There's no single recipe for starting a company.
Despite the catchy title, this Instructable is more personal story than authoritative how-to: It chronicles how and why Squid Labs, Instructables, and our sister companies were started, and what we've learned along the way. Squid Labs is a research and design firm that did innovation consulting, and built prototypes for services and products, many of which have since spun-off into separate companies: Instructables, this project-sharing website; Potenco, which is making a hand-held generator for cell phones and laptops; Howtoons, comics showing kids of all ages how to do things; Makani, an energy company seeking to harness high-altitude wind; OptiOpia, a vision-correction business developing low-cost portable vision-testing and lens-fabricating devices; and MonkeyLectric, which makes LED lighting systems for bicycles.
I hope to inspire the creation of more businesses and companies like Squid Labs by telling you how we did it. Take all the information in this Instructable for free; there's no franchise fee! The world needs more people dedicated to having a positive impact.
Step 1: Motivation For Writing This (Now)
Squid Labs is still an ongoing experiment, though we've made it through the first stage (achieving spin-offs), and all signs point to success.
So, why have I chosen to write about Squid Labs now?
First, since Squid Labs is an experiment, it will undoubtedly need to be repeated multiple times, and hopefully improved upon. There are people even more risk-tolerant than the Squid Labs founders out there -- I hope they can learn from the Squid example, and start sooner than they otherwise would. So, this Instructable is primarily written for technical and creative people, early in their careers, but I've tried to make it accessible to anyone. I'd be flattered if it inspired just a few people to take their ideas to the next level!
Second, Instructables, the first of the Squid Labs spin-offs, has reached a small internal metric of success: over a couple of months, it has brought in enough revenue through advertising and related sources to cover its expenses during that same time period.
Even if cash neutrality is all that Instructables ever achieves, and it never actually provides a meaningful return to its investors, I would still be proud of my company. Instructables by its very nature has, and will continue to have, a net positive impact on the world. It's a valuable tool for anyone with a project or idea to share, and we're building a fantastic community. However, don't let me be too humble: Instructables is at the center of a very big trend, we're growing fast, and we have unmatchable authenticity. So, as a member of the inside team, I assure you things are going really well and you can definitely bet on us.
Step 2: Know Your Team Beforehand
Working and playing together -- and sometimes even saving each others lives when kiting experiments went awry or someone (me, actually) fell through the ice -- meant that we knew each others' strengths and abilities, and could trust each other to work towards a common goal.
If you want to start a company that requires a highly motivated and tight-knit team, you should already be working with that team. If there's no one in your research group, club, current job, or social circle that you're already doing cool projects with, branch out and find the people who are. In my experience, it doesn't take long before you know, or are connected to by a mutual friend, everyone in town who is building cool stuff. While it may be fashionable to say innovation can come from anywhere, great teams are easiest to put together in the intellectual hubs. If you're serious, it's worth moving to one of those hubs.
True story: Tim Anderson, a role-model and mentor-of-sorts for Squid Labs in general, showed up and started wandering the hallways of MIT begging for free robots that he could teach to paint. Before long, he'd founded the successful company Z Corp., and was later running MITERS when we showed up.
Step 3: It Started with a Phone Call
Not yet dissuaded in the fall of 2003, I was closing in on what were planned to be the final 6 months of my doctoral work in mechanical engineering at MIT. My research was progressing quite nicely, and I felt on target and in control, when I met with one of my mentors and role models. He insisted that I develop a much more extensive model for the nanoparticle-based printing process I had invented and was researching, and pointed out that all the different branches that I wouldn't be able to address and study now would make excellent projects for grant applications and work for when I was "professor Eric."
I had a moment of clarity and realized my project was truly academic in nature, that its primary goal was to teach me and let me practice a research methodology, and my printing process's real-world impact was probably limited. Further, I didn't want to spend the next 18 months competing for an academic position whose availability was based more on an over-abundance of applicants than on my personal merits, and where I would eventually end up yelling at some poor grad student to finish a project faster so I could get tenured.
Basically, I wanted to continue kitesurfing on windy afternoons, and I wanted to actually have some direct impact on the world.
So, I immediately called up Colin, who had just left his previous company, Kovio, and said, "Whatever you're doing next, we're doing it together. Plus, I'm sure we can rope Saul in; he's pretty much in the same boat as me, but is 6 months further out from graduating." A few days later, Saul was involved, and we then recruited Dan.
So, Squid Labs literally started with a single phone call.
Step 4: Once It Was Decided, Things Moved Fast
First things first, we argued over the name of the company. I was partial to "Vimana Design" because it had a good story and meaning -- Vimanas are mythical flying machines, and at the time most of our projects involved things that fly. Eventually, Squid Labs emerged as a contender, but I was still unconvinced because there was no story behind the name. So, Saul fabricated a story about kitesurfing at our favorite spot, Pleasure Bay, and finding a squid with big eyes, a big brain, and lots of tentacles to juggle multiple projects. The story climaxed with "and it made Eric expel his own ink." Once my friend Seppo drew a squid logo, we were off and going.
Colin and Dan started doing electronics consulting work for a small aerospace company, while Saul and I wrote an application for a small business innovation research (SBIR) grant when we should have been writing our dissertations.
Seeing the world as our oyster, I put together a huge matrix of locations and weighted benefits of those locations for things the Squid team found important: proximity to a world-class university, presence of tropical birds, average wind speed for kitesurfing, and a lack of ex-girlfriends among many others. I wanted to make the decision using an analytical process, but in the end it came down to Boston vs. the San Francisco Bay Area and we literally got snowed in to my house in Somerville, MA the night of the vote!
Step 5: We Need a Warehouse to Store Our Junk! - Find a Location
We looked at dozens of buildings, and seriously looked at 10. In one building in Emeryville, a high-end home-building shop had just gone bankrupt and cleared out, leaving all of their tools (these were going to be auctioned off) and built-in furniture. There were four beautiful desks with a conference room in the front, and a warehouse with skylights in the back. It had a definite fate-like feel: 4 desks and 4 partners; an air-compressor with plumbing, regulators, and fittings already installed; lots of built-in cabinets, drawers, and work-areas; and an upstairs break-room area that could easily be converted to living quarters. We could move in and get to work immediately.
Since Squid Labs had no assets nor any history of making money, I took the lease on our building personally. I had just sold a house in Massachusetts, and my wife, Christy, would soon have a job in biotech, so I was able to convince the landlord that I could (probably) handle the financial burden if Squid Labs never took off. I figured you can only go to zero, and that my partners wouldn't let it get to that point. However, we negotiated a break-lease clause that cost 3 months of rent plus the realtor's fees. The thinking was this: Either we're going to fail and need to get out of the lease before 3 years us up, or we're going to be successful and need much more space before 3 years is up.
Renting 5000 sqft of commercial real estate may not sound like the best way to live and start your business cheaply, but I think it's important to have a space whose primary purpose is work. For the first few months before we got our warehouse, each of us was consulting from our houses or apartments. Work certainly got done, but the positive change in attitude and emotion around the business when we started working from "Squid Labs" was simply amazing. If you're just starting something and won't be able to take an entire building, I would highly recommend finding some office or lab space to share.
Step 6: Bring in Revenue; Pay Yourself
Unlike our relative ownership of the company, which changed over time (see Step 10 Bring On New People), the amount we paid ourselves was always equal. Paychecks were erratic and were often predicated on when a client paid. None of us are particularly motivated by money, and this system was the easiest to implement because it required very little discussion or thinking. Besides, we were all used to living cheaply on graduate student stipends.
Dan did all the bookkeeping and found a service to do payroll and keep track of taxes. We were all grateful that he managed the finances because it seemed like a crappy job; but in the end, it would have been worth paying $1-2 K per month to get a bookkeeper or consulting-CFO involved. As an aside, if you are located in one of the intellectual hubs, local contractors and consultants (lawyers, bookkeepers, etc.) will be expensive; consider finding a firm not on a coast/not in a major city, as they'll be just as good for most of your work and much cheaper.
Once we got our NIH SBIR grant, the money was consistent and allowed us to explore technologies around an interesting area; but it took a full year from writing the application to actually getting the first check, and in the interim we had little insight as to whether we would get it at all. For us, this delay was ok because we had already filed provisional patents around the technology and needed to actually work on graduating from school. If you have an idea that can be fleshed out into "yes, this can be a company" or "no, this won't work" for less than $100 K (approximate average you might expect from a phase-1 SBIR), I'd recommend consulting by day, and working on your own idea at night -- you'll have a year head-start, and won't be tempted to write more grant applications hoping to up your hit percentage just because the topics sound kind of interesting. Within Squid, we wrote, or jointly wrote with other companies, around 10 additional governmental grant applications on a variety of things ranging from highly interesting problems to "let's repurpose this old idea and see what happens." While none were granted and I would be hesitant to recommend the SBIR process, I am specifically not putting SBIR grants into Step 11 Dumb Ideas. If their timing works for your business, and it won't cause you to miss out on other opportunities, SBIR grants are risk and equity-free sources of capital.
Consulting made much more sense. After just a few months, we were getting inbound interest in our research/design/build consulting services. For $1-5 K we'd do a "Feasibility Study," which included evaluating a client's technology or brainstorming with them about ideas, determining milestones for research or prototyping, and establishing a budget and timeline for a larger project. Projects were often several months long and ranged in cost from $20 K to several hundred thousand dollars. The client owned all deliverables, which might be physical prototypes, code, schematics, or circuit-board layouts, and could patent or protect as they saw fit. Normally, one partner was the lead on a project, and on a typical day in the first year of Squid Labs, everyone would be focused on their project doing design, CAD, simulations, layout, or prototyping in the shop, and pulling other partners in as needed. Most of the work we did for clients was confidential, so I won't include many specific details here.
The Feasibility Studies were lots of fun to do, and were probably an amazing value for the clients. Since all the Squids love thinking about new problems and brainstorming solutions, a nominal one-day one-partner study costing $1 K would often get everyone in the company thinking about the subject for the whole day. Further, telling potential clients we had a process involving a paid feasibility study was a great way to determine who was serious about working with us. For example, at least once a week, we'd get an email or phone call similar to this classic one:
I have heard that there is a tremendous amount of energy in each bolt of lightning. Imagine building power plants powered by thunder storms! ... I ask you to help me develop the underlying technology to enable these power plants. Because I have done the hard thinking to come up with this idea, we will split ownership of the patents, and both be rich!!!
So yes, I highly recommend feasibility studies.
Step 7: What to Work On
The general theory for Squid Labs was that we'd take consulting and prototype-building projects, and funnel that money into a series of internal project ideas. If any of the internal projects met with success, we'd license the technology or spin the technology out into a separate company and find people to run that company while we stayed focused on early-stage innovations.
The consulting and prototyping projects initially came through our various contacts from the Media Lab. The Media Lab is unique among graduate programs at MIT, and probably even more generally unique, in that the lab is sponsored by various corporations and governmental agencies and the graduate students are expected to demonstrate and show off their group's work to the sponsors on a very regular basis. On average, I gave one half-hour demo per week to a wide variety of people ranging from Hallmark to DARPA. With that much practice, it's hard not to get really good at telling a compelling story and thinking on your feet. And, the sponsors aren't dumb: good students typically received a job offer of some sort at least every month. It was these opportunities and contacts that we converted into our initial consulting work.
Some how-to advice amidst a self-indulgent story: To successfully start a company or market yourself to attract clients, you'll need to practice telling your story. If you don't already have multiple opportunities to practice, create some by joining a local group that holds public events (like dorkbot or Maker Faire) or putting a sign on your door that says "come in for a tour of my really sweet projects." Local museums, colleges, and universities may have interesting clubs you can join or visit. Put projects up on Instructables. Practice telling your story to both experts and the general public -- these are two very different skills, and you should learn both.
In my experience, people who are good at making stuff (by machining, coding, CAD, designing circuit boards, etc...) are always in demand, because there are fewer of us than people who can't make stuff. Once others know you can make stuff and that you're looking for side-projects or consulting work, opportunities should follow -- even without a Media Lab network to leverage.
The internal Squid Labs projects came from various ideas we'd been thinking about and working on outside of our official graduate research projects. These included battery vending machines, electro-spinning of nanoparticle fibers, ThinkCycle (a precursor to Instructables), tons of carbon nanotube ideas, flexible membrane molding for eye-glasses, Howtoons, kites and kiteboards of all descriptions, modular bikes, and strain-sensing rope. To give credit where credit is due: Saul is a total master of taking the first steps on a project and getting people excited; most of the above list started with him. We use to joke that Saul would start projects, and I would finish them. (Keep this in mind when choosing partners, as complementary traits are a bonus.)
There were a few things we specifically choose not to work on, despite existing opportunities. Chief among them were any technology that MIT had rights to. Colin, Saul, and I had all been a part of licensing technology that we had developed within MIT to a company that Colin and some others from our lab were founding. MIT's technology licensing office and the Media Lab itself both did some things that were counterproductive to the success of the young company and the happiness of the people involved. They made the process so painful that we vowed to avoid licensing technology from MIT in the future.
As an engineer, I feel that my strength is "problem solving" rather than deep knowledge of a specific technique or technology. There are pluses and minuses, but this is definitely the right attitude for attacking problems I've never thought about, and it helps when projects that aren't gaining ground need to be dropped.
Step 8: The Popcorn Machine of Ideas
I call this a trait, but I think it’s learnable. I’m often asked where Squid Labs got its initial set of ideas, and that’s actually a tough question – they seemed to be just floating around us. If you don’t already feel flooded with ideas yourself, here’s an analogy that might help you get going:
As a silly art project, joke, and something to tell a story about all wrapped together, my wife, Christy, our housemate Mitch, and I decided to Live an Aesthetic Life for a week by establishing a single color for each day of the week, and dressing in that color, only eating foods of that color, listening to music of that color, and so on. On orange day, Christy rode her orange bike to work, but Mitch and I were out of luck. So, we half-heartedly looked around our neighborhood for someone with an orange car, thinking we might be able to convince them that our project sounded like fun. It was a tall order, and we weren’t exactly successful, but I now recognize every orange car in the neighborhood. The orange cars had always been there, but I didn’t consciously take note of them until I specifically went looking, and now I’ll never miss them (especially that orange X-Terra with the vanity plate: 3DOGXT).
I think the search for ideas is the same. Try to be particularly attentive to things you’d like to change or improve. Once you’re in the right mindset, more and more will start popping out.
Here’s my chance to rail against MBA students: I know of many companies that were formed because some MBA students heard a particular niche market was “under-monetized.” They then convince themselves of their passion for their solution, as if the problem was something really painful to them personally. Surely there’s money to be made in these types of scenarios, but if this is your tactic for an idea, be honest about your intentions.
Step 9: Live as Cheaply as Possible So You Can Take Bigger Risks
Shoshana Berger and Grace Hawthorne tell one of my favorite stories about starting ReadyMade magazine on 12 credit cards by moving their expenses from one card to another until their revenue picked up. That's guts!
Another awesome trick is to have a spouse or significant other support you. If you live cheaply, one normal salary can easily support two people. Thanks Christy for supporting me by working in a giant bureaucratic pharmaceutical company while I started Squid! Or, if you're working rather than spending time in graduate school, see if you can save an amount equal or greater than you spend until you're ready to lose the day job. Finally, it's worth recognizing that I was 26 when I completed my doctorate and started Squid Labs, and kids were not on the horizon, even though I was married.
Reducing your costs and dependencies certainly helps, but there's also an element of enjoyment in taking risks that is probably hardwired/genetic/whatever. For perspective, I:
- have been swept out into the Pacific on an ebb tide while kitesurfing alone under the Golden Gate Bridge
- lied on my first mortgage because the bank and I had a disagreement about the prudent percentage of total income one should dedicate to a house (that worked out great, but will be saved for another Instructable)
- was the test pilot for the Stoopid Thing
- traveled to countries on the State Department's travel advisory list (cheap airfare, cheap accommodations, locals asking you if there were riots in the town you just arrived from!)
- and, have broken nearly 20 bones as a result of taking risks that didn't turn out so well -- click here for graphic images of my head trauma!
If this laundry list of stupid behavior strikes you as just that, perhaps you should consider a more conservative business. If not, grab some friends and a couple of free loaves of bread, and head out for an adventure...
Step 10: Bring On New People
Perhaps notably absent from this list is a "business person." We interviewed and tried working with a few people whose job it was to license our technologies, fund raise, or do initial market research, but in the end, it never worked out. Right or wrong, most of the Squids saw these activities more akin to busywork than anything requiring real talent, and the results were near identical when we did it ourselves compared to when someone trained-in-the-art did it. While I will admit to learning some very valuable Microsoft Excel tricks from business-people, the Scientific Method applies to running a business, and, in my opinion, someone, who can identify measurable outputs, run experiments, analyze data, and rigorously synthesize it all into actionable items, is truly valuable with or without a business background.
With just the initial four founders, a Limited Liability Corporation appeared to be the easiest thing to start, so that's what we did. Our incorporation documents were largely drafted from books with titles like "How to Start an LLC." Ownership of the company and voting rights were determined on a time-based function. Initial ownership was equal across the four founding partners, and as new people were brought on, their ownership would be determined by their months worked at the company divided by the total months worked by everyone (effectively diluting the ownership of the founders). Ownership of a spin-off company or licensed technology would be determined at the time of the spin-off or licensing. The concept was to create a structure where "work done" would be rewarded rather than simply being first. We wanted to attract top talent in the future, and thought that the best way to do so would be to give the new people a shot at owning as much of the company as the founders, if they stuck around long enough and created enough cool stuff.
Bringing new people into an egalitarian partnership such as ours had its difficulties, which were compounded by our bizarre ownership structure. We tried, usually with success, to do everything by consensus. Everyone shared the same overall vision, but coming to agreement on the details proved time-consuming, and doing so among 7 people is exponentially more difficult than 4.
When I do it again, I still won't establish a "boss" and I'll still try to build consensus, but I would like to use a little more process to make decisions faster. We had established a process for making decisions (voting by percentage ownership), but we never actually used it. I think we could have made the same decisions, but arrived at them faster by using our process.
Step 11: Some Dumb Ideas
First dumb idea: We spent a lot of time soliciting and negotiating investment directly into Squid Labs. For a chunk of cash, we were prepared to sell some fixed percentage ownership in the company (and hence ownership in any spin-off or licensing deals). Since we had a non-standard set of incorporation documents, were an LLC and could not issue preferred stock, and -- for one potential investor at least -- were doing cash rather than accrual accounting (or maybe the other way around?) the terms we got were not good. Investors want a simple story, and ours was anything but simple. It took a huge amount of time and yielded nothing. In the end, it's a good thing we never took an investment in Squid Labs because we would be totally regretting it now.
Second dumb idea: Squid Labs was founded as an innovation factory. The plan was to come up with tons of ideas, test out the physics or market by building an initial prototype, and then license the technology or find a management team and spin off a company based on the technology. The partners at Squid would remain focused on innovation and starting new things while the various successful prototypes grew into real products, services, and companies. Despite some very good technology -- strain sensing rope, for example -- we were not able to license anything. Perhaps it was bad luck, or simply lack of a track record. Next, finding management teams also proved impossible. Any founder-class individuals who could take a nascent technology and turn it in to a real product already had their own ideas and companies, and weren't interested in ours. Dan touches on some of these points and more, in this blog post, Advice for the budding inventor.
Third dumb idea: Ownership of the company had no vesting or vesting-like provisions (vesting is to give an immediately secured right of present or future enjoyment). My advice to anyone starting a company is that everyone, founders included, should vest; a 4-year period with a 1-year cliff is a good starting place. Acceleration on change-of-control can protect everyone in the event that the idea really takes off, but anyone unwilling to accept some form of vesting isn't dedicated.
Fourth (somewhat) dumb idea: Drafting our own LLC agreement was inexpensive and captured much of the spirit of what we wanted. However, once we were spinning off companies and getting venture capitalists involved in those companies, that document turned into a big liability. To invest, the VC's insisted that lawyers review everything, and because our document was something out of the ordinary, this incurred significant additional expense and time. Additionally, the spirit of the Squid agreement was neutered: Our lawyers determined that instead of making decisions based on majority or super-majority votes as specified in our agreeement, all decisions should be unanimous to mitigate risk. While we did reach unanimous consent in every case, this again required additional time and expense, and, in my opinion, didn't appreciably change the risk-profile of the spin-off company. (Some of my partners don't share this perspective, which is a testament to the challenges of drafting these agreements.) So, if you can spend the time to understand some existing structures, I still think writing your own LLC agreement is a good idea, but understand that if you will eventually want outside capital, that document will be subject to more scrutiny than originally intended.
Step 12: Get Recognition
To get recognition, apply all the same things about telling your story from Step 7 What to Work On. Your work maybe great, but if no one can find it, they'll never contact you. Start a blog, post Instructables, post videos, create a portfolio of your work, and generally take the time to carefully document what you're doing and building. Putting the extra effort into documentation really pays dividends for a long time, because you'll find yourself using the material over and over. For example, the canonical ice-kite-butt-boarding video wasn't the best of a number of similar different videos, it was the only nicely edited video we made, and so I keep showing it over and over.
We applied and were accepted to present a number of our projects at various conferences, and from there started getting press inquiries. Some of the first press about Squid Labs was Wired's The Dream Factory article, where we debuted Instructables. This piece was the result of those conference presentations, some connections from the Media Lab, us being ourselves, and freely telling people what we were up to.
Step 13: The Story of Instructables, Or Bring on the VC's
Around 2001, Saul, Tim, and I started learning to kitesurf. The combination of sailing, unpredictable weather, experimentation, and sheer power strongly appealed to each of us. The sport was still its infancy, and the gear was unrefined and way too expensive for anyone on a graduate student budget, so we built our own.
We'd turn up at beaches around Boston with hand-sewn kites and boards shaped from plywood. Half the equipment would break and the other half would perform beautifully. We'd then document our results on our personal websites and a blog called Zeroprestige (which has since moved to the Instructables ZeroPrestige group). Soon we were getting emails from people asking for more information, wanting to meet us at the beach, and looking for tips on finding/building similar communities. As a result of freely sharing our work, we met a ton of great people, received opportunities that resulted in the formation of Monkey Kites, and were smacked in the face with the need for a web-based documentation system.
Around the same time, ThinkCycle was starting up. ThinkCycle's concept was to utilize "unused braincycles" by matching up problems in the developing world with engineers in the developed world. While a few good projects emerged, the overall system was a failure because there are relatively few people who will passionately work on problems that are not their own.
After starting Squid Labs, and especially when Ryan joined, we finally had the resources to take the above lessons and do it right. We hammered out a prototype version of the site -- complete with the initial content of electronics, cooking, kiting, and bicycle projects -- and released it in August 2005 at the O'Reilly Foo Camp conference.
Within a few months, most of the new Instructables were posted by people we didn't know personally, and the site was attracting a fair amount of traffic (about a 1/10th of what it is today) while still growing. Squid couldn't afford to hire full-time people for Instructables, so I decided to try raising money from venture capitalists.
I had no idea what I was doing, and through trial and error discovered many of the things mentioned in Dumb Ideas. While pitching to OATV, who would later fund Instructables, they asked "So, who's going to be tied to the mast?" Their body language gave away that they thought I was the most mature of the Squid partners, so I said "me, of course" just to keep the meeting going. Everyone, Squids and VCs alike, seemed relieved, and that was literally the total amount of discussion around which partner would head the first spin-off.
The fundraising process took around 9 months of me working quarter-time on it. You couldn't possibly be any more naive, so take that as an upper bound; though more man-hours won't necessarily speed the process up as you're often waiting for introductions or for decisions from other people. With money in the bank, I hired Cloude, who has been absolutely instrumental in building Instructables to what it is today, and putting together the awesome team that runs it.
A quick note on hiring people in an intellectual hub: Finding good people to manage and run with our spin-off companies without us was impossible; but with one of the Squid partners involved and running it, attracting top talent became much easier. There is a caveat, though: You'll still need founder-class people for the first few positions, and in the 2006 Bay Area environment, nearly every smart person out there was already running/starting their own business. So, while interviewing, I always asked why people weren't doing their own thing, and I've since been convinced that everyone on my team could (or has in the past!) run their own team, but has a great reason why they now want to be with Instructables. In fact, Leah, who was one of the first hires at Instructables, has since started her own company, Pownce, a really cool social file-sharing site.
Step 14: The Pile-On Effect - We Smell Blood! And, Some Notes About Investors
It sounds dumb that potential investors would put so much weight in what others think, but don't underestimate it. People are busy, and if they can look to someone they trust or respect for an opinion, it saves them having to deeply think about it themselves. That sucks because we should all be evaluated on our true merits, but at least knowing this gives entrepreneurs an edge in evaluating investors.
When I was pitching Instructables, I read everything I could find about how to deal with investors, how to best pitch, how to make a great first impression, etc... with the best of the bunch coming from my friend Nivi's site Venture Hacks. My synthesis of the full body of work is this: There is no single best strategy, and no one really knows how to do it. Investors are just people, and while an obscene number of them seem to actually like Sand Hill Road and its boring plain office parks, they each have different opinions and methodologies. Some will make decisions based on an analytical by-the-numbers (even if they're fabricated!) approach, while others will determine if they like as you as person. Both are valid approaches, and both may have worked in the past, effectively validating them further. So, advice from one investor may be totally inappropriate when talking to another. Sarcasm and cynicism aside, while pitching, I met a large number of highly-engaged intelligent people that truly wanted to build great businesses, and that was fun in and of itself.
Dating analogies apply: There's no single best way to find and attract someone for romance, and the same is true for investment. It may seem like non-advice, but I believe the best approach is to treat people as you'd like to be treated. Tell your story in the same way you'd like to hear it, being honest about both your optimism and your fears.
While each investor may be a unique and beautiful snowflake, it's important to realize that they all are looking for a return. That return might come in the form of money from a public offering of your company, an acquisition, or even dividends; it might also come from the prestige of being an owner of a highly successful company. If you do choose to take investment, make sure you're really clear on the investor's return expectations and timelines. For reference, I've heard all sorts of expectations such as 2x in one year to 10x in seven years, which I convert to compounded annual interest to compare (100% and 39% respectively). A good understanding of the desired return will help you determine type and size of investment, and guide you to think rationally about generating that return (euphemistically, the exit!).
Step 15: Grab Opportunities When They Arise
Of the current spin-off companies, half were based on internal ideas that really took off, and half were based on exciting opportunities that fell into our grasp and found fertile ground -- it's an exercise for the reader to figure which company is which. The flip-side is that there are a bunch of projects that didn't take off, and are dormant. When I see other people working on projects similar to my old ones, my first response is always: "Finally! Hopefully they'll have better luck." Being able to lay a project down is part of being able to focus on a successful one.
Step 16: The Story Goes On
I didn't read or hear anything that really pushed me over the edge to start something, but I have come across a few excellent books that have helped put frameworks around many of the things I think about:
The Innovator's Solution
Buffett: The Making of an American Capitalist
The 4-Hour Workweek
Poor Charlie's Almanack
Here's a friend's take on a very similar theme:
A Story of GameLayers, Inc.
People ask me all the time if it was hard to start a business. Only the first step of truly deciding to go for it is hard. After that, it's a whole bunch of small things that add up to something great. If you make just a little bit of progress everyday, over time you can accomplish a great deal.