I Need MOOOOO Therapy

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These Moo cards are really starting to take my brain and feelings for a loop.
The impulse to make more is staggering. It takes a huge force of will to not go and upload more pics and order more.
When I order them, my intent is to use them as a personal ID card or as a unique business card design. But I find that when I get them, it is super hard to part with them. I like them so much that it’s hard for me to give them away! I think it’s the fact that I took those pics on the backs. I have a deep attachment to them simply for that fact alone.
It’s also their novelty and size. The slender aspect ratio of these cards makes them almost cute and you want to own them. I can’t part with them because they are so keep-a-ble!
Then when I show them to others, they like them too. But they won’t take just any card; they want to pick. They look carefully through them and only pick the one they like. Or take more than one. How strange. They want that special one that appeals to them alone, even though I took those pics and like them all.
It is even more pronounced when I show my biz cards. In case you didn’t know, the backs of my business Moo cards have images of my startups that I take on occasion to document their “Making Of”. So when they take my Moo cards, they don’t want some strange image or dudes on the card backs; they want something that is familiar to them, like either their own company or if they know the people.
Moo cards are strangely addictive and produce such interesting reactions in myself and in others. I think I am going to need some MOOOO therapy soon to figure this all out…

The Importance of Indemnification

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The other day, I met a guy who told me about a situation he was in where he was a consultant for a company who got in a legal dispute with another firm. Then he got tangled up in the lawsuit and got sued by the other firm and was forced to defend himself with his own funds because there was no clear indemnification in any contracting agreement.
At the moment, this guy is shelling out between $25K to $50K per month out of his own pocket to pay for legal fees. There is a soon to come happy ending though. It turns out that this guy was employed through another temp firm while working for the company. While indemnification was not explicit, it just so happens that employees are automatically indemnified via the California Labor Code (see section 2802) and is the same for pretty much every other state’s Labor Code.
However, had this guy worked directly for the company without an official statement of indemnification as a consultant, he would have been really screwed. There would be no clear path for indemnification and thus reimbursement for legal fees.
Very scary. How would you like to pay out of pocket legal fees of $25K to $50K per month, and for months on end?
As soon as I heard this story, I called my lawyer and thanked him for being so adamant about indemnification.
In my journey to implement indemnification, here are my thoughts and discoveries:
1. Ignorance of the state’s Corporation Code, especially with respect to indemnification, is common among the lawyers I’ve worked with. So they err on the side of company favorable tactics, which is to never give anything away, including indemnifying advisors.
2. Not knowing or understanding indemnification is also shared by investors and other entrepreneurs.
3. It’s very much a worst-case scenario discussion. It’s difficult to discuss sometimes.
4. Experienced entrepreneurs have no issue with it. They just assume they’ll protect anybody that does work for them. It’s natural for them to thank people who help them in that way.
5. By the way, all the Corporation Codes stipulate that in the case of an external person causing harm willfully to a company, the Code states that indemnification is invalid, even if a contracting/consulting/advisory agreement calls for indemnification. By the way, there is the case of unknowingly causing harm which is a huge grey area and would probably have to be explored on a case by case basis.
If you’re interested, you can read about indemnification in the California Corporation Code or in the Delaware Corporation Code.
6. No matter what, I do not want to put my personal assets at risk for another company. It doesn’t make sense at all.
7. I will definitely walk away from any deal that will not indemnify me as an advisor. It is a deal breaker.

The Most Amazing Off Road Vehicle Ever

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This isn’t a usual Business post. But I just had to post about it.
Today, my buddy Pooj and I were on our way home when one of the biggest nor’easters hits the east coast. It, well…kind of ruined our day. We both got to JFK only to wait many hours in the Admiral’s Club to find out that they cancelled all flights out of JFK to everywhere. We tried everything; getting on flights to LA, connect through everywhere, get on an international flight connecting through SF or LA – all cancelled. Dejectedly, we removed ourselves from the comfy Admiral’s Club where we were just sitting there surfing the Web and ragging on people. After looking at the taxi line (WAY TOO LONG), we jumped into the LIRR back which was quite an experience in hiking. Up stairs, down stairs, up stairs, walk more, down stairs, up stiars, walk more. ARG!!!
Eventually, we got back to Penn Station and after one more train ride to Grand Central, we said enough was enough. We’ve been dragging our luggage from JFK to Manhattan and pretty tired of that, especially given the constantly increasing snowfall.
So upon exitting Grand Central we said “f**k it” and jumped into the taxi line. As we were pelted by these little bits of ice which tried to fake itself into being snow, a guy pulls up in one of these:

Both of us looked at each other and had enough of the snow pelting so we jumped into this contraption.
Boy. I wish I had a video camera. It was the most amazing ride I ever had.
Imagine the snow piling up on the roads in this really slippery slush and taxis whipping in and around you as this guy is pedalling to your destination, which for us was only 5 blocks away. We weave our way around cars and people as he pedals in the middle of the road and we’re wondering how this bike-thing isn’t skidding out or doing some kind of donuts in the snow. We marvel at this bike’s manuverability as he is on the road at one minute, and then he jumps onto the sidewalk and now he is weaving in and around people as they walk on the sidewalk! Wow! And he even swears at another pedestrian in true New Yorker style! What a treat! In another minute, he is back on the road and riding along with cars and then lastly, we tell him that our stop is over there on the right, so immediately he turns right and leaps onto the sidewalk and delivers us to the doorstep.
It was then we were able to look at this thing. What kind of tires this contraption must have to transport us through ice and snow without skidding or causing an accident, and only through human power alone?
An amazing invention, this tricycle-come-rickshaw with unbelievable off-road capabilities. If it ever snows in NYC, I would highly recommend jumping off the taxi line and taking one of these.

The Mad Rush to Close

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Raising money is never fun. When the time draws near to a date at which you want to officially stop fund raising and collect the money, things tend to get pretty hectic.
So what happens exactly? And who is involved? What are things you should watch out for?
Let’s say you created a term sheet X weeks or months ago. You’ve met with a whole bunch of investors and some of them say they will invest (usually we say “we’ve soft circled them”). The term sheet has been negotiated and potentially changed, and you circulate that back to each investor and finally everyone says they’re on board and they’re ok with the final term sheet.
And then, time draws near and you realize it’s time to get serious and actually get the money. What happens?
1. In the financings I’ve done, the law firm project manages this process. They help circulate the documents, gather signatures, send reminders, etc.
2. The law firm has an escrow account where investors wire their money. As one entrepreneur I met put it, “The reason why you wire to an escrow account is to prevent us from absconding with your money (if wired into our own bank account directly) to the Cayman Islands before all the official paperwork was finished .”
3. The law firm takes the term sheet and expands that into official paperwork that spells out the terms in detail. The investors sign these documents and they make everything official. This paperwork is passed back to investors for review and signature.
4. Due diligence materials from the company are sent to each investor upon request (and I HIGHLY recommend that) to make sure everything is in order. Every company document is sent, every record, every contract – just about everything. Thankfully for early stage startups, there isn’t that much paperwork to review. But imagine if you were to do due diligence on buying a company like Yahoo! or IBM. The due diligence alone would be staggering as you reviewed every contract, every patent, every legal dealing, every lawsuit – everything that could introduce risk into the investment. You don’t want to miss something that could turn what appears to be a great investment into zilch.
5. The CEO devotes his/her entire life to the closing during the last 2-3 weeks before close of the financing. He calls every investor and double checks to make sure they are still on board. He fields any last minute questions. He assures investors that the close will happen and makes sure everyone knows to sign papers, wire money on time, etc.
6. Investors need to prepare the cash for wiring. This could take some time to prepare if the investor needs to sell stocks, or get out of other investments. They may need to give their money manager lead time to make sure cash is available. Even the wiring process takes time. I fax in requests the day before with wiring instructions just to make sure that they get in on time. If the money is being wired internationally, you have to be wary of the fact that it could take additional time, or the wiring may not even be accessible to that account from theirs. More warning is always better than less.
7. Signatures also take time to collect. The law firm project manages the collection of the signatures and makes sure that everybody has signed the right papers on the right lines.
8. After the money is collected and the paperwork signed, then the law firm gets copies of signed paperwork back to the investors and, if it is an equity deal, prepares stock certificates and sends those back to investors as well. Other paperwork that goes back to investors can include receipts for the money wired; one law firm prepared a huge notebook for me which had all the involved paperwork in it. Very nice!
9. Be prepared for high stress situations as the time draws near, the lack of sleep, distractions up the wazoo. You must remain focused and determined through the whole process.
So there are never problems, right? HA. What COULD happen:
1. At the last moment, one or more investors back out and you’re left with less cash than you expected, perhaps substantially less.
2. Other investors backing out could cause even more investors to back out. It might be interpreted as a vote of no-confidence for the investors.
3. Some strange investors could keep saying they’ll send you money, but it never shows up.
4. Unfortunately, I have also seen the law firm flake out which is REALLY BAD. All the more reason for the CEO to keep tabs on EVERYTHING and make sure it’s all moving along.
All sorts of things can happen which can spoil your day. As CEO of a startup and going through this process, you should make sure your full attention is on this and be ready to adapt to changing, chaotic conditions – but rejoice when you get every investor that you say you got and see that money arrive in your bank account.

I’m Gonna Write a (Beta) Book!

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Well, my friend Christina convinced me to write my first book, which will be about online advertising.
Why Online Advertising?
Haven’t enough books been written about online advertising? Perhaps, but not in the area I’m writing about.
Over the last 8 months of working on David Shen Ventures, LLC, one of the topics I talk most about is the area of online advertising. It’s an area in which many entrepreneurs have almost no exposure, and yet they talk a lot about putting ads on their sites.
I wish it were as simple as that. Technically, putting ad html tags on your site is pretty easy; orchestrating everything else is a challenge when you have no experience in doing so.
Revenue generation is top of mind for every startup. They want to figure out how to make the most money and advertising is a natural thing to try for every company working on an Internet product. So it has been amusing that almost every startup has contacted me for my user experience and product knowledge, but it quickly morphs to my guidance on online advertising and its implementation on the site and within the company.
For every startup, I found that I talk about exactly the same thing, the same issues, the same stories. And they eat it up because there is no one else to teach them the basics. There is a real need for resources to teach new Internet startups how to do online advertising right and there is not much out there at all.
It was then I realized I should just write all this stuff down and then just give it them in printed form. They can read and digest it, and then we could meet and go into the details, or talk about stuff that would inevitably be left out of the book, or the latest trends in online advertising which shifts all the time based on what is going on with websites and their users.
My other motivation for writing this was to document the history of online advertising at my old company, Yahoo!. As I talk about online advertising to my startups, I cannot help but insert the stories of our struggles with online advertising there. And when I think back to the evolution of online advertising, I cannot help but think how Yahoo! has shaped the industry as a whole due to its heavy involvement in it. It helped drive it through the Internet boom years, rode the downturn, but then helped pull the industry out of its doldrums and helped the advertising world regain confidence in what the Internet could do for them.
I did not want that story to be lost. I wanted to document it once and for all so that everyone can read it and learn from both Yahoo!’s successes and failures, and hopefully not repeat them again. And lastly, I wanted to recognize the women and men whose work made this a journey of discovery and rebirth for my old alma mater, Yahoo!.
But how to start writing this book?
Book 2.0 Beta

The Beta Book

If developers are nervous releasing code, then publishers and authors are terrified of releasing books. Once a book gets committed to paper, it’s seen as a big hairy deal to change it. (It really isn’t, but perception and memories of problems with old technologies still linger in the industry.) So, publishers go to a lot of trouble (and expense) to try to make books “right” before they’re released.

When I wrote the book Agile Web Development With Rails, there was a lot of pent up demand among developers: give us the book now — we want to learn about Rails. But I’d fallen into the mindset of a publisher. “It isn’t ready yet,” I’d say. But pressure from the community and some egging on from David Heinemeier Hansson changed my mind. We released the book in pdf form about 2 months before it was complete. The results were spectacular. Not only did we sell a lot of books, but we got feedback — a lot of feedback. I set up an automated system to capture readers’ comments, and in the end got almost 850 reports or typos, technical errors, and suggestions for new content. Almost all made their way into the final book.

It was a win-win: I got to deliver a much improved paper book, and the community got early access to something they wanted. And if you’re in a competitive race, getting something out earlier helps folks commit to you and not your competition.

– Dave Thomas, The Pragmatic Programmers, from Getting Real by 37signals.com

Over these last few days, I’ve been reading 37signals.com’s book, Getting Real and found this quote in there about publishing in the world of the Web. I realized that it would be a fantastic way to actually get my ideas down in written form and then solicit the world for comments. I could then edit and republish, get comments, and keep doing this until I am done.
So over the next few weeks and months (hopefully not years!), I’ll be posting potential content for the book in my Online Advertising Book category. My hope is that, you, the readership will read these incomplete ramblings and help me by commenting on them and making suggestions, resulting in a stronger product than if I just turned into a hermit for a few months and typed until the book was done. This book will be a true product of the crowd and I hope you will enjoy reading and shaping it as much as I will enjoy writing it and involving you.
Stay tuned!

NDAs and Me, Ideas and Execution

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It’s so funny when I hear people being so protective of ideas. (People who want me to sign an nda to tell me the simplest idea.)

To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.

– Derek Sivers, president and programmer, CD Baby and HostBaby

I just found this quote in 37Signals’s book, “Getting Real”, which is an awesome book on super fast Web development.

It says it all.
So far I’ve had a few entrepreneurs ask me to sign an NDA before talking about their startups. Each time, I politely decline. My main reason for declining is just what Derek Sivers says in his quote. Ideas are just that – they are just ideas. No substance, no solidity yet, but just words. Execution is harder than you think. Just because you tell me your idea doesn’t mean I am going to go out and build it. In fact, I have no desire to build it. I recognize that it’s your idea and that you are the best person to execute it, not me. And I don’t have the time or desire to execute it, nor is it my business model to build stuff.
So in essence I am saying that there should be no fear about sharing ideas and that goes both ways. I don’t mind throwing ideas their way as much as I like hearing them. I toss out ideas all the time and I don’t look for monetary return because I know that 99% of the time, they won’t be able to or have time or desire to execute on them.
But occasionally, they may find value in my ideas and actually do something with them and make their product stronger. That’s a good thing. But most of the time, they’ll need the originator of the idea to fully explain the idea enough to the entrepreneur so that they can internalize it and be able to execute against it. In that, I build value for my services and it helps sell my value to a startup.
Here are my thoughts about NDAs:
1. If I sign an NDA, then I’ll be bound to not reveal any ideas from my interactions with them for the length of time designated in the NDA. While I have no problem signing one if I do work with them in official capacity, it is possible that I might end up not working with them. If I don’t work with them, I could be hampered from working with any other company in the same space because I might inadvertantly reveal some bit of knowledge that could be taken as confidential by the company I signed an NDA with.
2. If for some reason I were to sign lots of NDAs, I would have to manage the NDAs which is a nightmare. I’d have to remember when each NDA started and when they would end. They could all have variable expiration terms. The chance of slipping up would be incredibly high which could put me at legal risk.
3. Negotiation of NDAs would increase my legal fees. There are mutual NDAs and one-way NDAs. There are those that go in perpetuity and those that end in 1, 2, 5 or any number of years. There is no standard NDA; the conditions are written based on the situation. I’d have to go through negotiation on every one.
4. If there is something you don’t trust me enough to tell me, then don’t tell me.
5. Trust is an essential part of my business. You gotta know when to keep your mouth shut and no piece of paper is going to help with that.
6. I have and will walk away from companies who require NDAs to hear about what they are doing. It doesn’t matter how cool the company seems to be. It just isn’t worth the hassle. There will ALWAYS be other companies and opportunities.

Rejection Sucks

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Rejection sucks. You spend umpteen hours on your deck, you go through trial runs and field criticism and incorporate feedback, you redo it again and again, you spend hours driving around to meetings, you brush your hair for the first time in weeks and pretty yourself up for the pitch. When you get there and start, you look around the room and the body language is clear:
What is this guy talking about?
This’ll never work.
Where am I going to lunch?
This is a dumb idea.
I can’t believe my partner dragged me into this meeting.
When is this presentation over?
I need to pee.
Way too many competitors. Why even touch this market?
Yawn.
And the list goes on. All from subtle and not-so-subtle bodily cues. Or overt vocalizations.
You throw your heart into the pitch and you wonder how these guys could be so blind! Why don’t they get it?
At the end, they usher you out with a polite, “We’ll get back to you.”
Your heart drops. You walk out dejected. Nobody likes you. Everybody hates you. Self doubt creeps in. Life sucks. You grab a beer and drown your sorrows vegetating in front of Tivo.
You wish everyone could just see why your idea is so great. But it’s just not so. I wrote about resonance way back and think it also applies to investors. They need to be able to feel the idea, to get their brains and hearts around it. And unfortunately, not everybody can resonate with every idea. It’s just the way the world is.
So steel yourself for rejection. It will come and you’ll see it a lot. Build your resistance to letting rejection take you down emotionally and energetically. Practice blowing it off so it doesn’t wipe you out. Because it only takes ONE investor to resonate with you and your idea, and they will give you the cash to make it to the big time, and then you can say, “I told you so” to all the nonbelievers.

FanLib Company Get-Together Numero Uno!

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February 27, 2007
The first company get-together for FanLib, bringing all the investors and company together to celebrate and show the incredible progress they’ve made:

I love group pictures like this, especially as they record history. They are all special moments in a company’s history and need to be saved.

No Sleep for Startups

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Just recently, I saw two startups go into “overdrive” mode. By overdrive, I mean the days of working 24/7 come into being, and you can see the bleary eyed entrepreneurs staying up late for nights on end, working to get their products up or maintaining them, doing it knowing that resources are tight and that there is no one else to turn to but themselves and that there is no where for slackers to hide.
Startups are inevitably short staffed. There isn’t enough cash in the early stage to hire enough people to do everything they want to do. I often warn them about the work that is required and hope that they have some forewarning. But I balance that with not scaring them so much from backing off on what they need to do and motivating them to stay up 24/7 and do what it takes, no matter what.
It’s easy to just give up. Go home and go to sleep. The leader needs to whip them into working every day and not going home until it’s done. The leader constantly needs to remind them that the survival and livelihood of the startup is at stake and that the future rewards are what everyone is working towards, and yeah it sucks in the present because you’re working 24/7 and getting butt tired.
To me, motivating them is easy. I tell them about my experiences in the early days of Yahoo. Surely they sucked from the standpoint of us getting no sleep, being perpetually tired, and knowing that your social life is gone. But I will definitely say the bonding experience of working in a small team and doing what it takes to get the product out the door is one not to be missed. Staying up late knowing that you’re not alone, and that there are others depending on you, and that you all are there working your butt off means you build trust with your teammates. You really find out what you and your cohorts are capable of, and who is going to give up or not.
It is like when you build a squad in the Army and you go out on patrol in hostile territory. You have no choice but to watch each others’ backs. Once you go out on patrol a few times and the enemy pops up and tries to shoot and kill everyone in the squad, but it doesn’t happen because your squadmates have saved you and you have saved their asses more times than you can count – there is no substitute for the bond that forms knowing you’ve all been through the trial by fire and come out knowing that you can depend on others to watch out for you.
You never know how someone will react until they are put under stressful situations, and in depleted situations where your personal resources are stretched to the limit. A lot of people can’t take it. They collapse, give up, run away. The Army or early stage startups is not where they should be.
But those who survive the test, and you, knowing who does and who does not, will know who you can trust at the eleventh hour and who you cannot.
It is a badge of honor amazingly enough. I used to tell stories of the old days at Yahoo and the new hires would be so impressed about the endless weeks of staying up all night getting stuff done. They seemed to idolize that. I shrugged it off mostly and just chalked up to storytelling about the old days, but I think deep down inside they wish they could have been part of that energy to do what it takes and don’t stop until it’s done.
The team unity of creating something and getting to the end is a huge factor. The satisfaction you get from watching something launch, after weeks upon weeks of working on it 24/7 is a feeling of accomplishment that transcends. You know you’ve accomplished something super difficult and watched it birth out to the world. On the Internet, the unfortunate thing is that you can’t fire and forget products; you need to worry about after they launch as users come onto the system and you then worry about post-launch things like the servers going down under unexpected load or maintaining editorial content on the pages, etc. The funny thing about Web products is that really there is no end. I’ve often stayed up late with teammates watching products go up, and then I go home to get a few hours of sleep, and get into the office before everyone else just to check on what we launched the night before. Most of the time you hit the site with your browser and everything still looks good; however, there are times when you login at 7am (after going to sleep at 3am) and….nothing pulls up…! You pick up the phone immediately and wake everyone up to figure out what’s wrong with the servers and the game goes on…
By the way, if you’re the leader of a team, I would strongly suggest you stay up with the team. Nothing is more demotivating than the leader who tells you to work all night, and then goes home at 5pm leaving the team to continue working. If you want respect from the team, there is nothing like telling them to work all night, and then staying up with them. This is even if you have nothing to do. I’ve just sat in my office at times, reading a book or sometimes even taking a nap while my team works around me.
So today I am out of that environment mostly, but I still retain the ability to operate on virtually no sleep. I thought about this a lot and offer some tips on increasing your ability to work endlessly on no sleep:
1. Vitamin C. I drink a packet, sometimes two of Emergen-C which is 1000mg of Vitamin C. Back in the old days, we’d have bottles of chewable Vitamin C and pop them like candy. There is conflicting research into whether Vitamin C really keeps you healthy or not, but I for one am a huge believer that pumping your body with Vitamin C prevents a lot of diseases that you can catch due to lowered resistance from lack of sleep.
2. Tums. Sometimes stress and no sleep can cause your stomach to do weird things. I used to take Tums to calm my stomach from excess acid and gas. It helps a lot.
3. Working out seems to increase your tolerance to operating without sleep. Dean Karnazes is noted for his ability to operate on four hours of sleep a night, getting up at 3am to run his daily 4 hours for ultramarathon training. My belief is that exercise is key to training your body to be able to function with less sleep. You keep healthy, you achieve deeper sleep during your lesser sleeping hours from being tired from exercising and it removes your stress. It clears the mind and helps you think clearer as well.
4. Along with exercise, you just adapt physically to operating on less sleep. Remember in college when we used to study all night? We seemed to be fine doing that for months on end. I think humans can build the ability to operate on less than 5 hours of sleep a night. Hunker down mentally and just get up even though your body and brain doesn’t want to. Keep moving all day and don’t stop moving. Coffee helps, but try to do it through mental fortitude and not drugs.
5. Having a sleep recovery day is beneficial. I try to do this on a weekend night where during the week, I may be getting 4-5 hours a sleep a night but then on Friday I don’t go out, crawl into bed at 9am and wake up whenever I feel like it. Recharging one night a week really helps.
6. The last and most important: POSITIVE ATTITUDE. Here is where I think the mind-body connection really comes into play. If you feel like whatever you do is dragging you down, you WILL GO DOWN. On the other hand, if you are energized with what you’re doing, you enjoy it, you are driven by it or any one or more of many other reasons, you’ll be able to do it and more. Try to find something that really interests you, that you can sink your teeth into and enjoy, something that TURNS YOU ON. Believe me, you’ll be able to work 24/7 for months on end and not look like the cat dragged you through the mud.
The days of working all day and all night are not to be missed. Everyone should experience it. It’ll take you to heights of creativity, turn you inside and out, bond you to a group of people with common purpose and you’ll party like it’s…well, not 1999 but maybe 2999 when you launch. I highly recommend it. You’ll thank me.

MOOOOOOOOOO!!!!!!

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One day, I saw someone handing out these small photographic cards with their contact info on the other side. They were photos that this person had taken and I thought it was a great idea to meld photography, or life imagery, with a personal identity system. I was hooked. I had to make some too! Enter Moo.com .

Moo.com allows you take photos from flickr or bebo and make cool business cards out of them. These can be from pictures you have uploaded into your own account, or they can be semi-randomly selected from the gazillion photos on either service.
I took some of my own favorite shots and uploaded them into flickr. Then I went to Moo.com and they have a great interface for selecting which pictures you want, cropping them, setting up the text on back, and the ordering them.
For one batch, the result wasn’t that great; they sometimes don’t print so well. However, my second batch came back really cool and you can see them in the picture above. The second batch was a personal business card and I just ordered another batch of business cards, with candid photos from all the startups I work with on the back.
I love the way they make printing these cards so easy. It’s also an interesting way of expressing yourself (or your business) through the use of photography, a lens into the world through your own eyes. Something to share, something to tell your own story with.
I can’t stop ordering these cards!