Online Positioning Roundtables for Entrepreneurs
In addition to the Entrepreneur Journeys series of books, Sramana Mitra offers a series of free online positioning roundtables to mentor and help entrepreneurs further develop their business ideas. In these roundtables, she also addresses financing strategy for each business.
During each 60-minute online session, entrepreneurs are invited to pitch Sramana their ideas in a three-minute presentation. She reviews the material in real time and provides feedback on each pitch, as well as addresses specific questions from the entrepreneur. Afterward, she takes questions from other participants. Each session is open to 1,000 people but only the first five to sign up have the opportunity to pitch Sramana and discuss their business in an interactive mode.
You can find more information about these webinars, recordings of past roundtables and registration links to upcoming sessions at:
www.sramanamitra.com/entrepreneurship-strategy-roundtables/
We hope you will join us!
Praise for Entrepreneur Journeys, Volume Two
Bootstrapping: Weapon of Mass Reconstruction
by Sramana Mitra
“Sramana Mitra’s Bootstrapping: Weapon of Mass Reconstruction is a book for our time because it’s something real out of Silicon Valley. No more stories about legendary VC fundings of startup-to-IPO in six months. In this, the second volume of Entrepreneur Journeys, her focus is on doing more with less, in tune with the times. This book has some fascinating histories of the different paths people take to entrepreneurship, and the difficulties they face. I would only have wished each of the interviews to be longer and deeper, because every story is worth telling.”
-Fast Company
“Mitra clearly has a passion for small businesses. This useful volume is largely comprised of interviews with the founders of such companies. Her skilled questioning prompts a discussion of the many issues involved in starting and growing a business. The entrepreneurs share wisdom and insight useful to any budding or existing business owner. The reader will be struck by the vision, inventiveness and sheer determination of these entrepreneurial heroes, who operate businesses that are successful but far below the radar. A highly relevant and timely work on entrepreneurship’s role in economic reconstruction.”
-Kirkus Discoveries
“I recommend Bootstrapping: Weapon of Mass Reconstruction to my MBA students and to anybody planning on, or even just thinking about, starting a business. And also to policymakers. Maybe especially to policymakers. The importance of entrepreneurs to our economy cannot be overemphasized.”
-Craig Newmark, “Newmark’s Door” blog
Associate Professor of Economics, North Carolina State University
“Sramana’s work on bootstrapped entrepreneurs is an inspiration in these tough economic times. The solutions to our economic problems ultimately lie with the entrepreneur who brings imagination, resourcefulness and good old-fashioned elbow grease to tackle old problems in new ways, create new solutions and new industries. It is all too easy to forget this, particularly when we feed on the depressing daily diet of endless bailouts and hear trillions of dollars being thrown around. A great entrepreneur can do a lot with ten thousand dollars. This book is a good antidote to the depressing mood of these times.”
-Sridhar Vembu, CEO of AdventNet and Zoho,
Bootstrapped to over $50 million in annual revenue
“In the end, a true entrepreneur will not be denied. What Sramana captures with simple grace are the riveting personal stories of modern day business alchemists, who mix vision, pragmatism and relentless effort to forge creative new and successful ventures. Her collection of interviews will make for an engaging, educational read, for those in the entrepreneurial space, those considering joining the game and those just plain curious about the formative innovators whose efforts provide outsize social returns of the most concrete and enduring nature.”
-Don Hutchison, Silicon Valley Angel Investor
Entrepreneur Journeys
Copyright © 2009 Sramana Mitra
All rights reserved.
ISBN: 1-4392-3451-5
ISBN-13: 9781439234518
Visit www.booksurge.com to order additional copies.
Entrepreneur Journeys
Volume Two
Bootstrapping: Weapon of Mass Reconstruction
Sramana Mitra
To my mother,
and the virtue of frugality.
Where the mind is without fear and the head is held high
Where knowledge is free
Where the world has not been broken up into fragments
By narrow domestic walls
Where words come out from the depths of truth
Where tireless striving stretches its arms toward perfection
Where the clear stream of reason has not lost its way
Into the dreary desert sand of dead habit
Where the mind is led forward by thee
Into ever-widening thought and action
Into that heaven of freedom, my Father, let our minds awake.
—Rabindranath Tagore
Contents
i. Prologue
ii. Doing More with Less
a. The Real VCs Of Silicon Valley
b. Fund Envy
c. Bootstrapping, Montana Style
Greg Gianforte, RightNow
iii. Getting Started with Little or No Capital
a. Passion and Leverage
Cree Lawson, Travel Ad Network
Beatrice Tarka, Mobissimo
b. Barack Obama’s Finance Lesson
Om Malik, GigaOM
Rafat Ali, paidContent
J. R. Johnson, VirtualTourist
Guillaume Cohen, Veodia
Wayne Krause, Hydro Green Energy
c. Weapon of Mass Reconstruction
Scott Wainner, SysOpt and ResellerRatings
Ramu Yalamanchi, hi5
iv. Validating The Market – On The Cheap
a. Carts Ahead Of Horses
Murli Thirumale, Ocarina
Manoj Saxena, Webify
v. Resurrecting The Dead
a. Silicon Lazarus
Lars Dalgaard, SuccessFactors
vi. Epilogue
Prologue
Much of this book was written in 2008, as Barack Obama ascended to the White House and Wall Street descended to the poor house. While Obama called for hope on billets in our shop windows and front lawns, on seemingly every bumper of every car on Bay Area roads – our financial market simply collapsed.
“What next?” was the question at the top of my mind. And as a result, readers will find this volume laced with political nuance, as well as a genuine attempt to understand what might deliver America, and the world at large, from its dire present day.
So, what next? Where to from here? From my perspective it is clear that small business must be a top policy priority. There are approximately five million small businesses in the United States with fewer than 20 employees. Another 20 million mom-and-pops endeavor day in and day out without employees. Let us hope that in the coming decade those numbers will double, then triple and quadruple. For here is the most powerful engine of economic growth and sustenance. Here is our way back.
If the next Google is to emerge and bring with it thousands of new jobs, it must first start over some kitchen table where not only hope, but opportunity is readily available. Where entrepreneurs not only start businesses at a higher rate, but also survive and thrive at a higher rate.
To achieve this we must answer several questions: Why don’t more businesses get off the ground? And, once up, why do so many fail?
Through much discussion, writing, and brainstorming on each topic, I arrived at a core thesis: Not just entrepreneurship, but bootstrapped entrepreneurship is the true weapon of mass reconstruction.
Businesses often fail to take flight because they cannot raise funding. Well, start with the assumption that funding will not be available until the business is substantially further along, if ever, and that bottleneck is removed.
Additionally, most businesses should not look to raise money. As true small businesses – in the eyes of venture capitalists, even a $5 or $25 million business is considered a small business – they do not really fit the framework of professional venture capital. That does not, however, mean these businesses are not worth building. In fact, a $12-million-a-year company fully owned by the entrepreneur is a wonderful situation. Full control. Loads of cash. And true independence. Heck, even a $300,000-a-year business has many of those same attributes, and is more than worthwhile.
Now, why do so many small businesses fail? Undoubtedly there are many complex reasons, but a primary one is that they run out of cash. They use whatever resources they have imprudently, and end up destitute. The offices empty through rounds of layoffs. Boxes are packed, projects shelved. A final liquidation, and the un-erring quiet of failure.
This though is not the inevitable end. In this volume, we explore a dozen stories of entrepreneurs who have mastered the art of doing more with less, creating a great many options in the process. And making clear for the world over that prosperity and independence are not mutually exclusive. That in fact they go best together.
Doing More With Less
The
Real Vcs
of
Silicon Valley
To understand the financing ecosystem in which startups play, it is important to first address some misconceptions. Chief among them is that VCs partake in early-stage investments.
While it is true that venture capitalists originally focused on early-stage, high-risk investment, today they have amassed huge war chests, raising funds set to eclipse one billion dollars. Even so, the number of people in most venture partnerships has remained relatively modest. You don’t have to do much math to realize that such firms are forced to make bigger and bigger investments to generate adequate returns for their limited partners. Therein lies the problem for first-time entrepreneurs.
Of course, the bar has always been high for those trying to start out. Alex Osadzinski, a former general partner at Trinity Ventures, notes that most VCs are reluctant to fund a first-time CEO who hasn’t held a key position in a previous startup. “If this is your first CEO job, and the first time in a startup, you’re putting a steep learning curve in your way,” warns Osadzinski. His advice: become the technical founder or vice president of marketing in someone else’s company.
Very well, but that’s a bucket of cold water for any entrepreneur with a burning passion. Besides, history is full of counterexamples – look at Steve Jobs or Bill Gates. Larry Page and Sergey Brin were young PhD students at Stanford University – their lack of experience couldn’t stop Google from taking root. Similarly, Mark Zuckerberg delivered the Facebook phenomenon as if out of a hat.
The truth is, startup-land is littered with mavericks, iconoclasts, dropouts and misfits.
“It definitely makes it easier to raise money if you’re a serial entrepreneur,” concurs Venky Harinarayan, chief executive of search engine startup Kosmix. “That said, the prevailing VC wisdom is that serial entrepreneurs can get you great returns, but the franchise companies are created by first-timers.” Those would be Microsoft, Google, Apple, Facebook, and dozens of others.
So how did these legendary entrepreneurs navigate the maze?
Lacking a better alternative, first-time entrepreneurs often turn to friends and family. Bill Gates funded Microsoft with family money, and the blessing of his parents. It’s a dangerous path, though. Startups are prone to tough times, and these relationships can quickly strain. After all, prevailing wisdom follows: taking money from friends is the surest way to lose them.
But what is the alternative, especially as VCs become scarcer players in the financing ecosystem?
Angels. While VCs primarily invest other people’s money, angels invest their own. An entrepreneur working on a fledgling idea needs investors who not only provide valuable business advice but who also connect the dots to make business development partnerships happen, help recruit key team members, and advance the venture from concept to fundable company. Good angels tend to have the operational background necessary to play such an active role.
In Silicon Valley, “super-angels” like Ron Conway, Reid Hoffman, Ram Shriram, and Jeff Clavier are providing seed capital and much, much more. Don Hutchison, a former Internet executive, is widely respected not only among entrepreneurs but also among VCs who often fund his companies. “Generally, I provide less money and more advisory support while attracting others to the deal as well,” Hutchison says. In many ways, such contributions are a far better value proposition for entrepreneurs, especially those taking their first swing in the game. During the adolescence of my own career, having such mentors to shepherd me forward was invaluable. One of them, David Chen, I met over dinner one night, and explained my product idea on a napkin. From there Dave sat on two of my boards, and has remained a lifelong friend and trusted advisor.
There are even formal efforts to institutionalize angel financing: the dinner club investment group, the Band of Angels, is the best organized in Silicon Valley. Once a month, entrepreneurs are invited to pitch to the group, following which those investors interested in the venture directly engage the team. Others are following suit. Some angels have even started to institutionalize their investments by raising small funds focused on seed-stage capital. Jeff Clavier’s new seed-only fund has breached $12 million. Dave Whorton’s, $50 million. Stewart Alsop, a former VC from NEA, has raised a $75 million fund to invest in similar early-stage deals.
However, cracks are developing in the angel ecosystem. Super-angels have adopted a spray-and-pray strategy, spanning so many deals that their attention to each shrinks by the day. And individual entrepreneurs are once again left without the mentorship so crucial to success.
In other parts of the world, seed investment itself remains a huge barrier to entrepreneurship. In India, entrepreneurs are severely hindered by the lack of “mentor capital.” They plow at business ideas without the expert guidance that can save months, even years of misdirection. A few small funds have come together to address the gap, including Mahesh Murthy and Praveen Gandhi’s Seed Fund. But entrepreneurs in India still lack a route to access the many successful Indians in Silicon Valley who have the expertise to offer mentoring, connections, and capital. Unfortunately, this bridge, as of yet, is wobbly at best.
So, as entrepreneurs, especially first-timers, look to the “real” VCs, willing not only to take risks but to invest their mentoring time. Look beyond today’s big venture names, and instead look to the small venture capitalists or the angels who can and will engage with you on a regular basis.
Look not simply for capital, but mentor capital.
Fund Envy
There was no shortage of cheers on Sand Hill Road when Foundation Capital announced in 2008 a new $750 million fund, of which $250 million was allocated for the capital-intensive cleantech sector.
However, it made my heart sink. There went another strong early-stage venture firm. For how can you practice true venture capitalism if you have to put so much money to work? It is, nonetheless, the latest trend. Venture capital firms are raising more and more money, limiting their investments to later-stage companies. NEA’s current fund is one of the largest at $2.5 billion. So large it makes the term “venture capital” sound ridiculous!
Paul Kedrosky, a venture capitalist and author of the blog “Infectious Greed” disagrees with me over the implications of these monster funds. He writes, “a) I have no problem with Foundation raising a big fund to do cleantech b) there is oodles of money at both Series A and angel, and c) most angels are clueless. Then again, most VCs are clueless, so that’s not news.” I can only agree tepidly with his third point. Yes, many VCs and angels are clueless. But that means those with a clue must be preserved.
Foundation Capital is a great example of a firm with solid operational talent. Its general partners – Bill Elmore, Paul Koontz, Paul Holland, Mike Schuh, and Warren Weiss – have all held senior executive positions in workaday companies. “Each of us left successful careers in industry to work in venture capital,” their story goes, “because we wanted to pursue our passion: working with other entrepreneurs to build great new companies.” And Foundation knows how to do just such early-stage venture capital – its partners can put out a few phone calls on behalf of a young entrepreneur and make the difference between success and failure. They can get immediate call-backs from top 500 corporate CIOs. For a fledgling idea their support is a key to the city. But fledgling and $750 million rarely go hand in hand.
In the past, if solid VCs didn’t think you were ready for the big time, but that your technology was still interesting, they had the marketing savvy to help you reposition your venture in order to solve a different problem than what you had set out to. This is why entrepreneurs flock to VCs: coaching, contacts, and other unquantifiable attributes still abundant in Silicon Valley. But entrepreneurs, I bring bad news: today’s leading VCs rarely extend the expertise on your behalf. They’ll do things just as easily done by bankers – namely, manage money.
Why? Foundation’s nine general partners now manage this $750 million fund, plus the remnants of a $525 million fund raised two years ago. As venture funds typically run a 7- to 10-year life cycle, the earlier fund is presumably still sitting around, largely uninvested. Management fees for venture capitalists are 2.5% of capital. That means with just the $750 million, Foundation Capital is already taking in $18.75 million per year. Now add the fees still rolling in from the previous fund, another $13 million and change per year. Per my back-of-the-envelope calculations, the general partners are taking home an average of $2.5 million per year – before incentives. When the general partners’ investments start actually generating returns, they get paid 20–30% of the profits, otherwise referred to as the carry.
Now, apply the formula that I explained above to various fund sizes, and see what you get. If your fund is $100 million, you only get paid $2.5 million a year in management fees. Split that among, say three general partners, pay for office space, some analysts and secretaries – each partner takes home a reasonable paycheck, but hardly enough for a private jet. It isn’t hard to see why successful VCs are reaching for the easy money of bigger and greener pastures.
The rule of thumb in venture capital is for each partner to manage $50 to $75 million in capital, handling an average of five to eight deals at any given time. This equation gets very complicated in the seed and early-stage game. Managing those investments involves more work, including shepherding young entrepreneurs through the learning curve that every new venture requires.
And for all this heavy lifting? The promise of sweet and easy returns not to early-stage investors, but to those who invest later. The real money is in Series B. So there too have gone the real (and rare) VC talents. For greed, indeed, is infectious.
Bootstrapping,
Montana
Style
Greg Gianforte does not believe in raising money from investors. “The best money comes from customers, not investors,” the former Silicon Valley software entrepreneur says.
Gianforte had to believe that. After selling his first startup to McAfee for $10 million in 1994, he moved to Bozeman, Montana, and launched another software company. But getting funding for RightNow, his new customer-service software company, proved impossible – Bozeman wasn’t the tech hotbed or venture capital magnet he’d come from.
“All my business contacts literally threw away my card,” Gianforte recalls. “They thought I was finished when I made the decision to start a company headquartered in Montana.” Thank goodness Gianforte believes in bootstrapping; there was no other way to get RightNow off the ground. He plowed $50,000 of his own money into the company and did all the work himself – from cold-calling companies to training them on how to use the software, which lets customers get answers to questions in a Web-based FAQ. Remember, this was 1997, when Web-based automated customer service was just getting started.
Once Gianforte got a sense that he could sell the product himself, he hired three sales reps who worked entirely on commission. To further slash RightNow’s burn rate, he decided against paying himself a salary. Cash was being preserved at all costs, a golden rule of bootstrapping.
Before long, RightNow’s revenue was doubling every three months. Two years in, with 150 employees and $6 million in revenues, the company was valued at an astronomical $130 million. Gianforte finally raised venture capital. In two rounds – the first in 1999 and the second in 2000 – RightNow raised $32 million from Greylock and Summit.
When RightNow went public in 2004, the management team owned 70% of the company. Today Gianforte still owns 28% of the company, which crossed the $100 million mark in revenues in 2006 and today boasts a market cap close to $500 million.
How was he able to keep such grip on the reins? Bootstrapping offers entrepreneurs tremendous leverage with late-stage VCs. In early-stage venture capital funding, much of the power and control lies with the investor; in later stage funding, entrepreneurs often call the shots, with VCs falling all over themselves to offer up money.
What I find even more compelling about Gianforte’s story is that it proves that distributed economic development remains possible in America. As India’s engineering and customer service workforce becomes more expensive, it is in places like Montana and Wyoming that companies can find viable alternatives to support their growth. Even though Bozeman is no Silicon Valley, Gianforte says RightNow has had no problem attracting high-quality engineers. In fact, he managed to lure many away from Silicon Valley – an advertisement in a San Francisco paper garnered some 2,500 resumes. After all, salaries may be lower in Montana, but so is the cost of living. And even an engineer will admit that fly-fishing and skiing trump traffic congestion and rumbling airplanes overhead.
Just as I think India needs to find second- and third-tier alternatives to the seven major metros – Bangalore, Mumbai, Delhi, Hyderabad, Kolkata, Chennai, and Pune – America needs to do the same. Unlocking, as Gianforte has done, the still untapped potential of the American hinterlands.
Greg Gianforte, Rightnow
The first time I sat down with Greg Gianforte in his modest San Mateo office, I knew I’d found a kindred spirit. The CEO of RightNow is a hardcore right-wing capitalist, and like me, believes that entrepreneurship is the solution to the world’s economic problems. But even more precisely, Greg is so concerned about the obsession among entrepreneurs to raise external capital that he wrote a bootstrapping book to teach his hard-learned tricks.
And tricks, he has no shortage of. Industry observers say that RightNow’s early product left a lot to be desired. There were other, superior products in the market from companies swimming in venture capital. However, Greg managed the last laugh, refining his product over time, while maintaining financial control of his company, and his destiny.
SM: To start, let’s talk about your background. GG: I’m an engineer. My undergraduate degree is in electrical engineering and my master’s is in computer science. I attended school at the Stevens Institute of Technology in Hoboken, New Jersey.
SM: Can you give us some background on Brightwork? GG: Brightwork was a company I co-founded to develop network management applications. It was founded in 1986 in a sunroom in New Jersey. We developed tools focused on the Novell Netware solutions, since they were the dominant player back then. Ultimately we sold the company to McAfee for about $10 million, hence the Montana retirement before RightNow.
SM: The network market was chaotic at that time. How did you break through as a bootstrapped company? GG: We had a good product for Novell Netware environments. But sales were terrible. We didn’t have a reputation, so nobody would talk to us. We knew we had to leverage somebody else’s credibility to break into the market, we just weren’t sure how.
Since Novell was the dominant player in the market, and our product focused on the Netware environment, we figured with their endorsement we could get a solid foothold. Since we didn’t know how to get their attention, we decided to buy a 48-foot-long billboard across from their corporate headquarters. Novell was headquartered in Provo, Utah, and billboards there didn’t cost too much. I think it was $200 a month, including lights.
The billboard had eight-foot-high letters that read, “Don’t just network, Brightwork.” The very next day we received a phone call from the senior vice president of communications at Novell asking for our PR department. My partner had answered the phone, so he put his hand over the receiver and asked if I wanted to be the PR department. He passed the phone over, and I picked it up and said, “PR department.”
I asked what prompted the call and the reply was, “A billboard you have in front of our building. We’re trying to figure out who you guys are.” To which I replied, “Where are you located?” The answer, of course, was Provo, Utah. I said, “You mean those marketing people put one in Provo, too?” We ended up flying out to meet with Novell, and we left with a distribution deal. All of this occurred in just six weeks.
We shipped $100,000 worth of our product to them, which they put in their warehouses. Two months later they tried to return it; fortunately our contract did not allow them to do so. From that point on we were able to use the fact that Novell was distributing our product as a point of credibility when calling banks and larger corporations around the country. It gave us the start we were hoping for.
SM: What were your revenues at Brightwork? GG: Ultimately it grew to $10 million a year in revenues.
SM: Nuggets of knowledge you took away from Brightwork? GG: Brightwork was my first entrepreneurial endeavor, and I had a steep learning curve. I remember very early on looking for mentors to help me understand business. I think every family has somebody who’s the “business expert,” and mine was no different. Uncle Pete was the one in our family everybody said I had to talk to. He gave me a bunch of advice, which I went off and used. About a month later I came back for more advice because I thought what he had given me was really useful. This time he said, “Greg, you’re pouring your heart and soul into this thing; I hope they’re taking care of you.” I didn’t realize he had always been in big business. He had a completely different frame of reference, and it was not appropriate for entrepreneurial startups.
That
was my big lesson from Brightwork: find an entrepreneurial mentor,
and if you’re going to bootstrap, find a mentor who has already
bootstrapped a business.
SM: What was your exit from Brightwork? GG: McAfee acquired Brightwork. At the time we were 50% larger than they were.
SM: Why were they interested in purchasing Brightwork if they were in the security market and you were in the networking market? GG: At the time, McAfee owned about 67% of the antivirus market compared with Symantec, which had 14%. They were interested in leveraging our sales channel since we had good relationships with network managers and a strong telesales process. McAfee had been selling to very large customers like the government and Ford Motor Corp. They realized they were going to need to start expanding their sales channels in order to maintain their market lead and continue growth. They also needed to change their sales approach, and we had a proven telesales approach that worked.
SM: Your sales methodology at Brightwork was telesales? GG: Initially, yes. We had a very viable model financially. We hired telesales people, and they would be profitable in 30 days. By that I mean we hired them, trained them, and within 30 days they were covering their costs. We hired sales individuals in classes of five every month until we had 75 people selling.
SM: How long did it take to hire those 75 people? GG: That occurred over an eight-month period. We also did it organically; we didn’t use external financing to fund the growth.
SM: How did that transition to McAfee? GG: At McAfee we had 300,000 people a month downloading our software. At the time we were the most profitable software company in the world on a percentage basis. The year I started there, it was 72% pre-tax profit. Our job in sales was to get the pirates to pay us. It was really profitable, largely due to our strategy of giving it away and then tracking down the big violators of our licensing agreements.
SM: Can you quantify the results in terms of revenue? GG: When McAfee bought us they had $25 million in revenues. A year later they had $60 million. It was a combination of telesales and Web sales, but it was largely based on what we did at Brightwork. We were even selected by Fortune as one of the “10 Coolest Companies in America” because of our sales approach.
SM: What came after Brightwork and McAfee? GG: I retired to Bozeman, Montana in 1995. I used to vacation in Montana when I was a kid. I did some backpacking trips there. I decided to retire there because I thought it would be a good place to raise my family. We ended up buying a house outside of Bozeman with a good amount of land. It was a lot of fun at first with all the camping and fishing, but it just wasn’t enough. I didn’t want my tombstone to be: Dedicated to Fishing! I had the talent for starting companies, and I felt that it was unethical for me to waste that talent. So, I decided to create 2,000 high-paying high-tech jobs in town. I launched an incubator and started mentoring local entrepreneurs. Eventually, I decided I really needed to start another venture, which was RightNow. That company has about 700 employees now, so it’s almost halfway to the goal of 2,000.
SM: What is the story of RightNow? GG: We’re a SaaS company – our applications are delivered on a hosted basis. We’ve had eight straight years of revenue growth and a successful IPO. I think it’s a good success story.
SM: Can you walk me through the founding and startup phase?
GG:
I started RightNow
in an extra bedroom in my house in 1998 with $50,000 cash.
I had a crazy idea that the Internet was going to change how companies communicated with their customers. Consumers used to communicate about products with retailers, but when the Internet came along they started going directly to the companies. Dealing with this increase in direct consumer communication was going to increase costs for companies. I wanted to see if there was a business I could create to solve that problem.
SM: Can you tell us more about the bootstrapping elements of RightNow? GG: Confucius said you are never in a position to learn until you are totally confused. When I make presentations I tell people there’s a process of immersion that’s required, and that’s where I started. Immersion is done by making a lot of phone calls, so I started by calling companies and asking if the Internet was changing the way they dealt with their customers. What I heard, and I heard it over and over again, was that they were having a hard time dealing with all the e-mails and inquiries they were getting because the distribution channels were collapsing.
When I asked companies how they were going to handle it, the answer was that they were going to hire more people. So I came up with the idea of putting dynamic questions on a Web site which allowed customers to help themselves. It didn’t require any special software. I wrote down a couple ideas that I thought companies would be interested in buying, and started making calls. I asked, “If we had a product that allowed us to put questions and answers on your Web site, and this product would make all the e-mails go away, would you buy it?” Now here’s a good lesson in bootstrapping: I did all of this before I had a product. When I asked if they would buy it, they said no. Better to find that out early on! I then asked companies why they said no, wrote their answers down, and moved on to the next phone call.