Given all the recent chatter and discourse on the challenges of startups and the pains of course corrections in tough times, I thought it would good to revisit some of our earlier posts on lessons learned (Earlier this year socialmedian invited several startup founders to talk about their lessons learned.  I'll be reposting some of the best posts from the series as well as bringing some new voices into the discussion).

Here, from earlier this year, are 5 lessons learned from Jonathan Abrams, founder of Friendster, the original social network that started it all.

1. Focus is difficult but crucial. Until your product is complete, your technology solid, your customers or users happy, and your sales or traffic growing and near critical mass, most other things do not matter. A startup CEO can waste a lot of time on premature marketing, business development, partnerships, PR, consultants, board maintenance, etc. before the company is really ready for those things.

2. Hire based on passion, not resumes. If you attract candidates based on your prestigious investors, be wary. If you lose candidates because you don't have prestigious investors, they weren't the people who you needed anyways.

3. A startup can get more done in the same amount of time than a large company, and needs to, but a startup is still more like a marathon than a sprint. Things will still take longer than you expect to get done, and you will make mistakes. Making mistakes is ok, as long as you get more things right than wrong each week, and correct the things you get wrong. Avoid irreversible mistakes.

4. Losing control of a startup to investors puts founders and common shareholders in a vulnerable position and may not improve the company's execution or increase the company's chances of success. Surrendering the corporate governance of a company to the wrong people is typically an irreversible mistake.

5. For a software or Internet company, overall execution depends on engineering execution in the first few years -- make sure your stuff works! A technical founder should stay involved in the technology until it does.

Jonathan Abrams is the founder, CEO, and Junior Computer Programmer at Socializr, an online service for sharing event and party information with your friends. Jonathan is an award-winning serial entrepreneur who created the pioneering social networking service Friendster in 2002. Jonathan is the inventor of a United States Patent for a "System, method, and apparatus for connecting users in an online computer system based on their relationships within social networks."

Previously, Jonathan was the founder & CEO of bookmarking community HotLinks, and worked as a software engineer at companies such as Netscape and Nortel. Jonathan holds an Honors B.Sc. in Computer Science from McMaster University, which he received after flunking out of engineering school.

Since it's the only thing that anyone/everyone in the tech community is paying attention to today anyway, we thought what the heck ... we'll play along too.

Get all your iphone news from more than 50 sources all in one place. 
http://www.socialmedian.com/network/iphone
Open invitation for anyone to join.  Use special invite code "iphone" to register.  100 invites available today only.

Here's another post that some folks have asked me to republish.

Not everyone starts a company this way -- it is  non-traditional for sure.  But  if you're up for being super scrappy and embrace the challenge of partnering with folks on different continents, this way of doing it sure can be fun and rewarding.

1. Work from home.  You don't need an office until you have 3 people in the same city.
   
   
2. Don't hire anyone in the United States until you have to. 
   
   
3. Partner with a great offshore team for development and invest all your time collaborating with them.  Visit them and work alongside them.
   
   
4. IT:  mac, skype, webex, blackberry, hosted exchange provider, server beach, trac for bug and feature tracking.
   
   
5. Get your friends and colleagues to  be your first product testers.
   
   
6. Don't buy anything that doesn't contribute directly to proving out the initial product.
   

A number of folks have recently pointed out to me that the link to this popular post got busted when we moved the blog.

Here it is again in full text here as well as linked to the original post.

12 Learnings From My First Turn As Startup CEO

By Jason Goldberg on January 15, 2008 8:05 AM | Permalink | Comments (10) | TrackBacks (16)

In December 2003 I decided to take the plunge and quit my corporate job to start a new company from scratch.  Believe it or not, it was an easy decision.  I had an idea and a certainty that there was a valuable company to be built around it.  That company was Jobster, where I served as CEO until January 2008 when I helped recruit my successor, transitioned to vice-chairman of the board of directors, and turned my attention to starting a new company.

Back in December 2003 I had no reasonable idea of what was ahead ... what i did have was passion for the idea of Jobster and for the pursuit of starting and growing a business.

I learned many valuable lessons at Jobster which I will take with me as I start my next company and my next and my next. 

Here are some of the key learnings that I hope will benefit many an entrepreneur:

1. The CEO's job is to create value.  Determine early on what the keys to value creation are in your industry and map a path for value creation for your business.   Return often to measure how you are or are not creating value.  Weigh business decisions based on whether they contribute to value creation or not. Avoid paths that do not contribute to value creation regardless of how sexy or fun they might be.  Narrow the focus as much as possible.  Get one thing right then move on to the next. 
   
   
2. Try to ride some powerful existing waves vs. just creating new waves.  Find some big and important industry trends and ride on top of them.  It is very very hard to create your own industry trends.  Be careful about getting out too far ahead of any wave. 
   
   
3. Technology companies are all about the product.  Getting the product right is critical before aggressively going to market.  We went to market too fast in Jobster's early days.  Ultimately your technology company will be judged based on how good your product is and how your target users take to it.
   
   
4. Related to #3, the rapid iteration model (ship early, learn from usage, adjust) works well for consumer services but works not as well for B2B services.  Consumers will let you learn with them over time.  Paying business customers, however, have less patience for your learning on their dime.
   
   
5. Hire people who are passionate about the specific problems you are trying to solve.  We raised money for Jobster in 2004 when few startups were being capitalized.  We were early to social networking.  We signed up 150 customers in the first 90 days of going to market.  As such, we quickly became the cutest kid on the playground for startup enthusiasts and everyone in town wanted to work at Jobster.  A problem, looking back at it, was that many people (not all) joined Jobster because they wanted to work at Jobster, but not because they were passionate about the specific business problems we were trying to solve.  Getting this right is very hard but so important.
   
   
6. You must get close to your users and customers and live their personas.  We often struggled with this at Jobster as not many of our product developers related to recruiters and had trouble walking in their shoes.  Likewise, we often had trouble relating to jobseekers and truly understanding their pain, as many of our employees had never really looked for a job.  It is critical that you live, sleep, eat, and breathe the personas of your target users.  That's one reason for Facebook's success -- their employees use their product all day everyday.  It's awesome to be able to build products for yourself.  That's what I'm doing in my next company where I am the target persona.
   
   
7. The value of your company is directly related to your capital efficiency.   Spend every dollar like it is equity.  Preserve cash!  Preserve cash!  Preserve cash!  Yes, you need to spend money to build a company and to make money, but every dollar misspent erodes your valuation.  We overspent going to market at Jobster in the early days and while we thankfully were able to recognize this and adjust, we are still working at overcoming it.  One of the things I'm most proud of at Jobster was our financial discipline in 2007 which enabled us to grow revenues by 50% while cutting our expense base by 50%.  That's hard to do but is smart business and drives value creation.  That discipline also forced us to (and enabled us to) develop lower cost product development models, and develop a lower cost model for traffic acquisition based on technology and seo instead of spending to acquire users.
   
   
8. In the early days, I highly recommend that you force your startup to be resource constrained.  Spend as little money as possible until you get some significant product traction.  In the early days, if you think you need $1M, take $500k and force yourself to make it work.  Our first capital infusion at Jobster was a $2.5M seed round.  That was too much and enticed us even in the very earliest of days to go too fast.  Within 6 months we had 15 people.  For my new company in the early days 3-5 people and at most $750k will do just fine for a long long time until we prove out the product.
   
   
9. Don't listen to outsiders who tell you to go faster and ramp sales and marketing.  Instead, listen to your current customers and users.  The best sign that you are truly ready to ramp the business is customer/user satisfaction.  Understand customer/user satisfaction drivers and gaps before ramping sales and marketing.
   
   
10. Avoid field sales in favor of telesales.  At Jobster we quickly learned that field sales cost twice as much to sell (longer sales cycle, higher salary reps), and that you could sell the exact same product over the phone faster, cheaper, and with a much lower expectation for after sale support.
    
    
11. Once you are in the market and have established some measurable and repeatable levels of success, #11 negates #8 on this list:  Raise more money than you need when you are in the market and the terms are favorable.   We raised $18M at Jobster in mid 2006 at good terms and that fundraising was absolutely key to our being able to make critical adjustments which have Jobster on solid footing today.  In hindsight, I should have and would have raised $30M then.  Businesses take time to develop and are bound to have rough patches.  Having the capital to learn, adjust, and get through to the other side is critical.
    
    
12. Have fun.  Everyone looks to the CEO everyday to set their own moods and expectations.  Being CEO can be lonely -- someone once said to me that CEO is the loneliest job in the world as there are days that your board hates you, your employees hate you, your customers hate you, and your family hates you -- true.  That's why you need to make sure to have fun every step along the way.  If you are having fun, people will see that and they will follow your energy.  Remember, behind every wrong turn is a better path.  And remember, that the beauty of startups is that you get to try, try, try again and again and learn a ton along the way.

Back in the early days at Jobster we had some catch phrases we used to repeat all the time:

"Your #1 job is to have fun"

"When you're having fun it's no longer work."

I can safely report that I'm currently having more fun at work than I have ever had in my entire professional career.  Starting up social|median is a blast.  I'm over in Pune, India right now working 18 hour days with our development team.  This is my second trip over here in the past 4 weeks.  In between trips we're on skype each day for 2-3 hours per day. 

Our top 3 priorities right now are: 
(1) product
(2) product
(3) product

That's how it should be early on.

We're a small team which means that its always on:  if we don't do it, it doesn't get done.

I haven't hired anyone in the states yet, which means I'm a fulltime product manager.  Which is a fantastic back-to-basics approach.

We've been cranking on our alpha code for about 8 weeks now and it is starting to come together nicely.  We're shipping new code daily and getting awesome immediate feedback from our early users.

We have no idea if this idea of ours is going to actually amount to much, but it sure is fun to give it a try.

UPDATE 3/27/08: 
REGISTRATION FOR THIS DINNER IS NOW CLOSED. 
FULLY BOOKED.  THANKS.

Announcing the first in a series of social|median startup salon dinners.

What's this all about?

• I'll be hosting a series of invite-only dinners and drinks events over the next few months in various cities with people involved in startups.
  

How does it work?

• Each dinner or drinks event will have a theme.  Anyone who meets the criteria for that particular event may request an invite.  Invites will be provided on a first-come space-available basis.  Events will range from small dinners, to dinners +1's, to sessions with bloggers and reporters, to drinks, etc.
  

When and where is the first event?

• April 7, 2008, 8pm -- dinner at location TBA upon confirmation of your RSVP
  

What is the theme for the first event?

• Silicon Alley Founders
  

Who can attend the first event?

• 10 individuals who are currently founders of Silicon Alley startups.

What will we do at this first event?

• Chat, eat, drink
  

How do I get an invite?

• e-mail me and request an invite.  Make sure to include your full name, company, job title, and link to your preferred online profile.

When and where is the next event?

• I'll announce the next event theme, date, location, etc. soon.        

Prior to just a couple of years ago, the typical software development model was to ship the product when it's done.  That typically involved many steps and processes over an extended period of time (less than a year from planning to live product was considered fast.)  Activities included:

• Plan it
  
• Prototype it
  
• Spec it
• Design it
• Build it to spec
  
• QA it
• User test it
• Revise it
• QA it
• SHIP IT

More recently, software development has become more "agile."  Spurred by the relative speed and flexibility of web development (and as the Internet has enabled teams to get instant feedback from real users early on in the product life cycle), software development has taken on a much more iterative model, typically involving 1-4 week full development milestones.  Each iteration is an entire software project, including planning, design, coding, QA, and documentation.  An iteration may not add enough functionality to warrant releasing the product to market but the goal is to have an available release (without bugs) at the end of each iteration. At the end of each iteration, the team re-evaluates project priorities.

The big question in an iterative agile development model is WHEN is the right time to "ship" the product to the public?  Do you stay stealth until you have the product fully baked -- that is say after a handful of iterative cycles and private alpha user testing?  Or, do you go public early and iterate in front of everyone?

We're thinking a lot about these questions here at social|median.  After just 4 weeks of software development, we shipped our first "dogfood" code this past Friday and expanded from 10 to about 50 early users.  It's a good start but it's not what you'd typically call ready for "prime time."  It works though and already provides some instant utility.  We know the product isn't even close to being done (heck, we've completed less than 10% of our known early features and we haven't applied any graphic design what-so-ever), but it sure is fun and incredibly helpful to see people touching the code while we're still working on it.  So, we're thinking of adding more users very quickly.  And, we're thinking of just throwing it out there really early and just iterating it in real time in front of the world.

It's a risky path as some folks are bound to use the early product, not like it, and never come back.

What do you think? 

Cedric Maloux is the CEO & Co-Founder, AllPeers.  AllPeers enables friends to share any file from their browser, with support for even the largest of Torrents.  AllPeers is backed by leading European VC's Index Ventures and Mangrove.

Before co-founding AllPeers, Cédric Maloux was Vice President of European Operations for PlanetOut Inc, a leading global media and entertainment company. PlanetOut's brands include Gay.com, PlanetOut.com, Kleptomaniac.com, and OUT&ABOUT Travel. In 2000, Mr. Maloux joined Gay.com after it acquired OOups.com, a leading French community website he founded in 1996. He led the implementation of Gay.com in the UK where he brought his team to profitability within 14 months. Gay.com UK was awarded the prize for Best Consumer Media at the NewMediaAge Awards in 2002. Prior to PlanetOut, Mr. Maloux was Business Development Manager for UK and France at iPlanet. During that period he dealt on a day-to-day basis with the Heads of Group Security, Heads of Group e-Payments and Heads of Groupe-Commerce of the leading financial institutions in Paris and London. Mr. Maloux received master's degrees in Computer Science and Artificial Intelligence from Stevens Institute of Technology (USA) and EPITA (France) in 1992.

I asked Cedric to share some of his key learnings as a startup CEO.

In Cedric's own words:

1. Include a CFO in your founding team. As a CEO you need to focus on operational matters and your cash-flow management is too important not be left in the hands of a professional even if it costs you a few percentages of the capital. Especially in the early days when cash is not flowing in (nor out), it helps to have someone capable of saying "no you can't purchase this. Can you try to find another way?". It will boost your creativity to have to investigate cheaper options.
   
   
2. Bootstrap, bootstrap and bootstrap again. Yes you might need to raise VC money at some stage but try to go as far as possible before then. Even better, try to reach black without raising a single cent if that's feasible. Get your prototype out and don't waste time on a business plan until you have something to show to people. Try to lay down milestones and how much you will need to reach each milestones. Be ambitious but be realistic: unless you're a superstar very few VCs will invest so you'll waste your time. Bootstrap, get something done, find a business angel and move on to the next stage.
   
   
3. Stay stealth as long as possible (aka do not announce anything until you are sure you are ready to open it up). At AllPeers, we decided to publish a couple of screen-captures of what we were working on just to start to attract some attention. The blog post went online on the 22nd of December so we thought nobody would pay attention to it since most people were busy preparing their holiday or wrapping their presents. Within 3 days we had been Slashdotted and CNET wrote about how the blogosphere was going crazy about us. However it took us another 3 month before we were ready to start our private beta.
   
   
4. It's only a job. Yes it is your idea. Yes it is your baby. Yes you can't stop thinking about it. Yes you wished days had 48 hours but ultimately make sure you keep time for yourself and for your family. Some CEOs will tell you you should work 20 hours per day and I disagree. I believe you can be as efficient if you work 10 hours per day maximum. Your personal life is as important as your CEO life and if you are happy, rested, serene in your personal life you will be a better CEO. When I was younger I almost burnt myself out in one of my startup and had to make major personal decisions without which I might not be alive today.
   
   
5. It's not what you know it's who you know. Even though this is an extreme, make sure you go out and meet people. You are the best marketing representative of your company. Go to conferences. Meet other CEOs, become friends with them (that's easy, you have a lot of things in common). Do not hesitate to help people. Give advices, introduce people. If you grew up as a shy geek, now is the time to come out in your industry and meet people (I know this can be very scary).
   
   
6. Bonus: It's all about people. Make sure you team up with people you respect and who respect you. It's going to be a roller-coaster ahead so your team is going to be your most precious asset when the time will be difficult. Yes there will be disagreements and maybe even arguments but make sure you and your team is strong enough to deal with them in a professional way in order to always grow better out of them.
   

As the CEO of KickApps (www.kickapps.com), Alex Blum is responsible for building a world class technology, marketing, business development, finance and operations team with the goal of providing web publishers the tools to easily enable their sites with user-generated content, social networking, premium video and content syndication capabilities.

I asked Alex to share some of his key learnings as a startup CEO.

In Alex's own words:

1. I believe the most important lesson is that the people who join you in the early stages of a start up are more important than anything- including the concept for the business. Markets are more dynamic than ever so your great idea of today is likely to be tweaked or even radically changed over time so you need to have great people who can help you work through those issues and be prepared to adjust without losing the passion.
   
   
2. CEO's of start ups need to wear many hats but the most important one is that of a cheerleader. Nothing varies more than the emotional cycles of the employees of a start up. One day you are on top of the world convinced that you are sitting on a rocket ship more powerful than Google and the next day you read a blog post or learn of some new company or innovation that completely renders your idea useless. A CEO has to maintain the steady hand even while your gut is churning so that the troops will always feel the confidence and comfort that they are safe and sound.
   
   
3. The CEO needs to be more careful about choosing investors than mates. If you think the most important decision you make in life is who you will spend the rest of your life with your wrong. Take the time necessary to really make sure you like, respect, and can count on those who invest in your baby. Fair-weather investors and board members are a dime a dozen but those who can buckle up and be helpful when things get rough can be more comforting and helpful than any words of support from your spouse.
   
   
4. If your start up is in the business of creating software open things up as early as possible. It's critical in the early stages to have other technologists outside of your company love and respect what you've created and there is no better way to obtain this support than by having them participate in the process. Of course the other benefit is you'll have accelerated product extension and enhancements and you may even be pleasantly surprised by what the outside developer community comes up with. It could be a build on an idea or a new direction that you and the team hadn't even contemplated.
   
   
5. You can kiss the wife, kids, or girlfriend/boyfriend good bye unless of course they are your partners in the business which I don't recommend....
   

Jonathan Abrams is the founder, CEO, and Junior Computer Programmer at Socializr, an online service for sharing event and party information with your friends. Jonathan is an award-winning serial entrepreneur who created the pioneering social networking service Friendster in 2002. Jonathan is the inventor of a United States Patent for a "System, method, and apparatus for connecting users in an online computer system based on their relationships within social networks."

Previously, Jonathan was the founder & CEO of bookmarking community HotLinks, and worked as a software engineer at companies such as Netscape and Nortel. Jonathan holds an Honors B.Sc. in Computer Science from McMaster University, which he received after flunking out of engineering school.

I asked Jonathan to share some of his key learnings as a startup CEO.

In Jonathan's own words:

1. Focus is difficult but crucial. Until your product is complete, your technology solid, your customers or users happy, and your sales or traffic growing and near critical mass, most other things do not matter. A startup CEO can waste a lot of time on premature marketing, business development, partnerships, PR, consultants, board maintenance, etc. before the company is really ready for those things.
   
   
2. Hire based on passion, not resumes. If you attract candidates based on your prestigious investors, be wary. If you lose candidates because you don't have prestigious investors, they weren't the people who you needed anyways.
   
   
3. A startup can get more done in the same amount of time than a large company, and needs to, but a startup is still more like a marathon than a sprint. Things will still take longer than you expect to get done, and you will make mistakes. Making mistakes is ok, as long as you get more things right than wrong each week, and correct the things you get wrong. Avoid irreversible mistakes.
   
   
4. Losing control of a startup to investors puts founders and common shareholders in a vulnerable position and may not improve the company's execution or increase the company's chances of success. Surrendering the corporate governance of a company to the wrong people is typically an irreversible mistake.
   
   
5. For a software or Internet company, overall execution depends on engineering execution in the first few years -- make sure your stuff works! A technical founder should stay involved in the technology until it does.