Why not create the next killer location-based app? By all means, let’s dream big.

On the other hand, I was thinking the idea distribution was SO skewed towards these “sexy” apps: location-based, social, etc… There were hardly any B2B (business to business: a business which offers products to other businesses) ideas thrown on the table. This was surprising for me. My first thought was wondering about how many people around the world they were competing with. Moreover, there’s that danger of having a giant like Facebook or Google making a feature out of your idea – you’d be out of business in a hurry.

People, why not B2B?!

Here are some powerful reasons to consider it:

1) Online Purchasing Isn’t A Standard (yet)

While internet penetration is uncommonly high here in our country, online purchases are far from the norm. Not yet, anyway. And since our country is a third world country, it may take a while to get there. Since online purchases are commonly the lifeblood of web startups, it becomes a challenge to create a sustainable business model for those who insist on them. You could target a first world country nowadays, of course, since the world is flat – but then you’d have to worry about a ton of competition and a disadvantage of knowing the market a bit less.

2) Take Advantage of Your Corporate Domain Expertise

The ironic thing is that most of the people in that room with me were corporate lifers. Do they hate their corporate jobs that much that HARDLY any B2B idea were generated?

If you spent 5 years in Finance, or 7 years in Supply Chain Management, or 10 years in Human Resources, one thing is for sure: you know more about your corporate domain than most people. You know gaps / problem areas, or at the very least know people who would know about these gaps in detail. These gaps are tremendous opportunities. The fact that they are still gaps means you can come in and take that strategic early mover advantage. (instead of being, like the 167th mover in one of those “sexier” areas)

Also, while a great number of people do not like their corporate JOBS, I’m betting it’s not because of the domain. For example, I was in corporate HR for a good decade before taking the leap. It WASN’T HR that I loathed about corporate – it was the politics, the narrow responsibility sets, the butt-kissing, rigidity, etc… But HR as a domain and body of knowledge? I continue to love it.

I bet you feel the same way about your domain – marketing, sales, finance, etc…. There might be a reason you gravitated towards the domain. It might just be love of the game.

3) Take Advantage of Your Corporate Network

In corporations, one thing you have the opportunity to do a lot is to network. There is a TON of ways to do so: of course you start with your co-workers, but then you also have your suppliers, or the would-be suppliers who send you proposals, those people you met in trade shows or public training courses, business partners, and clients. Why not build something where your existing network can still be useful, instead of creating a new one from scratch?

4) Corporations Have Money

Of course, during economic downturns, it might prove to be a bit difficult to get them to open their wallets. But you know what? If you solve a significant problem for them, you’d be amazed at how easy it is to do so sometimes. Oh, and yes, and corporations have credit cards.

I have discovered that locally owned companies tend to open their wallets faster than their multinational counterparts, probably because they don’t need to consult their regional counterparts for significant purchases. These might be good to target first.

5) B2B Firms Work

Amazon, Facebook, Mang Inasal, Zynga – these are all shining B2C examples. If you’ve got a killer idea like that, then by all means, take the plunge. But do take a look at some of the biggest successes in the startup world: Salesforce, 37 Signals, Linkedin (used mostly by business professionals), Success Factors (recently bought by SAP for $3 Billion), Taleo (recently bought by Oracle for nearly $2 Billion as a counter to SAP’s purchase),  I could go on and on. These firms work. These firms scale.

6) Yes, You Can Go Multinational

Creating a B2B firm does not mean you’ll get stuck in just the local market. On the contrary. First, a lot of the companies you can target here are MNC’s. This means have regional affiliates they meet and talk to very regularly. This is one of the EASIEST ways to get to go international – just ride with your MNC clients. Do a good job with the local affiliate and they just might recommend you to their neighboring counterparts.

Another idea is viewing the local clients as a way to perfect your products for the international market. It will obviously be easier (and cheaper) to sell stuff here. You can start with that. Then as your portfolio grows, it becomes a virtuous cycle – you make your products and services better to account for the increased clients, and as a result your portfolio will grow even more – allowing you to position yourself nicely for international growth.

If you are a corporate lifer thinking of making a jump, then a jump to becoming a corporate entrepreneur does make a ton of sense, especially here in our country.

The ONE Thing To Focus On When You Start Your Company

Peter Cauton

We are smart people. So before we started our startup, we thoroughly thought about our business strategy . Perhaps we drafted a comprehensive business plan which outlined our specific market and how to leverage our competitive advantages.

Armed with our plan, we started. We marketed and began selling. We talked to our customers.

Here is where it always gets interesting. When we offer our product, a lot of times, the consumer will ask us for something else. Another way to use our product. An altered product, perhaps. Or a service related to what we are offering, but not exactly what we are offering. When I was selling our HR technology products in our startup STORM, I was asked several times by HR Directors about whether we did executive search. I always thought it was a good thing that I kept on saying no.

Since we are smart, we would probably invoke Steve Jobs and think about his “Focus is saying no” mantra. You might be tempted to say no and say “the money’s good , but this will be a distraction.”

Let me give you one piece of advice:

Do the service. Bend over backward a bit. Then take the money.

When you begin startup operations, there should be one thing that should consume you above everything else: SURVIVAL. A lot of us have grand plans and we dream of raking in the dough the moment we start. Then we do start and the dual-reality hits us: it’s hard to get customers to open up their wallets and costs are higher than we expected. The dream then transforms into a (necessary) desperation.

Most startups kick the bucket in 5 years. 99% of them do so because they didn’t have enough cash to sustain operations. Cash is king.

As CEO, would you rather deal with a profitable company dealing with lack of focus, or a “strategic” company going under? Thought so.

Beggars aren’t choosers. Startups are essentially beggars. So take whatever money that you can to survive.

Saying no to focus is crucial, but it normally comes after a few years when your startup more or less has created an identity and is a bit more financially stable.

Cash allows your startup to be flexible. Cash will give you leverage – and time – to solve problems. Lack of cash is the opposite – it is a death sentence.

For startups, survival is success. If your startup idea is a good one, I guarantee you this: as long as you survive those critical first few years, IT WILL GET BETTER. But until it does, you have to hang in there and just concentrate keep your head above water. This means saying yes to any and every monetary opportunity available, as long as you don’t veer so much from your main vision ( a judgment call). Keep your head above water – there is nothing more crucial than this when you start. Eliminate luxuries, create an ultra-conscious culture to keep costs low, and maximize every earning opportunity.

The mind-blowing thing is, that “extra” thing that you were asked to do might be the bigger business opportunity than your original plan. Paypal started out as a Palm Pilot electronic wallet idea. The had an online emulator which did payments online, and at first, they were ignoring the sudden rush of people which wanted to do online payments. Then it finally hit them in the head that they were inadvertently sitting on a goldmine.

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6 Tips for Developing a Startup Without Quitting Your Day Job, Part 2

Peter Cauton

(This is the second post in a two-part series. Part one can be found here.)

Here are three more crucial tips in getting your startup to work while maintaining a day job.

4) Organize a STARTUP POWER WEEK

I got this idea from my friend Elmer, who  works fulltime in a service firm and manages to have time for a couple of startups. What I’ve seen Elmer do TWICE already is to plan and execute a STARTUP POWER WEEK.

Here are the steps:

a) Take a 5-day Vacation Leave 2-3 months in advance.

Of course, a vacation is the LAST THING on Elmer’s mind, in fact the opposite is more appropriate. The nine days he will free up is the startup equivalent of what Santa Claus does on Christmas Eve – Elmer will be delivering an insane number of items.

b) Arrange and Schedule EVERYTHING on these 9 days.

Think of the work you CAN’T do during your spare time, the work that can only be done during official work hours. These might include: face-to-face selling to a huge client, talking to a big supplier, or market research. Call a ton of people. Get them to commit to dates and times. Cram the 9-days with every strategic item you can get to work on. Yep, work the nights as well for crucial interviews or coffee talks.

Why don’t you just spread the leaves out instead of doing it all in a week? For Elmer, he HAS to do it this way because he works in the US and his startups are local – so he TRAVELS here during the nine-days. He can’t spread ’em. But there is another reason you might want to consider: momentum. I’ve SEEN first hand how Elmer makes these power weeks work – they are EXTRA productive for him.

During this one week, you will NOT be distracted by your day-job requirements (well, hopefully). During this one week, you can go into a deep dive. You can be totally immersed and it can be exhilarating – you get a a week’s feel of the startup life. At the end of the week, great momentum is created which can’t help but get carried over the succeeding ones. Momentum is everything.  

c) During and preceding these 9-days, take plenty of vitamins (oh wow, getting hit by the bug here would be such a choke-job).

5) Find Passionate Co-founders

First order of business: find a passionate, FULLTIME co-founder. There is a MUCH greater chance for your startup to succeed if SOMEONE is fulltime, preferably that someone who will do a bit of sales, marketing, or business development. Can you imagine doing sales for your startup while having an 8-5 job? (think about that for a moment)

I’ve done that. I’ve had to cancel meetings with my startup AN HOUR before the scheduled time because my boss just wanted to talk to me. Quite tough to operate this way.

I’ve now started quite a few startups – some have failed, some have succeeded. What do all the successes have in common? Each of the successes had a fulltime partner. I can’t over-emphasize how crucial this is.

Note: you can HIRE for this full-time need and pay an employee to do it. However, one big factor I’ve discovered is: if you have a fulltime job, you”ll only have a limited time supervising and leading an employee. There is a GREAT chance that not only will your employee end up being unproductive, but demotivated as well. A co-partner, on the other hand, will have equity in the firm. The equity will likely make him much more invested and motivated in building the firm – especially if you aren’t around most of the time.

6) Respect Your Current Employer

Under no circumstances must you compromise your integrity by compromising the interests of your current employer. None.

As tempting as it may sound, you mustn’t allow yourself to do your startup work during official working hours, or compromise the quality of your work in any way because you were too distracted with a startup-related project.

There are practical reasons for this: getting caught (and fired), ruining your reputation (which is crucial when you start selling stuff in your startup), the company confiscating your startup work (whatever is saved in your company laptop DOES NOT belong to you),  and others.

But I think it can boil down to one thing: the golden rule.

Plus, karma’s a bitch.

Do check out this related post about planning carefully for the startup runway.

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With great FREEDOM comes great responsibility

Peter Cauton

When I took the leap to fulltime startup founder back in 2008, the very first thing I felt was total liberation. Suddenly, after a solid decade of bosses, schedules, rules, and policies, there was...beautiful freedom.

I could do whatever I wanted anytime I wanted!

The first few months of this were so liberating. I would go to the office late, work from home, or take long lunch breaks – without any immediate consequences.

If you are a stickler for structure and rules – then this would probably be a hellish experience. If you are a bit of a rebel, like me – then this is heaven. I make the rules. I answer to myself.

Of course, I’d love to tell you that it ends happily ever after, that an entrepreneur’s life is really about doing whatever you want at anytime.

Well, yes and no.

Yes, there are no immediate ramifications to your daily decisions on where to allocate your time. There are no formal letter warnings, reduced leaves, getting scolded, getting a salary deduction, or even getting fired.

What I discovered though, was that the ramifications of my actions (or inaction) come a bit further down the road.

When you put up your startup, what you will discover fast is that the time and effort you put in the startup has a DIRECT correlation with your bottom line, and in turn, your capacity to pay yourself.

For example, early on, I was in charge of sales. I remember that there were times when I would have to cut my salary for particular months so we can continue to pay employees. I could actually trace these cuts back to weeks where I knew I could have called more people or have done a better job following leads up.

Direct correlation. The more you work, the more you earn. The less you work, the less you earn. It can’t get any simpler than that.

This is very different from corporate, where like clockwork, you get the same amount of salary on the 15th and the 30th no matter what happens or how you perform.

So yes, the startup owner does enjoy the freedom to dictate what transpires in her workweek. If I want to take a leave the whole next week to go to Boracay, I can do so. No one would stop me. I could cancel all my meetings with my clients and move them to the week after.

I just need to understand that the time missed comes with a direct opportunity cost, which, in turn, WILL have a direct effect on my own bottom-line, one way or another.

The younger your startup, the more direct this correlation will be. As time passes, you will have an opportunity to build your startup in such a way that it can be more independent of your time. (If this is the goal though, you might need to rethink why you put up a startup you want to escape from in the first place)

Before that happens though, you gotta give your baby all the time, love, support, and yes, the necessary structure it needs to grow.

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STEP 6: Why You Should Rethink Doing a Launch

Peter Cauton
Think VERY carefully before punching that button

(This is the 5th post in the series 6 Steps to Startup Launch. You can find the introductory post here, and the previous post here.)

Ah. I remember our own “launch” back in 2006. It was a grand thing. We booked a room at Discovery Suites for half a day and we invited a number of corporate managers to a free “product launch” of our Flexible Benefit services in STORM. Since we didn’t really put in a lot of cash in the venture when we started, this was a major, major expense for us. We filled the room with people carrying important-sounding business cards. And yeah, we felt like we had it made.

Of course, it was a flop. Not one person in the room bought our product. If anything, we just broadcasted to some very important people how silly we were.

We didn’t exactly learn our lesson fast.

Undaunted, around a year after we tried exactly the same thing with another product – this time though, we had free wine! Not one person in the room bought this new product. We got our first sale for this product much more organically – by talking with and cross-selling to an existing customer.

Take note that launching is different from starting or incorporating. “Starting” happened when you got your founders together and momentum was built. “Incorporating” happens independently of these six steps to startup launch. Indeed, you can incorporate at any time within the process.

So what is “launching?”

Launching is when you let everyone know about it in one sitting – through a press conference, or a large newspaper article, or when you have a big product launch event.

My recommendation? Don’t bother.

In a launch, the name of the game is to talk about how great you are, about how your product is the best and how it will change things. Chances are, this early in the game, you startup is the complete opposite – you are making mistakes, iterating, fighting multiple fires at the same time. There’s a small chance that you can actually live up to the expectations that come with a big launch.

Moreover, this early in the game, the amount you will be spending to do your “launch” might best serve you in some other way (payroll, iterating).

If you absolutely have to though, then do it as late as possible in the ballgame. Perhaps when you have a small number of customers already. One simple, efficient rule you can follow is that your launch has to be funded by profit funds already, as opposed to initial investment funding.

Think of all the great startups you know. No, you probably did not get to know about these startups through some “launch” or press event. Didn’t they just sneak up on you? Perhaps a friend told you about it.

Instead of “launching,” then think instead about how you can develop the small customer base you already made during the feedback and iteration phase. If you have a B2B service concept, then you can ask them if they can refer anyone else who would benefit from your product – and then give them a good incentive. If you have a web application, think of how you can make your service go viral – the Dropbox viral strategy is a great example. If you have an actual product, then network with potential distributors and negotiate good deals.

The point is to go out and do. Go out and do. Go out and do. With perseverance, passion, and creativity, you’d be surprised about what you’d have in your hands after some time. THEN perhaps, it might be good to think of that launch.

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