Give $100 of value for $10 in return

So last week I was doing some streamlining with the number of stuff I carry on me. Call me picky but carrying a phone and a wallet 1.0 is a nuisance. It is one too many occupied memory registers that could be used for something better to worry about. So I decided out with the wallet and in with a ultra-slim self adhesive credit card wallet 2.0 for my iPhone. Garbage collection complete. Now whenever I get the urge to check if my credit cards are with me, I know by default that if my phone is with me my cards are too.

But what’s this got to do with giving $100 of value for $10 in return? Well it’s what I found during this cleanup process inside wallet 1.0 that I want to share with you. I found this note…

100-to-10-postit_s

“How can I give $100 value to 1m people and ask for $10 in return? Give value!”

The backstory

Circa 2008, I still remember when I 1st wrote this note on that yellow postit. I was a young snotty kid in search for “the secret to business success”. Ploughing through books, videos and seminars including the actual The Secret movie, I found zilch. Zero. Nada. Until I ran into a successful business owner who said to me “Find a way to give $100 of value for $10.”. I heard a pin drop (metaphorically speaking of course). Something so simple yet profound. It left an impact on me and thus had to be noted on paper so I could recall it every so often.

This is not a revolutionary idea nor is it a new one. But it helps me focus on what matters when it comes to making money through a vehicle like business or startup or whatever the fancy word will be tomorrow. The more this note soaked in, the more I realized we all have seen this in some other forms in the last few years during the startup gold rush.

Make something people want – YCombinator

If you are familiar with the good work of YCombinator then you already know of their motto “Make something people want”. You may also remember the famous advice by PG (Paul Graham, YC Founder) to AirBnBs founders; PG told Brian Chesky to go and speak with their NYC customers to find out exactly what their needs were and then deliver it. i.e. “Make something people want”. It’s not revolutionary. But it serves as a reminder to us, to be laser focused on the customer, execute and create magic.

10:1 (value to investment) Ratio

What I love about the 100:1 or 10:1 (value to investment) ratio is it helps you build a cash cow business. Building a profitable business gives jobs, changes lives and usually has a social impact. If you can give a 10:1 ratio of value:investment to your customers then; (a) you won’t have to compete on margins with the “me too startups” and/or (b) get into price wars with other companies/startups. You may recall from school business 101; price wars end with the one with the deepest pockets. From a customer point of view, getting a 10x in value is an opportunity cost worth putting money on.

“Rule #1: Build Proprietary Technology That Is 10x Better” – Peter Thiel

This is #1 Rule from Peter Thiel’s famous book, Zero to One, around business philosophy on creating a successful company. It is a great way to think about how your business creates value. If your not shooting for the stars then what’s the point. Now notice how the 10:1 rule fits into Thiel’s 10x better thinking. Of course it’s not easy to achieve those sort of ratios but when you do you know you are onto something special.

Venture Capital

The Startup gold rush has given anyone with an idea a reason to start a business. Venture Capital is often used as a means to fuel rockets (performing startups). We all believe our ideas are rockets. However the only rockets are those that have a competitive advantage like; (a) unique distribution, (b) talent and/or (c) 10x/10:1 customer value ratio. VCs love these because a VC firm is for profit; check out how VC funds work for an overview of the Venture Capital world. What I’m saying is that if you start a business with the 10:1 ratio you will have market elasticity in your favor and metaphorically speaking VCs knocking down your doors.

“Fortuna audaces iuvat”

Fortuna audaces iuvat
Fortuna audaces iuvat

So let’s wrap this up…
It feels like if you put in the hard work and create a product that gives $100 of value for $10 (or somewhere abouts there) then..

  • Customers will love you,
  • Investors will love you,
  • Market will love you,
  • Employees will love you,
  • And the media + the startup community will love you.. and maybe dissect you (in a good way of course).

What’s not to love about solving a hard problem?

Let me know what you think in the comments section below.

~ Ernest

Startup School 2010 – the recap, highlights & lessons

Startup School 2010 was a success! both on the quality of the turn out of entrepreneurs, speakers and the organizers – Y Combinator and Stanford BASES.

The day started on a nice crispy Saturday morning 16th October 2010. Breakfast was provided to all those that attended while the Dinkelspiel Auditorium at Stanford University was prepared.

Startup School 2010 - at Stanford, Dinkelspiel Auditorium
The morning of Startup School 2010 - at Stanford, Dinkelspiel Auditorium

Startup School 2010
Startup School 2010

Schedule

The theater got packed out with many great minds of all ages – even entrepreneurs 12 years of age eager to start changing the world. The following are notes I took during each of the speeches + video. Hope you enjoy the content and find it as valuable and inspiring as I did.

Brian Chesky (Founder of Airbnb) speaking to an audience of entrepreneurs. Spot me in the 3rd row! :-) Photo by Robert Scoble
Brian Chesky (Founder of Airbnb) speaking to an audience of entrepreneurs. Spot me in the 3rd row! 🙂 Photo by Robert Scoble

09:30
Andy Bechtolsheim
Founder Arista Networks; Founder, Sun Microsystems

Andy Bechtolsheim - Founder of Arista Networks & Founder of Sun Microsystems
Andy Bechtolsheim - Founder of Arista Networks & Founder of Sun Microsystems

Wow, what a great start to this day. Andy went over how Silicon Valley got to where it is today and then touched up on the following interesting topics:

  • The process in creating a business is in 3 steps: Discover –> Design –> Deliver
  • “Discover” phase has more value but typically less money is spent while moving to the right to “Deliver” has less value but more money is spent on it.
  • The Horizon Effect”, also a topic in psychology, outlines how the majority of humans only purse goals which are in our horizon, stuff we can see, instead of stuff we cannot see. Aim past the horizon like Christopher Columbus did when he sailed past to the horizon only to find that he would not fall off the edge of the world.
  • Great companies:
    • Apple – spends the least on R&D ($1.2b) and consumer research. They trust their gut instinct to deliver super products. They also have less products to maintain than most companies.
    • Google – expects to solve the impossible. Most of their success today is attributed to the 1 day per week given to their employees to brain storm & prototype new ideas.
  • Innovation is the never-ending search for better solutions.
  • Most successful companies have more than 1 founder.

10:00
Paul Graham
Partner, Y Combinator; Founder, Viaweb

Paul Graham - Partner of Y Combinator & Founder of Viaweb
Paul Graham - Partner of Y Combinator & Founder of Viaweb

Paul spoke of Super-angels vs. VCs and how the landscape has changed. I didn’t take notes during Paul’s speech since Paul made it available online here.

The New Funding Landscapehttp://www.paulgraham.com/superangels.html

10:30
Andrew Mason
Founder, Groupon

Andrew Mason - Founder of Groupon
Andrew Mason - Founder of Groupon
  • Initial site was a WordPress blog where Andrew would copy and paste group buy requests from ThePoint.
  • Early hiring advise:
    • Avoid titles (unless required for hiring purpose) and
    • Don’t create too much structure.
  • How to defend yourself against competition:
    • Build an awesome product and
    • Never get out-innovated.
  • Lessons from Groupon’s journey:
    1. You’re building a tool, not a piece of art. Don’t be blinded by the vision.
    2. Recognise and Embrace your constraints.
    3. Have a Growth plan.
    4. The best tools aren’t always that cool – email is worth 10x more to Groupon than Facebook/Twitter followers.
    5. You will probably fail – failure is real but you don’t have to fail.
    6. Quit now – signs are always pointing but you get to decide.

I highly recommend you watch the videos below of Andrew talking about Groupon since it’s both educational and entertaining (plenty of humor).

Video part 1 of 2Andrew Mason – Founder of Groupon @ Startup School 2010
http://www.youtube.com/watch?v=fw6GxABcdy4
Video part 2 of 2Andrew Mason – Founder of Groupon @ Startup School 2010
http://www.youtube.com/watch?v=dIUlweek0FM

11:00
Break

11:30
Tom Preston-Werner
Founder, GitHub

Tom Preston-Werner - Founder of GitHub
Tom Preston-Werner - Founder of GitHub

12:00
Greg McAdoo

Partner, Sequoia Capital

Greg McAdoo - Partner of Sequoia Capital
Greg McAdoo - Partner of Sequoia Capital
  • “Leverage” is very important to demonstrate value in attaining VC funding.
  • Read about Achates Power “Fundamentally Better Engines” and how they did what GM couldn’t do in 20 years with half the staff.
  • Key points on the success of startups getting VC funding:
    1. They thought differently.
    2. They don’t throw money at problems, but ideas.
    3. They built simple easy to use products.
    4. They stay closer to the customers.
    5. They do more with less.
    6. They ship something early.
    7. They put a price on it early.

12:30
Reid Hoffman
Partner, Greylock; Founder, LinkedIn

Reid Hoffman - Partner of Greylock & Founder of LinkedIn
Reid Hoffman - Partner of Greylock & Founder of LinkedIn
  • There is around 7 +/- 2 of sites people have in their mind. Your goal is to be one of those 7. Search is in the 7.
  • Competition is the noise you need to get above. One way to do this is to make sure they sux and you don’t.
  • Release version 1 of your product asap to test your hypothesis early and to prove your ideas. If you are not embarrassed by version 1 you have released too late.
  • Build an intelligence network early, from investors, co-founders etc to help with testing your hypothesis (pivot).
  • Make social features available for when new customers ask – “who else is here that I know”.
  • Don’t plan for more than 6 months forward since the consumer internet changes rapidly.
  • Hire people who cohere as a group and learn quickly.
  • Solve your venture’s hardest problem of distribution e.g. how to get to massive size. And then you are on your way to success.

If you are on LinkedIn let’s connect. Just let me know who you are.
My LinkedIn profile is located here: http://www.linkedin.com/in/semerda

12:55
Lunch

Ron Conway
Partner, SV Angel and former co-founder of Altos Computers

Ron Conway - Partner of SV Angel + Ron's good friend McHammer
Ron Conway - Partner of SV Angel + Ron's good friend MC Hammer
  • Provide a service where users are happy and then monetize.
  • Entrepreneurs build and innovate companies and investors should be lucky to be a part of it.
  • Never forget its your company, the founder’s company.
  • Once an entrepreneur, always an entrepreneur.
  • It takes guts but anyone can do it.
  • It’s crazy to start a company with 1 founder. It’s all about building a great team. And if you are a founder you have to build a great team some day so why not build it the day you start the company – the 1st hurdles to get over.

There is more in the videos below where Ron outlines his journey and the journey of great friends from Napster, Google, Facebook and Twitter.

Video part 1 of 2Ron Conway – Partner of SV Angel @ Startup School 2010
http://www.youtube.com/watch?v=MvmYGK2Jhck
Video part 2 of 2Ron Conway – Partner of SV Angel @ Startup School 2010
http://www.youtube.com/watch?v=FjaI43_u3dk

Adam D’Angelo
Founder, Quora and ex-CTO of Facebook

Adam D'Angelo - Founder of Quora
Adam D'Angelo - Founder of Quora
  • It’s ok if something doesn’t scale as long as it strengthens your position.
  • Facebook leanings:
    • Good infrastructure early on saves future development time to correct it.
    • Get as much start-up experience as an employee so that later you can climb your own mountain with this knowledge behind you.

Quora is a great Q&A product with quality content.
You can find me on Quora here: http://www.quora.com/Ernest-Semerda

Dalton Caldwell
Founder, Picplz; Founder, Imeem

Dalton Caldwell - Founder of Picplz & Imeem
Dalton Caldwell - Founder of Picplz & Imeem
  • Don’t be a cannon fodder. Work on things you love. Life is too short.
  • Key before you start your own music startup:
    • Artists are poor so they won’t pay you,
    • The market is totally saturated,
    • The economies are challenging with required payments to labels every quarter and lawyers waiting for you to become big so they can sue you.

If you want a good laugh and learn heaps about the risks of starting up a music venture then you should watch Dalton’s music business review (videos below) of his 6 years of building Imeem, what worked and what didn’t.

Video part 1 of 2 – Dalton Caldwell – Founder of Picplz & Imeem @ Startup School 2010
http://www.youtube.com/watch?v=pshTi9dk7Bw
Video part 2 of 2Dalton Caldwell – Founder of Picplz & Imeem @ Startup School 2010
http://www.youtube.com/watch?v=TphryAOyY40

15:55
Break

Mark Zuckerberg
Founder, Facebook

Mark Zuckerberg - Founder of Facebook
Mark Zuckerberg - Founder of Facebook speaking with Jessica Livingston (Y Combinator partner)
  • Facebook’s mission is: Give people the power to share and make the world more open and connected.
  • Mark stated that he acquires companies primarily for the excellent people. “Past handful acquires were a success so why not more.”
  • The goal is to build Facebook as the McKinsey of Entrepreneurship.

In the video below Mark speaks with Jessica Livingston (Y Combinator partner) on the initial days at Facebook, about the new movie Social Network and answers popular questions about Facebook.

Video part 1 of 2 – Mark Zuckerberg – Founder of Facebook @ Startup School 2010
http://www.youtube.com/watch?v=SjVACXklxJk
Video part 2 of 2 – Mark Zuckerberg – Founder of Facebook @ Startup School 2010
http://www.youtube.com/watch?v=DjuMARuv5sg

Brian Chesky
Founder, Airbnb

Brian Chesky - Founder of Airbnb
Brian Chesky - Founder of Airbnb
  • If you have an idea put it up there online, no matter what it looks like. You need the feedback early on.
  • Inventors of Obama O’s: Hope in every bowl! and Cap’n McCain’s: Put a maverick in your morning cereals – when the times were tough and money was required.
  • Had many unsuccessful launches but persistence got them through. Paul Graham stated “you guys won’t die, your like cockroaches”.
  • Michael Seibel from Justin.tv introduced Brian and his co-founder to the Y Combinator methodology and eventually to Paul Graham. Initially, Paul didn’t like the business idea. That changed quickly.
  • Brian used a classic motivation / psychology approach that Anthony Robbins teaches: “Whatever you focus on expands (you get)”. So he decided to focus on revenue by printing a positively inclined graph depicting revenue and pasting it on the bathroom mirror. This way it was the 1st thing he saw every morning and the last before going to bed to dream. It worked!
  • Paul Graham advised: “Go to your users”. So Brian and his co-founder flew to NYC, Washington DC and Denver and knocked on people’s doors to sell their service – “do you know how much your bedroom is worth?!”.
  • Then, David, Barry Manilow’s drummer posted his apartment for rent while he toured with Barry Manilow. This changed the direction of AirBnB and the 1st “wiggles of hope ~ PG” appeared. AirBnB launched version 5 of their product and started to be Ramen Profitable.
  • Today, AirBnB is in 8200 cities, 166 countries and traffic has started booming in the last 5 months.
  • AirBnB is now a “Community market place for space”.
  • All this started with an airbed in a living room to solve an accommodation problem.

The following videos are titled “Powerless and obscure” – 1,000 days ago (October 2007). How Brian started AirBnB and it nearly fell apart only to survive after the 5th launch. Very inspiring and educational.

Video part 1 of 2 – Brian Chesky – Founder of Airbnb @ Startup School 2010
http://www.youtube.com/watch?v=KOytubycHOg
Video part 2 of 2 – Brian Chesky – Founder of Airbnb @ Startup School 2010
http://www.youtube.com/watch?v=VZ1fC6kAg5k

I also got to meet Brian the following day during Y Combinator Open-Day at AirBnB headquarters in SF.

Me with Brian Chesky - Founder of Airbnb @ AirBnB headquarters in SF
Me with Brian Chesky - Founder of Airbnb @ AirBnB headquarters in SF

In Conclusion

And that wrapped up an amazing, day at Startup School 2010.

My top 3 take away (learnings) from Startup School 2010 were:

  1. Find a solution to something people are hurting (strongly need) and they will pay you for it.
  2. It’s all about the “Experience”, not the technology. You are selling the experience not the technology.
  3. Build an awesome product that makes your competitor’s version sux.

Now it’s time for action!

Ernest