Archive for category business
Got a trademark? Go phish.
It turns out that overseas scammers target more than just naive pensioners. They try to hit up businesses, too.
Last November, my friend Lyle suggested that I trademark the name of Nesota LLC’s main product, Blurity. If nothing else, a registered trademark would be a piece of property that could be useful in the event of a sale of the company. I thought it sounded like a good idea, or at least one that wouldn’t hurt, so I put the process in motion. Eight months later, the registration certificate arrived:
Blurity trademark registration (click for larger)
It didn’t take long for the sharks to smell blood.
In the span of a few weeks, I received several letters from various European locales, each of which made every attempt to look like official trademark registration forms.
The official-looking envelope from Switzerland (click for larger)
They used mixtures of French and English. They had official-sounding names. They made vague promises of IP protection. And oh yes, they asked for money.
It seems that a bit less than US$3000 was the typical going rate. It was only in the smallest of the small type that the letters fessed up about not being official government agencies. In a strict sense, they were not phishing, since they did not impersonate a legitimate agency. However, in a practical sense, given the unfamiliarity of most Americans with European trademarks, the letters were effectively pretending to be the actual registrar, OHIM.
Send us money! We are so official! (click for larger)
Nesota LLC is small enough that the thought of dropping a couple grand on a European trademark is a complete non-starter, but I have to imagine that slightly larger companies could be duped. Maybe an innocent admin would see the official-looking bill and think that she’s just doing her job by paying it. Empirically, there must be some suckers out there, because there are several groups sending out these Who’s-Who-type propositions.
If you’re in the position of acquiring trademarks, be vigilant. Cutting checks based on uncertainty is a quick way to financial ruin.
Going for it
About six and a half years ago, a man named David Roux came to speak at Rose-Hulman. I was an undergrad at the time, in my junior year, and I was probably more concerned with an upcoming snowboarding trip to Steamboat Springs than a lecture from some unfamiliar old guy. However, his main point sunk in: Don’t be a worker bee. Start. Lead. Explore. Create. Be an entrepreneur.
As of today, I am officially abandoning my job hunt. I have found what I was looking for; I had it all along. The problem was a lack of complete commitment.
I have been doing entrepreneurial things since I was a child. Mowing lawns at first, later doing IT consulting and computer repair. While in undergrad, I dabbled in the world of web development by building Bonneville Club, which served as an invaluable lab for me to learn about server administration, community building, people management, and revenue generation. Later, I experienced the thrill of being web-famous with a couple of popular blog posts and millions of visitors to my webcomic.
The business card from my IT consulting "company" during high school, a decade ago.
I valued my time at Medtronic after undergrad. I had wonderful co-workers, a company that treated its employees very well, and a salary higher than many see in their lifetimes. But I wasn’t satisfied.
“I realize this seems odd advice. If they make your life so good that you don’t want to leave, why not work there? Because, in effect, you’re probably getting a local maximum. You need a certain activation energy to start a startup. So an employer who’s fairly pleasant to work for can lull you into staying indefinitely, even if it would be a net win for you to leave.”
When I went to grad school, I chose to study entrepreneurship in the Management Science and Engineering program. I took courses on starting companies. I attended lectures by famous entrepreneurs. I talked with Silicon Valley venture capitalists and CEOs. I idolized my successful-entrepreneur professors. I watched my friends start and build businesses.
There was, I believe, a bit of jealousy. If my friends could do it, why not me? I mean, I was smart, too. Why couldn’t I experience the dizzying highs and crushing lows? Why couldn’t I build amazing products? Why couldn’t I achieve financial freedom? Why not?
I have come to realize that there were two things holding me back: fear and social expectations. For a time I used money or a lack of ideas as excuses, but a detailed examination of business case studies shows that deficiencies in those areas rarely represented insurmountable obstacles. No, the fear of the unknown kept me locked in place, and that kept me in line with society. Why give up a good job at a solid company in the pursuit of a crazy dream? What’s more, society tends to fear change and uncertainty and ostracize those who dare challenge the status quo. To many, the thought of venturing off on one’s own is pure madness.
But without change there cannot be progress. Who will move the world if not me?
“If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It’s not something you have to know about ‘business’ to do. Build something users love, and spend less than you make. How hard is that?”
– Paul Graham
In some ways, the economic collapse was the best thing that could have happened for me. It made my job search difficult to the point of impossibility. In hindsight, I don’t know why I was looking for a job at an established company instead of heading out on my own. Clearly, my heart wasn’t in the hunt. The challenge was worsened by my desire to switch into a more business-oriented role and away from my technical roots. I had good discussions with a few companies, and interviews with some others, but they seemed loath to help me make that transition. Some went as far as to offer me technical roles developing software, but such capitulation would be, in my mind, career suicide. Another job as a software engineer for somebody else would nullify my entire graduate education and permanently cement me in my pigeonhole. I would rather abandon high-tech entirely than write software in a cube for somebody else. Oh, and I don’t think I’m a very good programmer.
“You‘ve got all these cops thinking you‘re a lawyer. And you got all these lawyers thinking you‘re some kind of cop. You‘ve got everybody fooled, don’t you?“
— from the film “Michael Clayton”
On the other hand, writing software for myself is entirely different. Despite my not being particularly good at it, writing software for my own ends is deeply satisfying. I love the act of creation. I love the instant gratification. I love the communion between me and my machine.
Thus, my startup is a software startup. Of my many interests — hockey, photography, baking, etc. — software is the one most amenable to company-building. Who cares if the prototype code is crap? If it works well enough to get me to the next stage, where I might be able to hire a competent coder to replace my hacker self, then the mission has been accomplished.
Nesota LLC world headquarters
My intent is to give this my all. When I turn 30 in three years, I want to be either rich or penniless. The outcome doesn’t matter so much to me as long as it’s not the mushy middle; that would be indicative of a failure. I want to know that I gave it my full effort. I don’t want to half-ass it and spend the next decade wondering what could have been.
Hopes and dreams
I’m not rich. I’m not famous. I have limited capital, a car with 204k miles on it, and a two-year-old computer.
But I have ambition. I’m going for it.
(cross-posted at Keacher.com)
The Idea(s)
It is a common belief in Silicon Valley that ideas are worth very little. Instead, execution is the key to success. Consider the famous Edison quotation:
“Genius is 1% inspiration and 99% perspiration.”
So it went with Nesota. I considered many ideas, including:
- Group travel planning/coordination service, born out of my own frustration
- Consumer-grade thermal imaging camera, prompted by stories of volunteer firefighters borrowing the departments’ thermal cameras for use as hunting aids
- Group gift service, where money for a gift from a group could be collected and the gift selected
- Coaching hub, where students could find coaches, coaches could find students, and payment could be exchanged in a formal manner (”YouCoach.Me”)
- Broad automotive enthusiast site, in the style of BonnevilleClub.com (my successful niche site for Pontiac Bonneville owners, now sold)
- Photography TV channel or show, showing how to achieve various ends through technique (kind of like Good Eats meets The Shot)
- Service for pestering people to stop procrastinating and start working, targeted at entrepreneurs who can’t seem to get their projects going
In the months and years since my initial thoughts, some of these have come to be (for example, StickK partially fulfills the nagging-service use case), and others remain frustratingly absent (like the consumer-grade thermal camera, though it seems to be a ripe opportunity for Redshift Systems). Part of the challenge in selecting an idea is having the perseverance to stick with a single idea instead of running off with the idea-of-the-week, each of which is “surely easier” and “certainly more profitable” than the original idea under development.
After a bunch of false starts (anybody want to buy the domain YouCoach.Me?), I settled on a computational photography idea that grew out of a discussion with a good friend. What, specifically? Well, if a photographer or the camera makes a mistake with the exposure setting, the white balance, or the framing, all of those problems can be corrected rather simply in post-production. However, if a focusing error is made, the photographer has few good options. Sure, he can hit the picture with “unsharp mask” and its brethren, but those filters serve only to increase the acutance of the image. They don’t fix the underlying focus problem. What to do?
It turns out that there’s a better way. A way that’s been used to a limited extent in astronomy and microscopy for years. A way that presents an exceptionally difficult technical challenge to the implementer. A way that’s ripe for commercialization.
Imagine: if your camera produces a blurry photo because of a focusing error or camera movement, this technique can recover the latent sharp image and save the day. Such is the beauty of the current idea.
The challenge now is the implementation.
The Plan
The purpose of a business is to make money. Business make money by bringing in more than they spend. Doing that requires a plan.
When I filed the paperwork to organize Nesota, I didn’t have much of a plan. Nay — I had no plan at all. I had a whiteboard, an LLC, and a web server. No plan.
There is some precedent for starting a company before knowing the company’s area of business. For example, the founders of Hewlett-Packard started their now-enormous company without a clear idea of what to do. Eventually, they figured it out, and HP went on to help establish what became “Silicon Valley” as we know it.
Hewlett and Packard might not have known the exact nature of their future business, but they knew enough to develop a list of guidelines. That seemed like a good idea, so I did the same:
- Find a problem first, then build the technology around the problem, not vice-versa. An all-too-common mistake among tech companies run by engineers is to focus on the technology instead of the customer needs. In effect, they build an amazing solution to a problem nobody has. They expect the world to beat a path to their door just because they have the coolest technological marvel. Sorry, doesn’t work that way. The correct approach is to develop a hypothesis about a problem, validate your assumptions by bringing your ideas in front of actual potential customers, and iterating until you hit on something viable.
- Identify an opportunity with low market risk but high technical risk. Think about it: not often have companies failed solely because the engineers shrugged and said, “Well, I guess what we set out to do is impossible,” med-tech and bio-tech companies excepted. In general, if the market exists, engineering can figure out a way to deliver something that will solve the customers’ problems.
- Ship early and ship often. Focus on getting early cashflow and customers to support continued work and obtain real feedback. Manage scope to keep the engineering difficulty and schedule in check.
- Build a sustainable business. Something with a real business model (i.e., not reliant on web advertising, and definitely not “free”). Something that will still be relevant and valuable in a couple of years. Not necessarily “sustainable” in the green sense of the word.
- Have enough profit potential to be a lifestyle business. I wanted something that would give me financial freedom. If I could do it without hiring anybody, so much the better. Net income targets would be in the $100k — $500k per year range. Not huge, but enough to allow me to live comfortably.
- Not requiring external investment. Revenue goals like those mentioned above are far too low to be interesting to venture capitalists. Accepting outside investment makes one beholden to outside interests, which are not always well-aligned withe the founders. No, I wanted to bootstrap the entire operation.
- Selling products as opposed to services. Consulting and contract work can be lucrative, but the money is flowing only while you’re working, and such business don’t scale well. A business selling products can “work” even while I’m hiking in the woods.
- Doing something I love. Work takes a lot of time. Why spend so much of the best years of my life doing something I don’t enjoy? There’s always a risk in choosing an enjoyable topic that the existence of the company will destroy the enjoyment, but that can be mitigated by selecting a related field instead of the primary area of enjoyment.
Many of these criteria were informed by my experiences at Stanford, especially the course MS&E 273: Technology Venture Formation, which was perhaps the most useful, the most enjoyable, and the most work of any I took there.
Criteria: done. Next step: identify The Problem.
Minnesota scene
A few Twin Cities startups are alive and kicking, so says an article in Monday’s StarTribune. And not just the usual med-tech ventures one expects in Minnesota, such as Apnex; the companies featured in the story were web/mobile firms incubated in Y Combinator: FanChatter and Socialbrowse.
While I’m skeptical about the long-term viability of any company that rests upon social interaction, Facebook included, I applaud the efforts of FanChatter and SocialBrowse to get something going in the Minnesota startup scene. Sure, there are some others worth mentioning. A quick Crunchbase search for companies in the Minneapolis area pops up a few familiar names, like GasBuddy and TinyUrl, but that pales in comparison to the wealth of startups in Silicon Valley.
I spent the past few years living in Palo Alto, and I have witnessed first-hand how pervasive entrepeneurship can become in a culture. Out in Silicon Valley, it’s a badge of honor to be working at a startup. Out in Silicon Valley, everybody seems to know at least a few VCs. Out in Silicon Valley, there’s an extensive support structure for entrepreneurs and their fledgling companies. Minnesota has a ways to go.
In Minnesota, it seems that most residents don’t even have a clear understanding of the word “startup.” They smile and nod, because they’re Minnesota Nice, but the concept evades them. I’d like to see that change.
Part of the trouble is that the Twin Cities are often thought of as a med-tech innovation center. Other subjects might get short shrift. I have a background in medical devices, but I’m not qualified (yet) to lead such a venture, so I prefer to focus on smaller IT-type ideas, even those small enough to be bootstrapped.
Here are some resources and entrepreneurial resources that might be of use to Minnesota startups:
- VCs: Split Rock Partners, Rain Source Capital, the yet-to-be-launched Altavail Partners, others listed at the MVCA
- Competitions/Demo Days: MinneDemo, Minnesota Cup
- Companies: Crunchbase listings
- Organizations: Minnesota High Tech Association, getSTEM
If anybody is interested in a Minnesota HN-type meetup, let me know. Also, feel free to pass along any information to add to the list.
The Setup
And with the stroke of a pen, Nesota LLC was born. Why an LLC? Why Minnesota? Why the name?
I had long performed entrepreneurial activities outside of a formal business structure. Consulting, BonnevilleClub.com, somewhat sketchy “independent contractor” gigs, and so on. According to the law, such activity is treated as a sole proprietorship, which is to say that the business and my person were legally indistinguishable. I reported my income as self-employment, paid taxes, and went on with life. There was no liability protection, but I had little to lose, and I didn’t want to bother with the paperwork.
Times change. Nowadays, I have something to lose. Nowadays, I expect to be dealing with large sums. Nowadays, I can handle the paperwork. I needed a way to provide some separation between my business activities and my personal life.
Why an LLC? I chose to organize Nesota as an LLC for both simplicity and tax minimization. All profits (and losses) pass through to me, but I enjoy the protections of the corporate veil by maintaining the company as a separate entity; namely, I’m less afraid of losing everything should I be sued, which is a near certainty assuming I achieve success. I could have organized as a Type-S corporation, which also features pass-through finances, but I felt the LLC was easier to establish.
Why Minnesota? There were some legal reasons, such as the protection under Minnesota statute of work done while moonlighting (something not true of all states), but the most compelling factors were my existing Minnesota residency and the low cost of filing in Minnesota: $135 (at the time), and I was in. No $800 franchise tax like California. No need for a registered agent in Delaware. No need to pay even more fees to register as a foreign company in the state with the actual operations. Will the relatively high Minnesota personal income tax rate hurt? Well, sure, but I’ll file that under “problems I’d be happy to have.” It’s not like I can’t change the legal structure of the business should I encounter wild success. Doing so might result in a high one-time expense, but hey — in that scenario, I’m already wildly successful, right?
Why Nesota? Because it’s pronounceable. Well, that and the .com domain name was available. Very important. And because I wasn’t sure what the company would be doing, so I couldn’t chose a more topical name. As for the origin, I took a play from Cisco’s book and trimmed out a name from a nearby geographical feature. In Cisco’s case, the name came from San Francisco. In Nesota’s case, the origin is Minnesota. I’m actually surprised that the name was available. According to my research, there have been a few companies with similar names in the 1970s and 1980s, but none are currently active. The pronunciation is slightly ambiguous, but I say it with three syllables and a short “e”: neh-so’-tah.
From there, it was a simple matter of establishing a business address, getting an EIN from the IRS, and opening a business bank account. The foundation had been laid!
One problem remained, and it was a doozy: how to make money.
Next: The Plan.