Austin start-ups: highly efficient or just cheap?

I have lived and worked in this community for 17 years, through recessions and the most incredible boom times. One thing remains constant – we in Austin tend to “cheap-out”  when seeking the best advice and talent.

Austin’s start-up community is blessed with amazing resources. I love it here: I can ideate a technology product, assemble a team, and launch a product without having to glance beyond Austin’s city limits. Try that in St. Louis or Des Moines. Our entrepreneurial Bootstrap ethos and innovative conferences like RISE demonstrate the power of our community to build new businesses and future employers.

Anyone who lives on billable hours in Austin will likely agree, however, that it’s hard to make a buck in this town.  I spoke with a marketing consultant recently who explained he doesn’t notice the recession because he’s always struggled with finding good work in Austin, even in boom times, and that “people just don’t want to pay for good help here.”

To be sure, I am conflicted. As an avowed bootstrapper I have benefited from our low-cost support structure. I have also felt the pain of many a goose chase from well-intentioned but relatively unsophisticated Austin companies. 

I would posit that our garage culture extends too far into company maturity and our tendency to seek out “free-miums” with consultants and advisers hurts the success rate of Austin companies. Why?

I have a few theories…

1. Austin still trades on the tech boom myth that a cut-rate deal leads to windfall compensation at some future point. How many of you reading this (yes, me too) still hold millions in start-up paper? 
2. The influence of famously stingy organizations on our business culture. Those of us who’ve lived on the receiving end of Dell contracts understand this. 
3. The ratio of service providers to actual work is high. Many of us who love and choose to live in Austin trade a lucrative business environment for the privilege of living here. I recently heard one expert joke that in Austin you make money in  the “travel business” as in “traveling” to “business.”
4. Many Austin executives tend to be overly-impressed with folks from big-name companies, colleges and markets. Sure we have great engineers and designers, but when it comes to hiring the best business experts we tend to look elsewhere. Truly a shame.
5. When we have a critical problem, we do not eagerly seek out new expertise or service provides. We are still very much a do-it-yourself town.

I’m no big spender, but could this skimping reflect a lack of business savvy? Do we believe that tech companies in Silicon Valley and Alley scrimp and save when it comes to hiring the brightest bankers, lawyers, executives and advisers? Maybe now they must, but in my experience they have been too busy making money, launching products and grabbing market share to worry about negotiating hourly fees down another five bucks.

Since opportunity cost is difficult to measure we never know what we miss, and on we go, swimming in our pond, struggling against national competitors with stables of well-cared for experts, advisers and partners. 

My challenge for service providers: Don’t audition for work by doing free work, unless you are truly investing in a company and can afford the time. Estimate your marketable value  and stick with it.  If you don’t value your time, no one else will. Take pride in your expertise.

And for Austin companies still who never seem to make it to the next level? Pay experts what they’re worth. Leverage the best experts and focus on winning. And do it local – no need to look past the Great Hills Starbucks or 360Uno’s for the right person or firm. They will likely respond with more value than you ever  dreamed.

Let’s move the Austin technology community to our rightful place as influencers and innovators.

Microsoft playing Santa for Startups

Nothing like a giving away stuff to make friends fast. Works for Santa, and even Oprah, right?

My firm was just selected to join the Microsoft BizSpark program as a “Network Partner”. This means if you run a startup with under 1M in revenues and less than 3yrs in business, we give you bunch of free stuff to support the technology side of your venture.

I believe this to be a great deal and expect there will be many sign-ups based on the value of the licenses alone. The program provides free access to:

• Software. Access to current, full-featured development tools, including Visual Studio Team System, plus production licensing to develop and bring your solution to market.
• Support. Professional technical support from Microsoft and a global community of business experts.
• Visibility. Opportunity to achieve global visibility to an audience of potential investors, clients and partners.

Most technology entrepreneurs know that, when done right, an association with Microsoft can present real client and partner opportunities. The BizSpark is no different and allows smaller companies to gain visibility to potential clients, investors, and partners.

To enter the program, all you need to do is join online and when you do you get near-instant access to the software, and your only obligation is to pay Microsoft a small fee (USD$100) due at the end of the three years (or end of participation in the program)

You’ll need sponsorship from a Network Partner (that would be me). Feel free to contact me with questions.

So, you may ask, what’s in it for Microsoft?They have decided that their future is tied to supporting the next generation of successful companies and by introducing them to their technology stack early in their development. FYI I receive no compensation, just a chance to meet cool new companies and learn what they’re doing.

The New Entrepreneurs don’t need no stinkin venture money

In my role as a Bootstrap-Austin subgroup leader I am consistently immersed in entrepreneurial issues at the grassroots level. I love it. I am always fascinated by the journey nearly all start-ups go through. The soul-searching,  the freedom, the riches! …Er, ok… the freedom!

Entrepreneurs look a bit different these days. They are more practical. And typically more creative than they are technical. 10 years ago, for instance, it wasn’t uncommon for two engineers to hit on an idea and build a new system, then go try to find venture money to scale it, hoping to eventually take the company public and of course, become gazillionaires. 

But it didn’t quite work out that way for most of us start-up guys back then. Assuming you could build a solid product, land institutional funding multiple times, with few mistakes, there was still that prickly revenue problem. Even if you brought in a few customers, chances were by the time any exit ever happened your equity had dwindled sharply. Not exactly a yellow brick road to Richistan…

Take a look at all the Austin venture-funded companies for the last 10 years –you will find few relatively few founders who became extremely wealthy by selling their company in the end. Yet a sale is what generally happens to the more successful venture-funded companies, if they’re lucky.

It seems that the shakeout that followed those times has created a new and improved entrepreneur, one who understands the market limits of cool technology, the perils (and scarcity) of venture funding, and the idea that not all companies must go public to achieve sustained success.

A common characteristic among these entrepreneurs is humility – they see a business need, figure out how to tackle it, build a demo, get a few customers to take a chance on them, and grow organically. Venture money, even if it were available, would likely corrupt the journey and actually become a journey in itself, always focusing on the next round rather than on customers and products. These are cornerstones of the Bootstrap ethos, which I encourage any budding entrepreneur to check out. 

With technology as easily accessed as it is now, the costs of developing products has declined, which means creative, non-technical entrepreneurs can look past technology, and funding, and zero in on customer pain.

From TechCrunch50: New web technologies rocket tech start-ups

Interesting convo on TechCrunch50 LiveStream panel on angel investing. The Silicon Valley-based panelists, mostly angel investors themselves, are debating what it takes to get new technology ventures off the ground these days. Highlighted as a key difference (certainly from what I remember in the “good old days”) was that the cost of building new web-based products and services has dramatically declined — new start ups can have a product built and tested in an open source or even .NET framework in a fraction of the time it used to take. I enjoyed this “ease of entry” recently with the launch of the SBDP.org, a fairly sophisticated site that two years ago would have been prohibitively expensive for us to build.

Interestingly and to some protest, panel moderator Jason Calacanis enthusiastically quotes an academic “study” saying the likelihood of getting a new technology company off the ground outside Silicon Valley is really, really low.  Just a tip for our friends at TechCrunch: Leave Calcanis at home when you come to Austin for the Meet-Up this month!