Name: The Little Red Hen
ISBN: 9780618709045

graycatFeb 2016

Part II:

Okay, maybe that monitoring work would not be very important.

But, maybe the company is facing some challenges in routing, scheduling, planning that, as is commonly the case, boils down to linear integer optimization, right, known to be in NP-complete. So, an impressive example might be a 0-1 integer linear program with, say, 40,000 constraints and 600,000 variables. Then, asking for a solution that is optimal, down to the last tiny fraction, might be a bit much, but coming within 1% of optimality might be nice. So, suppose Joe came withing 0.025% of optimality? Might want to chat with Joe about any problems in looking for good combinations.

So, Joe also put that work on the 1000 resume copies he sent.

Ah, usually the real data is arriving in ways that are not fully predictable. So, there is a stochastic process and want to know some of what the results will be. Once Joe was in touch with some people in touch with the US Navy, and they wanted an evaluation of how long the US fleet of SSBN missile firing submarines would be under as special scenario of global nuclear war but limited to sea. From an old B. Koopman report and some common sense assumptions, Joe saw a continuous time, discrete state space Markov process subordinated to a Poisson process, wrote and ran Monte Carlo software to do the evaluations, and had the work please the US Navy and be sold to a leading US intelligence agency (could say which one but then would have to ...).

Joe put that on his resume, too.

Then Joe got a call back, and they wanted to know what he knew about C, Python, and R.

Joe said that he'd one some C programming, but the language was so primitive that it was usually next to useless for his work in analysis. For R, that was just simple, standard statistics, and the work he'd done is statistics was beyond what R offered and he wrote his own code. For Python, that was similar -- instead he'd written his own code.

The interview died.

Okay, there's a fundamental lesson here:

Fundamentally, in US business, the attitude remains much as back in a Henry Ford plant 100 years ago: The company and the company managers know more than any candidate employee, about the work, how to do the analysis, how to write the software, and an employee is there just to add routine labor to what the company already knows. So, a resume that mentions work beyond what the company knows conflicts with this fundamental attitude and results in rejection.

In US mainline business (there are exceptions elsewhere), they are just very strongly against hiring as an employee someone able to do something the company can't already do.

So, dumb down the resume.

Then inside the company, fit in, don't expose real potential.

Then look for a good, new problem, say, needing analysis such as in the OP.

Then, largely independently, after hours, make some progress through prototype code and some impressive real output from real data.

Then develop some high level foils, go to the relevant manager, and give a short talk.

Then expect 'incoming' attacks, vicious, whisper campaigns, sabotage, etc., from jealous people. Then discover if the company really wants good analysis or not. If so, likely will have to transfer to a much better position, say, on staff of the CEO. Else, will likely soon get FIRED. No joke.

If say anything about such analysis before actually have the results, then people will either laugh or attack. The situation is quite general, say,

"First they ignore you, then they laugh at you, then they fight you, then you win."

Mahatma Gandhi

So, what the heck to do?

Sure, face the market directly. Do a startup. Pick your own problem, do you own analysis, write your own code.

Back to it. Work for today: Use a .NET collection class for a fast, easy to program way to find duplicates. So, a Web server, a Web session state store (wrote my own with just TCP/IP sockets, class instance de/serialization, and two instances of a collection class instead of using, say, SQL Server or Redis), SQL Server, and two specialized back-end servers, 18,000 programming language statements in Visual Basic .NET in 80,000 lines of typing.

Going live is getting to be very visible!

Let's see: The work is intended to provide the world's first good, a must have, solution for a problem pressing for nearly everyone connected to the Internet. To start, if I can get on average one user a second, 24 x 7, then, ballpark, I should get monthly revenue of

2 * 8 * 5 * 3600 * 24 * 30 / 1000 = 207,360

dollars. Now, in the OP, what annual salary ranges where they talking about?

The core analysis work? Silicon Valley has more hen's teeth than entrepreneurs who would understand that work even if I explained it to them, and many more such entrepreneurs than such VCs!

If you have something and explain it, then, if it is really bad, no one will like it. But, curiously, if it is really good, the same, no one will like it. Remember what Gandhi said. Or, easier and much the same lesson, just go back to kindergarten and to Mother Goose and "The Little Red Hen" -- same stuff. The hen wouldn't get hired, either.

thread

graycatFeb 2016

Part II:

Okay, maybe that monitoring work would not be very important.

But, maybe the company is facing some challenges in routing, scheduling, planning that, as is commonly the case, boils down to linear integer optimization, right, known to be in NP-complete. So, an impressive example might be a 0-1 integer linear program with, say, 40,000 constraints and 600,000 variables. Then, asking for a solution that is optimal, down to the last tiny fraction, might be a bit much, but coming within 1% of optimality might be nice. So, suppose Joe came withing 0.025% of optimality? Might want to chat with Joe about any problems in looking for good combinations.

So, Joe also put that work on the 1000 resume copies he sent.

Ah, usually the real data is arriving in ways that are not fully predictable. So, there is a stochastic process and want to know some of what the results will be. Once Joe was in touch with some people in touch with the US Navy, and they wanted an evaluation of how long the US fleet of SSBN missile firing submarines would be under as special scenario of global nuclear war but limited to sea. From an old B. Koopman report and some common sense assumptions, Joe saw a continuous time, discrete state space Markov process subordinated to a Poisson process, wrote and ran Monte Carlo software to do the evaluations, and had the work please the US Navy and be sold to a leading US intelligence agency (could say which one but then would have to ...).

Joe put that on his resume, too.

Then Joe got a call back, and they wanted to know what he knew about C, Python, and R.

Joe said that he'd one some C programming, but the language was so primitive that it was usually next to useless for his work in analysis. For R, that was just simple, standard statistics, and the work he'd done is statistics was beyond what R offered and he wrote his own code. For Python, that was similar -- instead he'd written his own code.

The interview died.

Okay, there's a fundamental lesson here:

Fundamentally, in US business, the attitude remains much as back in a Henry Ford plant 100 years ago: The company and the company managers know more than any candidate employee, about the work, how to do the analysis, how to write the software, and an employee is there just to add routine labor to what the company already knows. So, a resume that mentions work beyond what the company knows conflicts with this fundamental attitude and results in rejection.

In US mainline business (there are exceptions elsewhere), they are just very strongly against hiring as an employee someone able to do something the company can't already do.

So, dumb down the resume.

Then inside the company, fit in, don't expose real potential.

Then look for a good, new problem, say, needing analysis such as in the OP.

Then, largely independently, after hours, make some progress through prototype code and some impressive real output from real data.

Then develop some high level foils, go to the relevant manager, and give a short talk.

Then expect 'incoming' attacks, vicious, whisper campaigns, sabotage, etc., from jealous people. Then discover if the company really wants good analysis or not. If so, likely will have to transfer to a much better position, say, on staff of the CEO. Else, will likely soon get FIRED. No joke.

If say anything about such analysis before actually have the results, then people will either laugh or attack. The situation is quite general, say,

"First they ignore you, then they laugh at you, then they fight you, then you win."

Mahatma Gandhi

So, what the heck to do?

Sure, face the market directly. Do a startup. Pick your own problem, do you own analysis, write your own code.

Back to it. Work for today: Use a .NET collection class for a fast, easy to program way to find duplicates. So, a Web server, a Web session state store (wrote my own with just TCP/IP sockets, class instance de/serialization, and two instances of a collection class instead of using, say, SQL Server or Redis), SQL Server, and two specialized back-end servers, 18,000 programming language statements in Visual Basic .NET in 80,000 lines of typing.

Going live is getting to be very visible!

Let's see: The work is intended to provide the world's first good, a must have, solution for a problem pressing for nearly everyone connected to the Internet. To start, if I can get on average one user a second, 24 x 7, then, ballpark, I should get monthly revenue of

2 * 8 * 5 * 3600 * 24 * 30 / 1000 = 207,360

dollars. Now, in the OP, what annual salary ranges where they talking about?

The core analysis work? Silicon Valley has more hen's teeth than entrepreneurs who would understand that work even if I explained it to them, and many more such entrepreneurs than such VCs!

If you have something and explain it, then, if it is really bad, no one will like it. But, curiously, if it is really good, the same, no one will like it. Remember what Gandhi said. Or, easier and much the same lesson, just go back to kindergarten and to Mother Goose and "The Little Red Hen" -- same stuff. The hen wouldn't get hired, either.

thread

graycatOct 2014

Okay, after reading the OP, explain something to me, because so far I just don't get it:

That is, from all I can see, the situation in the OP, admittedly only from an accelerator, is much like that in essentially all early stage VC firm equity funding. That is, as in the OP, I'm failing to see how "both sides of the table" ever have much chance of shaking hands.

Why? From all I can see, and as mentioned in the OP, to be considered for any funding at all, even via an accelerator, the startup needs to have a product that has traction in the market with that traction growing.

Before that traction, the guys with the checkbooks are not interested. With that traction, like the guys in the OP, I wonder why the heck the founders would want to take the term sheet, deal details, check, Delaware C Corp., Board of Directors, etc. instead of just growing, as in the OP, "organically".

Sure, I can imagine some exceptions, but the OP company was just two guys. Moreover, in the currently running Stanford course by Sam Altman and YC, the strong advice is to have 2-3 founders for a long time and be very slow to add anyone else.

So, the OP company had two founders, traction significant and growing, and, thus, qualified for some funding but with so few founders likely had expenses only at the Ramem noodle level and had some revenue and maybe free cash flow.

So, why take an equity check and all that comes with it instead of just continuing to grow organically?

Or, net, in simplest terms, it appears that by the time a startup, based on information technology and software where the product exists and has traction and was developed by a team of just 2-3, qualifies for funding, it will rarely still need or even want it.

So, I'm losing just where the guys with the checkbooks expect to find startups they want to fund that will take the funding.

Yes, I can think of some exceptions, but otherwise, again, I'm not getting it on how anyone could expect the two sides of the table to do a deal?

Two more points:

First, all across the US, Atlantic to Pacific, border to border, in crossroads, villages, up to the largest cities, the US is just awash in successful small businesses with 1-3 founders, often just 1, who do well. Indeed, from all I've seen, most of the nicer houses, 50 foot yachts, full tuition checks at private schools and colleges, late model luxury cars, etc. are paid for by such small business people.

These successful small business people rarely went to business school, never watched lectures on business such as the current YC course at Stanford, never went to an accelerator, and never got VC funding.

For being an information technology startup with a product just software and written by just 1-3 founders and with revenue, that should be one heck of an advantage compared with nearly all the rest of these millions of successful small businesses. If those millions of US small businesses can get to a good life style business, then the founders of a good information technology startup should be able to, also. And for further growth, a successful information technology startup should be able to generate plenty of free cash flow -- some software on a server can run by itself and make money sending ads 24 x 7 but for a guy with a successful pizza shop, or 10 such, each pizza has to be made by hand.

Then, with that nice start as a lifestyle business, maybe that information technology startup could continue rapid growth to be a major company.

I know; I know; there is a PG essay that a startup is intended for explosive growth and, thus, needs equity funding. Okay, but I'm missing just why the founders won't be happy with $20 million or $200 million and, instead, want to take on a lot of financial risk and burdens shooting for $2 billion to $20 billion. A rich guy can easily say, "I wouldn't walk across a street for another $1 million.".

But in all of this, I'm missing just where the accelerators or early stage VCs have a meaningful role to play. The VCs look like the Drawback on a football team, a third person twiddling their thumbs in a two person canoe, a fifth wheel on a wagon, mammary glands on a boar hog, or someone who wants to buy a ticket on an airplane after it has already left the ground.

Second, I have to be reminded of the Mother Goose story The Little Red Hen who found some grains of wheat but discovered that no one wanted to help her until she already had on her own built a bakery and had hot, fragrant loaves of bread and a line of eager customers and didn't need any help.

thread

graycatSep 2014

My main point is:

Just why is an information technology startup with explosive growth potential, early on with just a few employees, as described so vividly in Altman's lecture, usually so different, say, in level of desperation, from most of millions of US small businesses? That is, I'm not getting the solid reason for so much desperation.

On your 1) and a startup being a small business:

As a side point, for 1) your $100 K per employee per year might even be too small. I'd guess that in SV Google spends $300+ K per year per employee.

In your 1), you are assuming a lot of burn rate. Yes, I know; I know: Twitter long ran with rapid growth in usage, i.e., traction, with low or no revenue but recently, from some VC Fred Wilson comments, worked on revenue and is doing well with it. Maybe SnapChat and Instagram burned a lot of cash with low or no revenue. And maybe Square, Uber, and some others have high burn rates. And recently VCs Bill Gurley and Fred Wilson, and, now, A16Z, are complaining about high burn rates. I know. Still, from nearly all I've seen, coast to coast, "pre-revenue" usually means $0.00 equity funding.

So, connecting with my point above, maybe the offices of Square and Uber have some high level of desperation as described in Altman's lecture, but from all I can see for information technology startups with explosive growth potential and just a few employees, that such a high level of desperation, so different from nearly all of millions of US small businesses, is necessary or usual seems difficult to believe. Instead, with just a few employees, in nearly all respects the level of desperation should be just ordinary for small businesses.

Then there is the issue of burn rate and, thus, usually, VC funding:

from what I've seen, for a startup writing software and pre-revenue, about the best they can get from a VC is either "it appears that you are still in heavy development" (i.e., not a candidate for equity funding) or "when you go live with your service we'd like to 'play with it'" meaning that nothing prior to that is worth equity funding.

That is, VCs want to see at least a product ready for usage. That is, they don't want to pay for software development. That is, we get reminded of the Mother Goose story of The Little Red Hen who got no help or interest from anyone until she had hot, fragrant loaves of bread fresh from the oven and lines of eager customers out front.

So, what is a founder of an information technology startup to do about equity funding? A big point here, at times also mentioned by VCs, is that now the expenses, at least the capital expenses, for an information technology startup can be so low that really, by the time VCs are interested, the startup should be within just some weeks of getting users, ads, revenue, earnings, and enough in earnings to have a nicely successful small business with plenty of cash for organic growth and low to no need for equity funding. So, from all I can see, usually by the time VCs are willing to meet, there's a profitable small business or nearly so.

E.g., Menlo Ventures told me that they want to see at least 100,000 uniques per month. Okay, for my Web site that would be, say, for each unique visitor, an average of, say, 8 visits a month with an average of 8 Web pages seen per visit, with an average of 5 ads per page. So, if take the Mary Meeker KPCB estimate of $2 revenue for each 1000 ads displayed, then get monthly revenue of

100,000 * 8 * 8 * 5 * 2 / ( 1000 ) = 64,000

dollars for my solo startup. Moreover they want that traction growing quickly. At that time I'm looking for equity funding? I doubt it! Even if the $64,000 is too high by a factor of 10, still I'm not looking for equity funding; instead I'm profitable with plenty of cash for organic growth.

So, for equity funding, here is my

Point: For information technology startups of just a few people, nearly always, by the time the VCs are ready to write a first check, the company doesn't much need it. Then what's left for VC funding is expansion stage or, maybe, some funding in pursuit of the company being acquired. Or, again, I'm not seeing as very common Altman's description of VC funded startups with desperation.

For your

> Can you think of a software company that reached $1.5 mil in year two?

I'm not sure what Microsoft, Plenty of Fish, etc. did already in year two. Still I'm lost on your point here: You seem to have an implicit assumption that an information technology startup with explosive growth potential must go at least two years burning a lot of cash instead of making at least a little in earnings, and I'm not seeing a very good argument for that.

For 2), maybe the company is not in Silicon Valley? Even if the company has only a few employees and level of desperation like most small businesses, it might still have explosive growth potential and a corresponding "vision".

You seem to be suggesting that there is high competition for good employees, say, in developing software. I very much do not see that at all: From all I can see, the US is just awash in highly motivated, highly talented, Bachelor's degree and higher graduates in STEM fields with some to a lot of software development experience who can send 1000 resume copies and get back only silence or at best some absurd questions about how many golf balls will fit in a school bus, a question "What is your favorite programming language?" with, apparently, only one acceptable answer, C++, or a requirement that the candidate have several years of experience with just the combination of software tools and infrastructure the company is using that day. Nonsense. I've seen very highly qualified and otherwise just excellent people in computer science and practical software go for years looking for jobs and be essentially totally unemployable.

E.g., there is the parody, too close to being true, "If Carpenters Were Hired Like Programmers" at

http://www.jasonbock.net/jb/News/Item/7c334037d1a9437d9fa650...

Indeed, some famous companies have a personnel policy for technical employees of promotion into management by age 35 or fired. The US is awash in people with 5-20 years of software development experience essentially totally unemployable in software. For such a person, they would have been better off, literally, at age 20 starting a lawn mowing service so that by age 35 they would have a nice business with, say, 8 crews, be immune from being fired, able to continue the business as long as they were physically able, and also able to involve their family members in the business -- make it a family business. Software developers do not have good careers, and the US is awash in highly qualified people at relatively low wages, e.g., not enough to buy a house and support a family.

The US is just awash with good universities with good STEM and computer science programs with highly talented, well educated, highly motivated students ready, willing, able, and eager to get going in a career in information technology and with no significant offers for months or years.

For my startup, I have no question that I can hire and, with minimal training, have people writing the necessary Visual Basic .NET code using the .NET Framework, ASP.NET, SQL Server, etc. E.g., they can write what is needed for customer service. They can also learn, especially with some good consulting, how to plug together servers and get them into standard racks, connect the cables, automate the software installation and configuration, set up and operate the server and network monitoring, management, and administration, develop reports on users, usage, errors, loads, etc. For the tricky, unique, difficult to duplicate or equal crucial core code, that's mine and already in good shape.

thread

graycatSep 2013

The line in the essay I liked best was:

> But there may be cases where a startup either wouldn't want to grow faster, or outside money wouldn't help them to, and if you're one of them, don't raise money.

Having the essay earlier would have saved me a lot of time and effort. For my startup, I tried for a long time to raise money, and as in the essay it was a huge distraction from the real work. Eventually, at absurdly high cost in time and effort, I concluded the more common half of what is in the essay.

Since I wanted to try hard to crack the nut of fund raising, I kept at the effort until I got some decent understanding.

Also I had to conclude that VCs and I do projects and project planning and evaluation in very different ways. Since it was quite a while ago that I was 20 years old, and I've done a lot of projects and seen a lot of business, I prefer my approaches to project planning and evaluation. Also, for my project, my technical background, in applied mathematics, is far above that of all but maybe 10 VCs in the country. There is likely not a single VC in the country who could understand the crucial core of my project, some original applied math I derived, and only a few VCs who could even direct a competent review of that crucial core. So, I just can't be impressed by what VCs think of the crucial core of my project. When I was fund raising, I wondered how the VCs would evaluate my work; the answer is, they wouldn't! So, they don't have a clue about what they are missing.

So, net, VCs will evaluate my project based on traction which should mean that, for me, a solo founder with meager burn rate, by the time a VC wants to write a check, as in the quote above from the essay, I will no longer be willing to accept one.

After the fund raising effort, I settled on the line in the essay I quoted above: For me, and as often in the essay, the VCs are just too much trouble to work with to be worthwhile. Yes, the VCs are trouble in fund raising, but also the VCs will bring Board overhead, more time/money with lawyers and accountants, and, then, in case of the success they want, an IPO with all the Wall Street and SEC nonsense. Handling all that would be a full time job for me, the CEO of my company; that's not the kind of work I want to do; and my hands would be taken from actually building and running my company.

I see another point: In the US, businesses are started and succeed coast to coast in big cities down to crossroads by solo founders by the millions each year. Such a business might be a pizza shop, auto repair shop, landscaping service, big truck/little truck business, etc.

My startup, with me as solo founder, is in information technology (IT) which should be a huge advantage: E.g., my first server farm will cost less than the truck and lawn mower of the guys who cut grass in my neighborhood, and the Internet connection I need will cost less than $100 a month. Moreover if I half fill the Internet connection, then from simple arithmetic my revenue and earnings in one year will be quite comparable with funds from a Series A.

So I just view my startup as a one person pizza shop but with some big advantages from IT; e.g., a pizza shop owner needs to be in the shop for each dollar made, and my server farm can be making money while I sleep.

For PG's definition of a startup in terms of very rapid growth, so rapid that VC funds become important, that's not important to me. I need a nice business; I don't have to shoot for another Google and wouldn't want to manage anything that big anyway.

A recent remark of Mark Andreessen is that there are only about 15 startups a year that deserve a Series A. So, the essay is talking about only about 15 startups a year and, thus, I am not disappointed the essay is not talking about my startup.

The VCs and I will have to disagree on how to plan, evaluate, start, and build a company. If I am successful, then likely that disagreement will have been a big part of my success.

The VCs remind me of the Mother Goose story The Little Red Hen when she could get help only when she had fragrant, hot loaves of bread coming out of the oven and customers lining up to buy and no longer needed any help.

For me, one really serious turnoff of VCs is that, since they have really no chance of understanding the crucial core of my business or how I do projects, no way would I want to report to a Board with VCs. Vinod Khosla has some recent remarks on how helpful Board VCs are!

Another big turnoff of VCs is that, as reported on Fred Wilson's blog, on average over the past 10 years, the VC ROI has been poor. Net, VCs do not have a lot of credibility in business.

Another big turnoff is that too many VCs were not STEM majors and have written little to no code.

Another big turnoff is that my startup, as is recommended for startups, is doing work that is new; well, there is some education for how to work effectively with things that are new, a Ph.D. degree; I have an appropriate one from a famous research university, and nearly no VCs do. I will have a tough time viewing a VC as a helpful colleague in the crucial core of my business.

thread

NY_USA_HackerMay 2011

Mostly nonsense.

Dodge is wallowing in waste, and from that 'context' what he is saying sounds okay.

But the truth is different:

First, the most important thing to have in business is good luck. Since we can do little or nothing to control that, let's set it aside in favor of things we can control.

Second is the 'idea'. If lots of other people can have the idea and execute it, then the business promises to have too much competition. Indeed, there may be established competitors now difficult to start against. So, setting luck aside, the 'idea' has to be one very few people can understand and execute.

So, entrepreneur Joe has such an idea. Then Joe is about one in one million. Now how will Joe do on Dodge's points?

Will Joe be able to get others 'excited' about his idea that only Joe understands? If they are as well qualified as Joe in Joe's specialty, maybe, but we already know that Joe is one in a million. So, initially, likely Joe will have to proceed alone.

Will Joe be able to get VCs excited about his idea? Not a chance! In information technology, one could count on one hand all the venture partners in the country able to evaluate an idea from a guy as rare as Joe.

So, continuing with Dodge's points, suppose Joe gets users, customers, revenue, earnings, all growing rapidly, that is, gets 'traction'. Then what? Sure, then Joe will be able to attract 'co-founders' and 'investors'. But then the question will be, "Just why would Joe want to do that?".

That is, with Dodge's criteria, for a good project like Joe's, by the time co-founders and investors are interested, Joe will no longer need them.

This is an old story that goes back to the Mother Goose story 'The Little Red Hen': She found a seed. From others she got only laughs. She attracted no co-founders or investors. She plowed, planted, cultivated, harvested, threshed, and ground the seed to make flour. She built a bakery. She mixed the flour to make bread dough. She let the dough rise and baked it into fresh, fragrant loaves of bread. Now she had customers, revenue, and earnings. Also now, and ONLY now, did she have co-founders and investors but needed neither of them.

But aren't co-founders and investors nearly always needed? Let's see: Let's start in the East in the US and take a survey of businesses, move to the west, and end up on the West Coast. Our survey will be in villages, towns, and cities. We will see some millions of businesses in auto repair, auto body repair, Web site design, grass mowing, roofing, kitchen remodeling, HVAC, dentistry, pizza carry-out, 'Diners, Drive-ins, and Dives', commercial and residential rental property, big truck-little truck businesses, etc. A huge fraction of these businesses are Sub-chapter S sole proprietorships and have no co-founders or investors. And at all the larger bodies of water, a huge fraction of the yachts are owned by such people.

The advantage of Joe? With a one in a million good idea in information technology, with the advantages of Moore's law, the Internet, and infrastructure software and the ability to execute that idea successfully, Joe just has some advantages over the guy with pizza shops, etc. Heck, a good commercial lawn mower now costs much more than a good server computer. It costs much more to start a carry-out pizza shop than a Web site serving 100 ads a second.

Joe is the guy to pay attention to. Dodge's advice is not for Joe and is for people not able to be Joe. To heck with Dodge.

thread