Thursday, March 10, 2005

Startup howto

This is a nice essay on how to start a startup. The author, Paul Graham, a Harvard PhD in CS, founded an e-commerce software startup that was acquired by Yahoo! in the early days of the boom. Interestingly, his co-founder was Robert Morris, of Internet worm fame. I can still remember back in 1988 when his worm brought down the entire network. A team in the Berkeley CS department were the first to figure out what had happened.

I don't agree with everything Graham writes, but his perspective is interesting nonetheless. You can find my take on startups here (warning - PowerPoint slides).

"In a technology startup, which most startups are, the founders should include technical people. During the Internet Bubble there were a number of startups founded by business people who then went looking for hackers to create their product for them. This doesn't work well. Business people are bad at deciding what to do with technology, because they don't know what the options are, or which kinds of problems are hard and which are easy. And when business people try to hire hackers, they can't tell which ones are good. Even other hackers have a hard time doing that. For business people it's roulette.

Do the founders of a startup have to include business people? That depends. We thought so when we started ours, and we asked several people who were said to know about this mysterious thing called "business" if they would be the president. But they all said no, so I had to do it myself. And what I discovered was that business was no great mystery. It's not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff.

I think the reason I made such a mystery of business was that I was disgusted by the idea of doing it. I wanted to work in the pure, intellectual world of software, not deal with customers' mundane problems. People who don't want to get dragged into some kind of work often develop a protective incompetence at it. Paul Erdos was particularly good at this. By seeming unable even to cut a grapefruit in half (let alone go to the store and buy one), he forced other people to do such things for him, leaving all his time free for math. Erdos was an extreme case, but most husbands use the same trick to some degree.

Once I was forced to discard my protective incompetence, I found that business was neither so hard nor so boring as I feared. There are esoteric areas of business that are quite hard, like tax law or the pricing of derivatives, but you don't need to know about those in a startup. All you need to know about business to run a startup are commonsense things people knew before there were business schools, or even universities.

If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you'll learn something important about business school. You don't even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you'd do better to learn how to hack than get an MBA. [3]

There is one reason you might want to include business people in a startup, though: because you have to have at least one person willing and able to focus on what customers want. Some believe only business people can do this-- that hackers can implement software, but not design it. That's nonsense. There's nothing about knowing how to program that prevents hackers from understanding users, or about not knowing how to program that magically enables business people to understand them."


Anonymous said...

Steve, again there must be Blogger problems. I could not get to comments for 2 days. Oh well :)


Anonymous said...

Dollar's Fall Silences Africa's Garment Factories

MAPUTSOE, Lesotho - Buy a T-shirt at Wal-Mart, fleece sweats at J. C. Penney or Hanes panties anywhere in the United States, and there's a halfway decent chance that they were stitched together here, in an acre-size garment factory crammed with thousands of frantically clacking sewing machines. Virtually its entire output, 25,000 items of clothing daily, is America-bound.

These days, that is a disaster. 'Two thousand people work here, and unfortunately last week I had to retrench 500 people, because there are no orders,' Boodia Heman, director of the Ever Unison Garments factory, said in a recent interview. 'The American buyer is not coming to Lesotho to buy.'

Actually, the problem is not so much the buyers from America. It is the American dollar, and its headlong plunge in value. Three years ago, Lesotho's garment factories had to sell only $56 worth of clothes to stores in the United States to cover the monthly wage of 650 maloti for a sewing-machine operator. Today, that same salary consumes $109 in sales.

When the dollar is worth 8.5 maloti or more, Mr. Heman said, 'we break even and we are satisfied.' Right now, the weak dollar fetches less than 6 maloti.

The dollar could not have shrunk at a worse time for southern Africa. In January, China's powerful apparel industry was freed from the so-called multifiber arrangement, which for decades set nation-by-nation quotas and capped its garment exports to the developed world. Now China, which keeps its currency tightly pegged to the dollar, has begun to pursue the American market much more avidly.

American shoppers may register the dollar's fall, if at all, as an irritating uptick in the prices of imported goods. In tiny, dirt-poor Lesotho, it is more than an irritation; it is potentially fatal. Since December, 6 of the nation's 50 clothes factories have shut down, unable to match the prices of foreign competitors and still make a profit. That has eliminated 5,800 of the 50,000 garment-making jobs here. Layoffs have claimed at least 6,000 more....


Anonymous said...


Free of Quota, China Textiles Flood the U.S.

SHANGHAI - In the first month after the end of all quotas on textiles and apparel around the world, imports to the United States from China jumped about 75 percent, according to trade figures released by the Chinese government.

The statistics bear some of the first evidence that China's booming textile and apparel trade, unhampered by quotas, could be prepared to dominate the global textile trade and add to trade tensions around the world. The quotas came to an end on Dec. 31 as a result of an international agreement reached in 1993.

In January, the United States imported more than $1.2 billion in textiles and apparel from China, up from about $701 million a year ago. Imports of major apparel products from China jumped 546 percent. Last January, for example, China shipped 941,000 cotton knit shirts, which were limited by quotas; this January, it shipped 18.2 million, a 1,836 percent increase. Imports of cotton knit trousers were up 1,332 percent from a year ago.

These figures may be understated because China ships a large part of its goods through Hong Kong, and those shipments are not included.

Fears that China is going to flood the world market with cheap textile exports have already inflamed tensions between Washington and Beijing because of worries about American manufacturing plants being closed and thousands of jobs being lost.

Already, in January, the first month after global quotas were lifted, 12,200 jobs were lost in the United States apparel and textile industries, according to the Bureau of Labor Statistics. Some analysts have predicted that China could capture as much as 70 percent of the American market in the next two years. Before the end of quotas, about 16 percent of apparel sold in the United States came from China.

Last year, the United States trade deficit with China set a record of $162 billion, making it the largest trade imbalance ever recorded by the United States with a single country. To be sure, some textile importers say this phenomenon may be a one-time surge. Companies, for instance, may have put off shipping goods at the end of last year to avoid the quotas....


Anonymous said...

Dilberts rules of marketing

1. If you charge less people will buy more,

2. If you charge more people will buy less,

3. How do I look in these clothes

Blog Archive