Starting A Startup

[MSimon]

http://classicalvalues.com/2015/02/starting-up/
The links at the above site are to a set of videos by the Y Combinator folks at Standford. (Thanks GITman). I have the first video in the series up at the link. Paul Graham (another Y Combinator) also makes an appearance in text form. With a link.

And speaking of Y Combinator. http://www.theweedblog.com/y-combinator ... ivery-app/

I can't wait for GIT to chime in.

[GIThruster]

I don't know what you expect me to chime in about. The Y-C class is very good. So far as my own needs, session 18 on legal and accounting issues was a huge eye opener for me, and made me feel like I finally had the kinds of answers I needed to press forward. There are however a bunch of really great sessions, and I recommend the entire series to anyone who is looking to start a startup. I would however note a small handful of quibbles I have with what was taught.

First off, the suggestion that everyone should incorporate in DE is entirely self serving of Y-C, and as such should be viewed appropriately. If you think you'll have trouble raising funds, that is a good reason to accommodate Y-C, but make no mistake, the reason for using DE if you are for example in TX, is to make life easier for the folks at Y-C. That is not the job of a CEO, to make life simpler for his investors; and one could easily have reasons to incorporate where their lab is, for example, and let Y-C spend the extra few hours they need to, getting current on another state's law.

Another favorite session for me was session 9, and I think Marc Andreessen is a genius. Look for his vid with Peter Thiel where they take opposite sides of the tech attitudes as per optimism and pessimism. Great stuff! But this session #9 I think is marred by the teaching of the guy in the center (I think it is Ron Conway?) who is giving very bad advise. The way he announces himself as an authority is totally lacking perspective, and his advise mostly sucks. One minute he is telling entrepreneurs not to ask for an NDA, and not ten seconds later he is telling them to get everything in writing! And no joke, his reason to say the latter is, that he says, investors will "forget" what commitments they make.

Now I gotta ask you, if you're gonna deal with an investor, and he commits hundreds of thousands or millions of dollars, do you honestly believe he will "forget"? Rather, this is this guy's justification for lack of integrity, and if you're dealing with someone like that or someone who could "forget" don't you think you ought to have an NDA? The rationale for not asking for an NDA is that one is supposed to have a trusting relationship with their investor, but trust is earned and I for one am not going to share trade secrets with any investor until he has real skin in the game. The opportunities for investors to rip off entrepreneurs by thieving their trade secrets are far too many to trust someone you don't know, and who may "forget" he was told something in confidence. So this one guy is full of bad advise. And just keep in mind, this advise is all from the perspective of the investor. Entrepreneurs will very often have to take an opposite stance. This makes understanding the mind of the investor vital, and this series indispensable.

Other highlights: lectures 10 & 11 are pure gold. If you really intend to start a company, you cannot think too long or too hard on how to create the corporate culture you want and need. These sessions will help.

As far as Y-C funding a Cannabis app, I'd just remind you, that the vast majority of their investments go belly up. They only survive because they have the excellent terms they have. $120k for 7% is a ton of money for any startup that goes $100M in a few years, and this is how they make their money. But I am not looking for small investments like this. I'm planning to manage on almost no funds until we have a pair of wins, creating both the radiation hardening in simulation and the next gen ceramic, and both these have immediate applications so they can generate cash flow without actually building an M-E thruster. So we could avoid all investment. However, the plan at present is to go to DARPA once we have these two easy wins under our belt. So even though I have been studying what is necessary to get funding from investors, and Kickstarter, and DARPA, we may not need funding from any of these places. I'm a "hope for the best and plan for the worst" kinda guy.

BTW, if you like this series, I also recommend the various podcasts available on how Kickstarter actually works. One of the series is a couple hundred sessions and it is often very good. There was one session for instance, that does a statistical analysis of what works and does not work on Kickstarter, and I applied it to see how well it works. It works! For instance, there are two thruster projects that have been on Kickstarter, and one very quickly met its goals while the other failed. Turns out the content was very similar, but the timing was off. People give very little to Kickstarter in late July and August, so you don't want to close during those months, and it appears the reason the thruster project failed to get funding is that they tried to close in August. (Kickstarters generally only run 1-2 months, so it's important not to look for funding while people are doing their summer vacationing.)

simon, I really do hope you get the Poly some funding, so if you want to talk about that here, I will be happy to participate. But first things first. Who comprises the "team" that you are trying to sell? What can you say about them? Can you say enough to build confidence in that team, or do you need to add to the team? That's what I'm doing--looking for the proper cofounders--and I'm doing it full time for 9 months now. It makes no sense to go down the path for funding until you have the proper team assembled.

[GIThruster]

Here's the Andreessen/Thiel debate on the proper attitude toward technology. This is actually one of the primary subject matters in philosophy of technology, and these guys are contributing far more than a surface analysis here. It's really great stuff from really smart guys, who happen to disagree. I won't even say who I think is right or wrong on any specific portion of their discussion. It's all good.

https://www.youtube.com/watch?v=0yztBoNQRYo

[GIThruster]

Here's the iTunes podcast series on Kickstarter, ref. episode. 14:, "6 Stats for Kickstarter Success"

https://itunes.apple.com/us/podcast/fun ... 58956?mt=2


Here's some really excellent Andreessen: https://www.youtube.com/watch?v=JYYsXzt1VDc

Also just to make an observation, with this VC funding like at Y-C, you're only looking at about $120k, which will pay a physicist for about half a year. With this sort of funding, you are stuck with guys working for minimum wage, which investors love, but employees do not. You can only do so much with so little. What you really want is free money, for doing something very hard, like from DARPA. DARPA specializes in funding what they call "DARPA Hard". They are very specific what they need and what they will fund, and you can find out about this from the video series here:

http://www.darpa.mil/Opportunities/SBIR ... ction.aspx

Trouble is, DARPA does not fund pure research. In order to get DARPA funding, you need to present a plan for TRL1-9. You give the history and you give the plan to hit TRL6 or 7, and you give the plan to commercialize too. You have to have the whole picture together. It takes months to prepare this kind of proposal, but it is for FREE MONEY. That is what makes it worth all the effort.

Finally also note that all of these financial resources require you put together a proper pitch. You therefore need to study the art of the pitch. You'll find info on this all over the web, but look specifically for things like the "11 slide pitch", and I think the last in the Y-C/Stanford series is on pitching. Pitches are typically 3 minutes max. If you plan to do a pitch with 60 slides, you are planning to fail. I have had this conversation with people many times before and those people simply do not listen. Listen to what the investors and funding sources are saying. Pitch in 30 seconds, or 2 minutes, or 3. Not 30 minutes, nor 60, nor 90. That is planning to fail. Woodward planned to fail when he originally pitched NASA, and he did not learn his lesson. He planned again and again to fail, because he does not respect what he is told about pitching, nor promotionals, nor anything else that concerns how to share your financial needs. This is why he has no funding.

[MSimon]

NDA? Well it just doesn't make any difference. The initial idea is usually crap. At best a starting point. And if some one is going to steal it they still have to find the means to execute. If they are already in the same business what is the point? Where is your differentiator?

You see this over and over - investors are looking for people. They invest in people. People who are driven is the first choice. People with drive is the second. Anyone else? Not even in the running. As Paul Graham says. Good people can make a bad idea work. Bad people can't make a good idea work.

Do you know why I kept getting "We have an impossible task for you. What do you want to do?" at the large aerospace company I contracted for? Because I had the brains and the drive to get the job done. On time (or better) and on or under budget. Even in my old age I can still summon up that drive when there is something I want. I don't move so fast as I used to. But I know some of the mistakes to avoid. It balances out.

Y-Combinator is doing or has done some 700+ start ups so far. They maybe know something.

As to DE registration. I have looked into the laws and it is the best place in the US to incorporate. It is such a standard routine that there are just forms to fill out.

http://www.nolo.com/legal-encyclopedia/ ... aware.html

And people willing to be your registered agent for a fee. A small fee.

[MSimon]

BTW my point about the cannabis investment was not whether it is good or not. It is that my attitude on the subject is not the drawback you seem to think it is.

You may have noticed Steven "Freakonomics" Levitt is headlining a three day investor forum on Cannabis Investing at the Chicago Hilton.

The times they are a changin'.

Given all the investor interest - even the Republicans in Congress will be coming in line or they will be replaced.

[GIThruster]

NDA? Well it just doesn't make any difference. The initial idea is usually crap.

It's important to protect IP's as a habit, even if later they prove to be less than ideal.

While the basics of the Poly have been open source for years, I'm sure there are specific portions developed that have real value, and it is that IP value that makes people able to earn a living. IP's need to be protected. Especially in energy and propulsion research, there are a host of concerns who participate in regular, daily, corporate intelligence gathering--corporate espionage--that need to be dealt with suitably in order to protect the value in any company doing this sort of work. In fact, there are many reasons to be very proactive about security. Not everything can be patented because when you file for patent, you virtually guarantee the Chinese for example, will steal your work. These things therefore very often need to be treated under trade secret status which REQUIRES able security.

Probably what EMC2 needs, is what is known as "skiff level security" which is about the highest; combined with a true corporate counter-intelligence program. If you're going to eventually put together Gantt charts that show where the pesos will go in order to raise funds, you have to build security into that program estimate. If you put together a project without serious concern with security, you will quickly demonstrate you're offering amateur performance. You HAVE to be concerned with security and this turns out to be a very complex issue, because security concerns are often at odds with other parts of corporate culture. Working out who gets what they need is a complex issue you cannot simply ignore.

Here's are a couple good places to start to learn on the subject:

http://www.csmweb.com/strategic-planning.php#

http://ncix.gov/issues/economic/index.php

Note the two links at the bottom of this second page. They go to very short documents I highly recommend.

[MSimon]

NDA? Well it just doesn't make any difference. The initial idea is usually crap.

It's important to protect IP's as a habit, even if later they prove to be less than ideal.

While the basics of the Poly have been open source for years, I'm sure there are specific portions developed that have real value, and it is that IP value that makes people able to earn a living. IP's need to be protected. Especially in energy and propulsion research, there are a host of concerns who participate in regular, daily, corporate intelligence gathering--corporate espionage--that need to be dealt with suitably in order to protect the value in any company doing this sort of work. In fact, there are many reasons to be very proactive about security. Not everything can be patented because when you file for patent, you virtually guarantee the Chinese for example, will steal your work. These things therefore very often need to be treated under trade secret status which REQUIRES able security.

Probably what EMC2 needs, is what is known as "skiff level security" which is about the highest; combined with a true corporate counter-intelligence program. If you're going to eventually put together Gantt charts that show where the pesos will go in order to raise funds, you have to build security into that program estimate. If you put together a project without serious concern with security, you will quickly demonstrate you're offering amateur performance. You HAVE to be concerned with security and this turns out to be a very complex issue, because security concerns are often at odds with other parts of corporate culture. Working out who gets what they need is a complex issue you cannot simply ignore.

Here's are a couple good places to start to learn on the subject:

http://www.csmweb.com/strategic-planning.php#

http://ncix.gov/issues/economic/index.php

Note the two links at the bottom of this second page. They go to very short documents I highly recommend.

I think the Polywell people have excellent corporate intel. And counter intel.

And you know how that works in the real world don't you? "I'll trade you a bit of mine I think is not so important for a bit of yours with more value to me."

And you know - even that is going away to some extent with open source. How can you make money when you give your IP away? And yet people are doing it.

[ladajo]

It's not "skiff", it's "SCIF".

[MSimon]

Today, foreign intelligence services, criminals, and private sector spies are focused on American industry and the private sector. These adversaries use traditional intelligence tradecraft against vulnerable American companies, and they increasingly view the cyber environment—where nearly all important business and technology information now resides—as a fast, efficient, and safe way to penetrate the foundations of our economy. Their efforts compromise intellectual property, trade secrets, and technological developments that are critical to national security. Espionage against the private sector increases the danger to long-term U.S. prosperity.

http://ncix.gov/issues/economic/index.php

And yet we have a whole system in America for making criminals who live tradecraft. We make them by the millions.

Who did we go to first when we wanted to penetrate Germany in WW2? The German criminal underground.

Another reason why Prohibitions are a very bad idea. We have 10% of the population now disposed - more or less - to violate conventional morality and who live tradecraft. Far too many. And if an FIS finds a person in a useful position it has a blackmail tool to get leverage. Our intel services may be - in part - behind gay acceptance. The loss of Alan Turing still hurts.

The trouble gets very large because about 1/2 of people from age 18 to about 60 have at least tried the stuff. So many that they can no longer automatically be ruled out when they tell the truth on a security form. And of course some will lie.

And it gets worse. In Redmond and many other places in the computer industry they don't even test. Because far too many of the good or better people are users. They don't want to know. All they say is "if you have an accident on the job and test positive or get caught we will have to get rid of you."

As you know I follow the subject closely. And in my estimation our intel people have decided that Prohibition no longer provides the value it once did. It is now a liability. They have withdrawn their defense. Which does not call attention to their change of heart but does have the required effect.

I know you don't like it - but the sooner we integrate all those people back into society the safer we will be. Look at all the trouble gays caused us in the cold war.

You want to know the big tell for me? (I had been getting small hints for the last 4 or 5 years) Newt Gingrich - once a top drug warrior - campaigned for the decrim of heroin (and pot) in Calif. It passed. And it was so uncontroversial that except in Calif. it hardly made the news. What is another tell? Georgia (IIRC) passed a gay marriage bill.

Social liberalism is a requirement for defense against espionage. We should make as few people criminals as is possible. Reduce the recruiting pool. And our liberalism also gives us a recruiting tool against those not so liberal.

[GIThruster]

Yes. . .it is "SCIF" for "Sensitive Compartmentalized Information Facility". There are reasons to put a building out in the middle of a field where you can see in all directions.

[GIThruster]

Another reason why Prohibitions are a very bad idea.

I am not interested in having this same idiotic discussion. If you want to talk about what it takes to start a startup, I will participate, but know this simon: no one in their right mind is going to hand trade secrets of great value to a doper. Regardless of the state you live in and the laws, dopers are huge security risks and this is why corporations do drug testing. No high tech corp that earns its living generating IP's of great value, can afford to have dopers in the mix. It's just a non starter. So if you intend to get involved in commercializing the Poly, you do indeed need to do as you claim you have done and stop smoking pot.

And that needs to be the end of this discussion. I am not going to participate in this thread if you make it about prohibition as this is just not worth my time.

[MSimon]

Another reason why Prohibitions are a very bad idea.

I am not interested in having this same idiotic discussion. If you want to talk about what it takes to start a startup, I will participate, but know this simon: no one in their right mind is going to hand trade secrets of great value to a doper. Regardless of the state you live in and the laws, dopers are huge security risks and this is why corporations do drug testing. No high tech corp that earns its living generating IP's of great value, can afford to have dopers in the mix. It's just a non starter. So if you intend to get involved in commercializing the Poly, you do indeed need to do as you claim you have done and stop smoking pot.

And that needs to be the end of this discussion. I am not going to participate in this thread if you make it about prohibition as this is just not worth my time.

Well you might want to talk to the folks at Redmond who intentionally do not drug test their recruits. And there are quite a few other high tech companies with the same policy.

But as you point out it is a risk. And as I pointed out - all the more reason to end Prohibition. And why I think our intel agencies are in part behind the legalization movement. It is more of a liability than an asset these days.

[GIThruster]

“In the 1950s, people welcomed big plans and asked whether they would work. Today a grand plan coming from [someone not already a well-known expert] would be dismissed as crankery, and a long-range vision coming from anyone more powerful would be derided as hubris.”
— Peter Thiel in Zero to One: Notes on Startups, or How to Build the Future

[MSimon]

“In the 1950s, people welcomed big plans and asked whether they would work. Today a grand plan coming from [someone not already a well-known expert] would be dismissed as crankery, and a long-range vision coming from anyone more powerful would be derided as hubris.”
— Peter Thiel in Zero to One: Notes on Startups, or How to Build the Future

Microsoft did not start with a grand plan. But they had the smarts and drive to seize one when it was offered.

All that tells me is that if you have a grand plan - don't try to sell it. Just work it.

I have a couple of those in the works. Maybe more. Depending.