Up and Running:

There was a nice post Saturday called I had that idea years ago! on the 37 Signals blog.

For those who don’t know 37 Signals, it’s a very nice, simple, collaborative project-management site, one that several of us in Palo Alto Software use and admire.

This value-of-the-idea theme is pretty much old hat on this blog, but I liked the way the blog put it, so here’s what it said:

So somebody else built a successful business on that idea you had three years ago. What does that mean? That if you would just have pursued that idea, you would now automatically be enjoying their spoils? Sorry to burst your bubble, but I really don’t think so.

Ideas on their own are just not that important. It’s incredibly rare that someone comes up with an idea so unique, so protectable, that the success story writes itself. Most ideas are nothing without execution.

Just because you thought of a site to share photos with friends wouldn’t have made you Flickr.

But I can see how fooling yourself into thinking otherwise is attractive. When someone else is having success with an idea similar to yours, it’s almost like you’re having that success, if only you would have pulled the trigger on it. It inflates the sense that your brilliant idea really was brilliant and that success was just a binary switch away (pursue/don’t).

On the other hand, it means that you don’t need divine inspiration to start a successful business. Doing well is not restricted only to those who can have paradigm-shifting ideas. You just need to do it better, or actually merely even good enough, to please enough paying customers that income can exceed expense and you’re off to a great start.

You’re probably too young to wear nostalgia gracefully, anyway.”

Well said. Just another point of view, but still, worth noting.

BusinessWeek just started a new feature profiling new entrepreneurial companies, in a slide show motif, called Fresh Entrepreneurs - Profiling Startups Around the U.S. It strikes me as a nice way to get quick views of what other people are doing. Stories like …

• She quit her consulting job at Bain, hired a designer from Chicago’s International Academy of Design & Technology, pulled $50,000 from personal savings, whipped up some samples, and several months later took her Aphira line to high-end pro shops. Glaspie, a graduate of Northwestern’s Kellogg School of Management, generated $50,000 in sales in 2005. She hopes to hit $1 million next year.
• Efimova, who studied dance in St. Petersburg, opened Russian Pointe in early 2006 after selling ballet shoes as a wholesaler, first in Ann Arbor, Mich., and in the Loop since 2005. Official supplier to the Joffrey Ballet, she opened the retail suite to bring, in her words, “the love of dance, and beauty, to this magical city of Chicago.” The store is lavishly decorated: thick cabernet-colored velvet curtains hang in the windows, and a row of old opera-house chairs runs along the middle of the store. A stage with a large mirror and barre make the store a favorite with little princesses who come for their first fitting. Local ballet schools Ruth Page and Boitsov ensure a steady stream of wannabe Giselles coming through the door. Sales rose from $7,065 in her first month as a retailer to $29,286 in October.
• Forget Boston Market or the prepared-foods section of Jewel or Whole Foods. In Oak Park, there’s the Perfect Dinner, a kitchen that prepares “home-style” take-out and delivered meals. The startup is aimed mostly at “El” riders, who can go online to scope out the shop’s menu of eight to 10 daily entrées and order ahead before exiting Oak Station on the Green Line.
  The business was founded by Karen Gruber, 48, who formerly handled the Kraft cheese account at ad agency J. Walter Thompson, and Jill Haas, 47, a onetime food scientist at Kraft Foods. The Perfect Dinner broke even with $500,000 in revenue last year—the average check is $41—and is looking at 8% to 10% growth this year, Gruber says. The pair, who started the venture with $250,000 from friends, family, and their own savings, is now trying to drum up $700,000 to open two more sites this fall.

It’s a nice treatment, quick and interesting. Recession or not, people are making it with their startups.

Imagine yourself in a conference room, presenting your business plan to potential investors. How do you answer the question: “Where’d you get that idea?”

This comes to my mind today because of a post I read yesterday on Ask the VC. An e-mailer asked what it means when investors ask that question:

Are they looking for an emotional and inspiring story or are they worried that we may have taken our idea from someone else or, what I believe is the case, do they want to see if we were driven by an opening in the market that we observed?

Jason Mendelson answers that question, from the VC’s point of view, in his post “How Did We Get the Idea for Our Startup?” Yes, inspiration and emotion are nice, he says. And yes, a great new market is even better, for obvious reasons. However:

“Taken Our Idea from someone else”–This is a big one. If you come and pitch a next-generation social networking site and previously worked at Facebook, we are going to have an in-depth discussion. Maybe you didn’t steal it, but maybe your former employer will have a claim on the intellectual property developed while you were employed.

That last one is one that I’ve run into more than once, in reading business plans and consulting. When entrepreneurs are employed already in the same industry, that sends up red flags.

And I also enjoyed Mendelson’s last couple of possibilities. Maybe the VCs want to see how well you pitch an idea, giving you a stage to play on; or “perhaps it is just a trite icebreaker and the VCs are just asking you this so they’ll have time to answer e-mails on their Blackberry while you wax poetically.”

The discussion reminds me of the critical scene in the 1988 movie Working Girl. The old guy asks the two women where they got the idea–a contested idea, where ownership is being argued. One of them just hems and haws. The other reconstructs the thought thread in detail, with references to news pieces, gossip and other connections. Guess whose idea it really was?

I had a very interesting lunch meeting today with Derek Brandow and Jason Gallic of the YBGroup. That’s also YottaByte Group, and it’s about changing our education system. Ask yourself: What does technology have to do with education? Think of a 15-year-old kid you know. Outside the class, it’s cell phones, IM, SMS, Facebook, and so on. Inside the class, it’s essays, math homework, tests, start the period with a bell, end it with a bell . . .

“But wait a minute!” I hope you’re saying, the one world has nothing to do with the other. What would texting have to do with education? Hmmm . . . what’s wrong with this picture? Why does the one world have nothing to do with the other? Does that make any sense at all?

Gallic and Brandow are building a business plan around their way to prepare young people for the world the rest of us live in, using the tools the rest of us use, with processes (like collaboration, for example) similar to what the rest of us use. Seems like a good idea to me. I’m looking forward to getting more details, but from what I heard today, this is a business, with a business model. Not all far-reaching ideas to change education have to be nonprofits.

And, by the way, I love stories as a way to communicate, and I love the way their website tells a story to help us understand what they’re after. And I mean really tells a story, as in A fictional account of a YB student. If you’re interested in this, read the story.

Good article on Facebook in the Wall Street Journal Online: “Some Facebook Applications Thrive, Others Flop,” with thanks to David Miller of Campus Entrepreneurship.

For some of those developers, the applications have become viable businesses. Companies drawing large numbers of users to the Facebook web pages associated with their applications are able to sell advertising or even goods or services there. For others, the applications are helping to raise their profile and user ranks of existing operations.

But many more have tried and failed, unable to gain or keep a following. Creating catchy applications is becoming more challenging as the number of applications vying for users’ attention grows and their sophistication increases. Meanwhile, some early tactics used to gain wide reach are being eliminated by Facebook because their intrusiveness drew complaints.

“Entrepreneurs need to ask themselves, ‘What is the problem I’m trying to solve? What is the need I’m trying to address?’ ” says Ben Ling, director of platform marketing at Facebook. “The Facebook platform is not a magic platform and you can plug in anything and it will be successful. It doesn’t make something that’s not useful, useful.”

The top 1 percent of applications accounted for two-thirds of all application activity in the nine months since Facebook introduced the platform, according to a study of Facebook applications published in March by O’Reilly Media Inc., a technology-focused publishing company in Sebastopol, California. And only 200 applications hosted more than 10,000 users a day. About 60 percent of applications failed to attract even 100 daily users.

Worth reading.

Don’t choose an industry based on trends, statistics or some list of hot startups. Look in the mirror, focus on your strengths and weaknesses, your experience, whom you want to be and what you like to do–and start a business that reflects who you are and who you want to be.

I hate to disagree with Scott Shane because I like him, I like his books, and I like the way he thinks. But I do disagree with at least some of the underlying implications of his two-post reflection on failure rates by industry. Particularly the matrix he produces as a conclusion:

To bring you up to speed, this starts with Shane’s May 28 post on Small Business Trends, about how small business survival rates vary.

The data show that the four-year survival rate in the information sector is only 38 percent, but is 55 percent in the education and health services sector. That is, the average startup in [the] education and health sector is 50 percent more likely than the average startup in the information sector to live four years. That’s a huge difference.

Moreover, most of the sector trajectories don’t cross; the sectors that have lower initial survival rates generally tend to continue with these lower survival rates every year.

Then he followed up with an even more interesting post late last week, prompted by the obvious follow-up question, which is in one of the comments:

“Good point about selecting an industry with high survival rates for a startup . . . but does not an entrepreneur have to stick to the industry he or she knows? Perhaps the information is valuable for angel investors but I think entrepreneurs cannot change their spots, stick with your strengths.”

Exactly. I’ve posted several times on this blog my general orientation toward starting your business in the area that you know. For example, my previous posts: “Where to Start, What to Start” and “Mirror, Mirror, on the Wall, What Startup?” My general position is that you don’t choose an industry; you stay with the givens, meaning your interest, your experience and, in most cases, your location.

Shane has a pretty good answer to this question:

Entrepreneurs won’t be successful if they try to start businesses in industries they don’t know. We have a lot of data that show that various dimensions of startup performance–survival, sales growth, employment growth and profitability–all increase with the number of years of experience that an entrepreneur has in the industry in which he or she is starting a business.

But Joe and many other people are missing an important part of the success story, operating in a favorable industry. I can tell from the comments on my posts about picking a good industry that people are frustrated by this point because it creates a problem for many people. The dilemma is that if your experience lies in an industry–like autos or steel or retail–that isn’t favorable to startups, you’re disadvantaged relative to your friends in computer software. Their 15 years of experience in software positions them well to start a business; your 15 years of experience in autos or steel or retail does not. The frustrating part is that you can’t change your history.

But this dilemma doesn’t change the facts. Success as an entrepreneur is enhanced by being experienced in a favorable industry; being inexperienced or operating in an unfavorable industry puts you at a disadvantage. Even if you want to fight the odds, it’s an uphill battle because investors, customers and suppliers understand the situation.

. . . which brings Shane to the matrix above.

And my problem with Shane’s conclusion is that I don’t agree with the premise that your odds in a business you don’t know are ever better than your odds in a business you do know.

Statistics are dangerous. Generalities don’t work well. You aren’t just in autos or steel or retail, for example; you’re in your specific auto-related business or your specific retail business. The real odds are about the match between you, your business offering, your target market and your strategic focus. That’s my opinion, though; I might be wrong.

Great title. I wish I’d thought of it. It’s from Venture Hacks this morning in a post about Mike Speiser’s new blog: Laserlike. Laserlike’s theme is, “Free ideas. Just add execution.” In his second post, Mike writes:

The theme of Laserlike is that ideas are overvalued. Entrepreneurs spend too much time worrying about protecting their ideas and not enough time launching them!

I had trouble finding the original post, but not the PDF of the slides in a related presentation. And the Venture Hacks summary is also very good.

A drinking straw that purifies water. Talking books. A $6 valve that replaces $2,000 worth of hospital equipment related to IV medicine. An artificial optic nerve. Very interesting stuff in a slide show from Fast Company.

10 Ideas That Could Change The World | Fast Company

Another question in e-mail today that I can’t resist sharing, along with my answer. Here’s the question:

I believe that I have ideas that can make great money in the hands of real entrepreneurs. I do not want to be the one who spends my whole life applying them, writing the business plan, looking for money, finding the right team, etc. How can I sell business ideas or investment ideas without becoming an entrepreneur myself?

… and my answer:

Forget it. The idea has no value. If it’s worth anything, a thousand other people have the same idea.

You don’t believe me? OK, prove it. Prove me wrong. Make your idea work. Find a management team, write a business plan, get the funding, and–whoops–you just became an entrepreneur.

I could go on, I suppose (actually I did in the real e-mail), but this is a better answer. Right to the point. And I have posted on the value of the idea before on this blog, in Ideas are Easy, Doing Stuff is Hard and a couple other posts, and on bplans.com I posted an article in the same general mode called Protect Your Idea.

When you want to take a moment for thought, do some long-term thinking, and focus on the kind of trends research that can help to generate new ideas, take a look at the (newly-redesigned) Emergent Research site featuring a nice collection of reports and research on the sources and impacts of social and business change.

Our focus is the global intersections of social and demographic shifts, technology, marketing and economic decentralization.

I discovered this by reading Steve King’s Small Business Labs blog for some time. Steve is part of Emergent Research, and he posted today about the redesign. I’ve used his posts several times for my posts, I like his work, so I visited.

The research is a special treat. If you have any interest in trends affecting small business and entrepreneurship, look at the studies in the Research and Reports section, on the right top. I particularly like the one on the new artisan economy. The two trends pieces are excellent, and there are also several on the future of small business.

First HP ran a vote to determine top business blog posts. With the voting now in, it now has a promotion at Top Business Blog Contest that allows you to print those posts up as a small book. In the meantime, you’re seeing and using the HP Wetpaint offering that converts your blog, or your favorite posts on your blog, into an eBook.

Not bad. Great promotion. Get me to use it and make that work, and you’re a long way into getting me to buy it. I had a very nicely formatted PDF file saved in about 30 seconds. Now I’ve got the site bookmarked, and I’m already thinking about how I’d like to have something like that available to supplement some of my presentations.

I have to admit I like reading Gene Marks’ columns in Business Week because he’s a good writer and a clever contrarian, which makes his stuff fun to disagree with. Hence my title to this post, which is a counterpoint to his Tech Trends to Ignore.

Here’s my favorite “What? Me worry?” quote from Gene’s latest. On his list of trends to ignore he includes:

Anything Green. In the ’70s we were running out of oil. In the ’80s we had to save the whales. In the ’90s our attention turned to the depleted rain forests. Now it’s all about global warming. Is your business doing what it can for the environment? Do you demand that all of your employees drive hybrid vehicles? Have you installed solar panels to conserve energy? No? Then join the rest of us who want nothing more than to ruin the earth with our decadent and destructive business practices. Do we not care about the environment? Yes, but not enough to waste money on this year’s fire drill. If you can find a technology that helps the environment and is good for your business then go for it. And please let me know too, as I’m still trying to find it.

OK, that’s a fun one to disagree with. Silicon Valley and mainstream venture capital are doing tons of investment in green technologies. People are paying premiums for hybrid cars, socially sensitive farming and manufacturing techniques and fair-trade coffees. People are buying devices to control electronic overflow. People are recycling garbage. Did I read recently that one of the world’s richest people is a Chinese woman entrepreneur who made her fortune in recycling? Or is that just urban myth?

And aside from disagreeing, prove Gene wrong. Can you find a technology that helps the environment and is good for business? I don’t think it’s hard to find.