Category: STARTUP ADVICE

What’s The First Rule of Startups? There Are No Rules!

Peter Cauton

Early this year at STORM, we began building a competency framework for use in the company.  This is one of the tools large firms use to align everything towards their vision. The logic was, as we got bigger, we would need these structures to guide us. Building a framework like this is massive work, and our HR guy, Dino, was assigned to work on quarterbacking the project.

Around two months ago, we were laying the finishing touches on the framework. We had our core competencies (behaviors everyone in the company should follow), and were finishing with the functional (behaviors everyone in a specific function/department should follow) ones.

Then, I recalled the “big” employee handbook project we did the previous year – something NO ONE EVER BOTHERED TO OPEN. I then thought “What the hell are we doing?!”

So I quickly called everyone to our conference room to say I wanted the project scrapped ASAP. Bewildered, Dino asked me why. I apologized and told him that I knew he was working hard on it (I probably assigned it to him in the first place), but that we have to scratch it out as soon as we can.

It was a distraction.

We’re fifteen freaking people, I don’t need a complicated list of behavioral indicators to ensure everyone is “aligned.” I know exactly what each person is doing.  If something were amiss, I don’t need a complicated report to give me the details. I’d rather look at you straight in the eye and talk about it openly and transparently.

So we scrapped it. I made sure any form of “job description” was also scrapped as well.

I hate job descriptions.

The lesser the rules there are in a startup, the better.  

Don’t concentrate on creating rules. Concentrate on creating culture. It is culture that should drive your startup. And I don’t mean the culture that you supposedly create from drafting those useless “Vision-Mission” statements that no one really cares about (Guy Kawasaki talks about this in the video below). Culture will emanate from you – how you act, what you say, what you stand for. If you are always late in the office, then that is the culture you will create. If you continually ask people opinions on what they think and encourage risk, then that is the culture you will create. If you hold people accountable – then that is the culture you create.

Rules in a startup are oftentimes unnecessary, and all most them do is constrict and distract. The time you spend crafting that 40-page employee policy manual is time you could’ve spent talking and learning from your clients. And guess what, NO ONE WILL READ your manual 40-page masterpiece anyway.

So what do you do? Aim to create as less rules / policies as possible. There will be policies  you should hang on to  – mostly policies on pay and benefits. But the rest? Scrap ’em.

Manage each person in your team personally and uniquely instead. Talk to them. Connect. Lead.

So if your question is,”what about HR policy in my new firm?” Take it from someone who used to make a living crafting those rules. Forget about taking care of HR policy, just take care of your people.

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Start@Starbucks!

Peter Cauton

Start-bucks Coffee.

My first startup, STORM Consulting, started as an idea in 2005, I talked about it with around 10 people – all potential co-owners I targeted – mostly in Starbucks. I then narrowed the field down from ten to two people and began building the foundation of the firm with my two new partners.

A recent startup, StreamEngine, (site is still in beta) which is launching this January, started when I talked to potential partners – mostly in Starbucks (some in Seattle’s Best).

A chunk of my time now I’m currently using by  talking to different people regarding different ideas – all in coffee places and dining areas in the metro, 30-60 minutes each, mostly after hours.

You want to know where to start? Talk about it with someone. Get that idea of yours out of your head and into a conversation. To properly nurture ideas, they need to be out in the open, where they can grow, receive feedback, and get the attention they need. The more you talk about it, the more your idea will become real, more palpable. Energy is generated, momentum is generated – both critical elements in launching a startup.

Ideally, you are also using this process to recruit for potential partners. This is very critical, because once the incorporation is done – you essentially become married to your partners. Listen carefully: Who is excited about your idea? Who can help you take your idea further? Is this person DIFFERENT than you in key areas (ideas, skill set, network)? Is this person SAME as you in the key areas? (values, principles, work ethic)

So you want to start? Grab a cup with a friend tonight!

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Dare to be Different…like Tita Moning

Peter Cauton

I still remember my first visit to LaCocina de Tita Moning when my wife took me there around five years ago.

Vividly.

Why?

It was such an experience.

A few days before our planned dinner, Pauline asked me what I wanted to order, which I found a little weird.

Uhm…so can’t we just order from the menu when we’re there, just like every other restaurant?

Apparently not. This restaurant does not accept walk-ins. You have to call them a full 24 hours before your planned meal to preorder your food. Oh, and there’s not much to choose from. There are only 12 set menus, so you just choose once. That’s it.

These items alone made them different from 99.9 percent of the food places I knew, and even before I set foot in their premises, it was already making quite the impression on me.

Finally, we got to the place. It was near Malacanang.

The place itself did not look anything like a restaurant. It was an ancestral home and I felt like I was in another era. With good service, too. From the moment we entered the gate, someone was serving us, helping us park our car, and leading us to an al fresco foyer, where we had tea and some appetizer.

The server then asked us if we were ready to eat, or if we wanted to explore the house first.

Explore the house?! Pancake House has never asked me if I wanted to explore their house before. This was new. And therefore this was exciting.

Apparently, the house was also a museum. We proceeded to explore several rooms ogling different vintage furniture and radio equipment.

Finally, it was time to eat and we were brought to a grand dining area, where the other guests were.

We partook of our set meals in grand style. When we were having dessert, we were handed a guest book by the waiter who asked us to put a dedication. Then, our waiter called the cook and some of the other members of their staff, who then posed with us while our waiter took our picture. Not the sort of thing you see in Jollibee. The waiter then explained that this picture would be uploaded to their website the day after. (you’ve got some restos doing this now, but 5 years ago, this was unprecedented)

It was an amazing and a totally unique experience that someone designed. An experience someone took great care to execute and deliver.

To rise above the noise of today’s information-saturated world, you have to be memorable, magical, unique.

How can your startup be like Tita Moning?

Postscript: Oh, and food was just superb! Best bread pudding ever!

Postscript 2: No, they aren’t paying me to do this. Maybe someone can send pudding…

Buhay Bootstrap (plus, free startup glossary!)

Peter Cauton

The year is 2006. Pao and I were about 15-20 pounds lighter. Pao was still enjoying his mullet haircut, while I was still enjoying some hair.We wanted to put up a flexible benefits solutions firm, capitalizing on my own early-market experience with flexible benefits.

None of us were really “entrepreneurs” when we started. I was an HR guy and Pao was a programmer. We tried pitching to investors for startup capital, but I think this failed for two reasons: a) the mammoth 100+ page business plan (AKA complete waste of time) we crafted, and b) at that time, no one understood what our idea was and could become. So we ended up bootstrapping.

Funding. There are two general ways to fund a firm: a) raising capital from investors, or b) bootstrapping. Bootstrapping basically means getting no outside funds. The founders themselves would put up the initial capital (another common ploy would be credit cards, although nowadays there seem to be no end to spammed loan offers), minimize costs by all means necessary, survive, and wait for the business to break even and eventually, be profitable. What you give up when you get funding from investors is equity – and thereby control. When you bootstrap though, and it works – you retain control.

We put in around 90K all in all and got started. Pao actually took the leap much earlier than I did. In a crucial move, he went full-time in STORM immediately. I worked with him part-time. To minimize costs, the company began operating in the living room of my 1-bedroom condo. The bedroom effectively became my house. (When I stepped out of the door – boom, I was at work!) We didn’t pay for any office furniture – everything was something someone had donated, so uhm … it wasn’t exactly a breathtaking sight. Our monthly costs were Pao’s salary (near minimum), electricity, and the cheapest internet provider at that time – Destiny (don’t get me started). We felt like we could manage the burn and survive until we got a client or two.

Burn rate is a synonymous term for negative cash flow. It is a measure for how fast a company will use up its initial shareholder capital. If shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down. (wikipedia)

Our plan: to make money from flexible benefits consulting first, and then eventually use the funds to develop an online flexible benefits system to market. Game.

Excited, we planned out a half-day seminar on flexible benefits in Discovery Suites.  Then we started calling people to come. The event was jam-packed, filled with a lot of large firms. Peso signs started broadcasting out of our eyes and stuff. We we’re Kings of the World!

Until we talked to them.

None of them wanted merely consulting. They wanted the online system.

Hokay. This was a significant problem. We had wanted a kick-ass online system. We had previously developed the specs and we designed the data flow very carefully, capturing the various nuances of a comprehensive flexible benefits program. The resulting design was a gargantuan task which would take months to develop for a team. On pao’s salary alone we had 2-3 months of burn left. So what to do?

This led to our first pivot.

Pivot: this is when, due to new insights gathered from the market a firm does a quick turn, a quick strategy change, WITHOUT changing the overall vision of the firm

We needed small, quick wins to allows to raise funds to hire one more programmer to help Pao finish our system as fast as possible. Prior to this time, I had conducted an organizational climate survey for a friend’s organization – and thought that might be a cool service. However, there were a large number of competitors in the business, so we thought an online web survey tool (there wasn’t a popular one at that time) could make us unique in this market.

Amazingly, Pao did the tool in a month, we dubbed it WebSurv. (we still use it now for some projects) Websurv helped STORM land its first few projects – analyze/report projects for some medium-sized firms.

We eventually got to hire our first employee, Angela (who, during her initial interview, took fifteen minutes waiting just outside the door of my residential condo unit before finally mustering the courage to knock). This set the stage for everything. We finished the flexible benefits system before the year ended, managed to land two major flexible benefits clients as 2007 started, and the rest is company history.

In six years, STORM has manage to become a bona-fide player in the local HR technology market, with its sights set abroad.

Some items to takeaway:

1) No, it’s not as glamorous as you might think. (not at all!) It takes a whole lot of sacrifice and humility.

2) It really helps to have a partner with you to weather the storms (pun intended).

3) It’s mighty tough to get investor money (a bit easier nowadays though). Bootstrapping is entirely possible though and has a lot of upside. Check this out. I’m a big believer.

4)  Your plan has to be really be very very flexible to changes.

5) It can take a long time – so patience and perseverance are paramount.

7 WAYS TO ENSURE YOUR STARTUP IDEA DOESN’T SUCK, Part II

Peter Cauton

We’re talking about tips on startup business ideas. This is part two, you can view part one here.

4) RESEARCH

There are hardly any truly novel ideas anymore. That great idea you’ve always thought of? There’s a great chance someone out there has done it. Don’t fret, this is normal. In many cases, this actually means your idea has a market. Now, look deeper. Find out about how your competitor is doing it. How could you make the idea more remarkable?  What other gaps aren’t being met?

Two years ago, I thought about the idea of starting an executive search firm, partly because STORM, our HR technology firm, was always declining when we were asked by our clients if we did headhunting. A longtime HR practitioner, I employed headhunters before and knew it was a crowded market. At the same time, I thought it would be an interesting prospect to introduce something remarkable to an industry which hasn’t really changed much in decades. I spent an entire year gathering data about the industry, trying to identify a strategic gap. The Starbucks near our office made a fortune off of me interviewing over 50 headhunters, trying to find out more and more about this industry I was very much exposed already to as a client. We finally launched this year, armed with a unique strategy. Its been working so far, thankfully. (truthfully, I think waiting a year was too long, there is a point where research becomes the enemy)

5) STEALTH ISN’T HEALTHY

When we launched STORM in 2006, my attitude then was to “protect my turf,” hence I never talked about new ideas to anyone, paranoid they might get stolen. I was in “stealth” mode. I realize now that that was a complete waste of time. First, no one was out to steal my idea. Check out this article.

Talk about your ideas with people whose opinion you value. Seek out experts and talk to them. Tell them about your plans. The feedback you will collect will be invaluable. And no, even if you blare your idea out into a microphone in the middle of SM Megamall, no one will steal your idea. Trust me. Now stop being paranoid and get feedback. Feedback will perfect your idea, and will likely even lead you to better ideas. Now, I have regular coffee meetings with a few people per quarter, with the goal of just bouncing ideas around – I bounce ideas around with fellow entrepreneurs, and I bounce ideas around with vertical experts.

6) DON’T JUST COPY, AUGMENT

I think this is what Steve Jobs does best. Apart from the Apple 1, which was the first personal computer, none of his other products were firsts. The iPod wasn’t the first portable player. Microsoft actually had tablets almost a full decade before Apple came out with the iPad. The i-phone certainly wasn’t the first smartphone. Each of these Apple-made, market leading gadgets were augmented copies of their originals.

How could you make an existing product/service better? How could that innovation they use in one industry benefit yours? What global idea could be done better locally? Imagine and improve.

7) ITERATION > IDEATION

If you talk to VC’s and experienced investors, they will tell you that they invest in the team first, not the idea. In fact, be prepared for the likely possibility that as you develop your startup, your idea winds up in the waste basket, dethroned by a better one. Paypal started out as a Palm Pilot accessory. Groupon started out as a mere side project. It’s really how you will continuously iterate and improve on your idea that will determine your success as a startup. If there’s one thing that’s suicide for a startup, its idleness. Once you think of an idea, you almost immediately have to think of ways on how you can destroy it and build a better one.

There you have it, some of my suggestions on the startup idea process. Do remember that ideas, and the idea formulation process, can often get seductive. I know some friends who have a “good enough” idea on their hands, but don’t want to jump in because the idea isn’t “perfect” yet. Wasted time. Select an idea AS FAST AS YOU CAN, then find a WAY TO TRY IT OUT as fast as you can. The sooner you can gauge as to whether your idea is a good one or not, the faster it is that you can progress, or move on to a better idea.

7 WAYS TO ENSURE YOUR STARTUP IDEA DOESN’T SUCK, Part 1

Peter Cauton

Ok, while ideas ARE overrated, they are still important. Let’s talk about the process of evaluating, and ultimately choosing, which startup idea to commit to. This will be a long one, so I will cut it up into 2-3 posts. Remember, the criteria I will be using here will be for startups, not necessarily for lifestyle or small businesses. For a small business, sometimes all it takes is a good franchise and a good location. It’s a little more complicated for a startup with big dreams.

Let’s start with some career advice cliche.

1.Go after a passion

It’s cliche for a reason: its extremely important. A lot of entrepreneurs get into the game motivated by money, and that is fine. But it is only a deeper passion for the craft that will make your product truly remarkable. It is also passion that will help you stay in the game when the lean times come.

I immediately gobbled up Isaacsons’s Steve Jobs biography the minute it came out. What you get immediately is that Jobs wasn’t in it for just the money. I remember the part of the book where engineers were puzzled at Jobs’ insistence on getting the colors and design right for parts deep inside the computer they were building – parts the consumer would never even see. The whole book – and the whole history of Apple – is really about Steve’s overwhelming passion for the product, passion you could feel when you use Apple products.

What product can you talk about all day? What topic can you read dozens and dozens of books on?

What doesn’t feel like work?

(quick add: if you have a partner or 3, then consider common passions)

2. Consider Tech

Year after year, I get to interview fresh graduates coming out of the Universities. One thing I love asking business majors is what happens in their school’s usual “business simulation activity.” I ask the interviewee to try to remember ALL the concepts generated. I get the same sad company concept list year after year (this year not an exception) – almost 100% of groups do a retail concept, where a “new” food type or a new bag or a new snack is generated. Worse, schools usually hold a tiangge or ask students to put up a stall in Greenhills, thereby virtually guaranteeing that only retail concepts are created. The last 15 years, how many of these retail concepts have actually become household names? One? None?

If you want to make it big in retail, you need gobbles of money. Its a huge risk. With inventory. Oh, and your competitors are named Procter and Gamble, Unilever, and Universal Robina.

Didn’t people get the memo? That the Google algorithm was done in a garage? Didn’t people watch The Social Network? Tech is the one area where the playing field has been leveled, where innovation has become a commodity. Before, creating a tech product meant spending millions buying huge expensive servers and software licenses. Now you can talk to your programmer buddy and essentially create one basically for free. It’s an arena where tiny Chikka in the Philippines can build the world’s first mobile instant messenger and make a difference. There is NO reason why the next great tech company can’t come from the Philippines.

Consider tech.

If you are passionate with something else, you can think about how you can use tech to augment your product towards our new Star Trek era. Passionate about T-shirts? Maybe you can do something like this. How about food? Maybe you can build a local Yelp.

So what are you waiting for? Run and get your tech partner! That’s what I did back in ’06.

(Oh, and if there any school administrators/teachers around there who can influence curriculum – why not combine people from different majors when you do your business simulation activity? Think of what can happen if the business guys team up with the computer guys and the design guys. It will be amazing AND will simulate real life in a much better way.)  

3. Solve a Domain Problem

I was lucky enough to get a press pass and witness the first night of Startup Weekend when it was held in Fort a few weeks back. Great event. There were dozens of ideas, usually revolving around trends such as  location technology, new social networks, and online event aggregators. My problem with these ideas is this: how many people around the world are working on these ideas? Hundreds? Thousands?

My other problem is this: a lot of these ideas are features, not products. If Facebook, which everyone uses, decides to make your company idea in to a feature, then say goodbye to your firm. This problem is now what Foursquare is now facing.

My suggestion is you go zig when everyone else is zagging.

One practical way to do this is to tackle domain problems. If everyone else is busy building another Facebook (good luck with that),  why don’t you talk to 10-year veterans of certain domains. Talk to a great doctor. Ask him about the problems in that industry. Talk to a supply chain director. Talk to a high school principal. Heck, you might be one of these people. These are the people who have the needed experience to define problems very well – and the intuition to craft great potential solutions.

Talk to them about the sticky problems they face. Can creating a particular service help? Can technology help?

I tell you, you will be amazed at how much opportunity is actually available. Before doubt sets in, let me tell you now, you can make a difference.

More to come.

PS: If you are a “business” guy like me, you can form a great team already by partnering with a tech guy and a domain guy. Can’t wait to tackle forming teams!

Part II here!

Ideas Are Overrated

Peter Cauton

A friend of mine who read the blog told me early today, “Okay, I’m sufficiently inspired, now put something concrete please! Tell me how I can start!”

So where do we begin?

The popular answer is that it starts with the idea. This explains why so many people have the excuse, “I’d start, but I still don’t have that killer idea.”

Let me tell you a story.

Around a year and a half ago, I was really inspired to start a UX (user experience) Consulting firm, seeing that more and more firms needed this service and that there wasn’t any one firm catering to this need. So I poured myself in getting to know as much about UX as I can, and then I started talking to people who might be interested in helping me put it up. I found two young people. We started meeting in Kenny Rogers Katipunan, and we started setting it up excitedly. But then there were some problems we encountered: we felt the market might not have been too lucrative nor too ready for the concept. Considering the background of the partners, the idea then pivoted into a front-end design firm instead of a UX firm. A few months after, another set of circumstances necessitated another pivot – the decision was to focus and do mobile sites for brands. Soon after, it was decided that it would be wise for the team to join forces with another startup group. Streamengine was then created. What do we do in Streamengine? Video production.

“The big idea” is easily the most overrated aspect of startups. They are a dime a dozen. Streamengine all started with an inspiration and then a decision – I want to do something, I WILL do something. That inspiration of mine then latched onto the first “big idea” I thought of – UX. The idea failed. If my basis for starting were the idea, I would’ve stopped altogether, right? But the idea wasn’t my anchor,so I instead re-directed my passions towards the next “big idea.” When that failed?  Onto its next iteration.

I decided I had wanted to do another startup, and these failed ideas weren’t going to stop me from putting one up.

There is a lot of logic as to why I began with “encouragement” posts. Since it all begins with a decision, my great hope is that you get inspired to make one. If you do make one, I can guarantee that the going will then get tough and inspiration will fade. Then, only your decision will remain to hold on to and pull you through.

So you want something concrete to start with?

What about a concrete decision to start?