Changes Is Good

What does it take to build a business that gets a whole meme named after it? How do you get to be part of the Web 2.0 goodness that has been exploding all over the media? I dont know, but the web does provide access to lots of people that do. I contacted 10 of them for their answers to these questions and more.

Firing up my email program, along with a bit of courage, I emailed the founders of 10 different companies a series of questions about how they started their businesses and any lessons they'd picked-up along the way. I expected to get a few cruel letters of rejection and disdain from some overworked PR flack distrustful of blogs and unsure of their validity or usefulness. Instead, six founders running some of the Webs most interesting companies (at least the ones I use most often) agreed to chat with me.

Score: Indie Blogger 1, PR Flacks 0!

Who and How?
For this post I thought it would be interesting to try something kinda "newish" and editorialize the responses. Yeah I know, journalist arent supposed to insert their voices into their articles, but thankfully I'm not a journalist and can do whatever I want. You can read the unedited email responses here; MR, NR, SS, VL.

It all started with this email, I sent it to the good folks at Netvibes, 30Boxes, Listible, Writely, Digg, Pandora, Blinklist, Paidcontent, eyeSpot/MP3tunes and Riya (forgot to email Riya so we did a last minute phoner). Within a week the good folks at 30boxes, Pandora , Blinklist, and MP3tunes had responded. I never heard anything from the folks at Listible or the blog pioneers at Paidcontent and Digg. Tariq at Netvibes, responded but didnt get back to me in time to be included in this post. I did phone interviews with Munjal Shah and Tim Westergren.

Now, I present for your enjoyment and edification, the collective wisdom of a bunch of guys (sorry, no women) running the companies I wish I'd started.

The Questions:
1) "How did you come up with the idea for your company?"
Narendra Rocherolle , Co-Founder of 30Boxes offered this answer, "The three of us (myself, Nick Wilder, and Julie Davidson) grew tired of always asking what each others social schedules were like. All of us have disliked MS Outlook for years and we set about trying to rethink the idea of a calendar from scratch."

Vishen Lakiahni, of Blinklist offered a similar story "We tried to solve problems we experienced. Mike and I had been writing a book for almost a year - a 490 page behemoth on e-commerce. We needed a way to categorize the thousands of online studies, reports and articles we came across. BlinkList was our internal knowledge management tool. It turned out to be so useful we opened it to the public."

Tim Westergren of Pandora was also motivated by the need to solve a problem, he says that the "explosion of online music sites that promised to be a panacea for musicians" never materialized and it was this "failure of the first wave of online music sites" that motivated him to start the Music Genome Project which evolved into Pandora.

Munjal Shah, the figurative father of Riya, was trying to find a way to organize his 32 thousand digital photos and came upon the idea that there may be a better way to conceptualize picture organization. "The solution was not to organize it at all, but to be able to search through them. Like Gmail, but for pictures." Munjal says that great ideas have to "take both a bottom up and top down approach. 'Bottom up, is solving 'my' personal need and 'top down', is riding alot of trends."

Survey Says: For all of us wanna-be "wave jumping" CEO's, the trick to finding the next great idea appears to be finding a problem you (and a lot of other people) want to fix and then building a solution that fixes it. Vishen Lakhiani of Blinklist put it best when he wrote: "a favorite line [of mine] from the movie Babe is 'ideas that tickle and burn and never seem to go away, should never be ignored. For in them, lie the seeds of Destiny'."
_{FYI: Quoting talking pigs that want to be dogs is not a business dominance strategy you will find anywhere else but here.}

1a) How long did it take you to go from idea to beta product?
"A while." was the first thing that Munjal Shah of Riya said when asked this question. "We selected the idea in Sept/Oct 2004 and we didnt launch until 2005."

Tim Westergren related a similar experience in the development of Pandora . He says that he had been "sitting on idea for a few months" before sharing it with John Craft late in 1999. So from idea to beta product it took a good 5 years, which is the longest development time of any of the people we spoke to. Tim points out that this development lag was for two different entities, Music Genome and Pandora, and that they had a Music Genome prototype built in three months.

Michael Robertson and Narendra Rocherolle said it took them about 6 months to get their products out the door.

Sam Schillace of Writely wins the speed race claiming to have gone from idea to prototype in just 1 month. However, in order to believe this, I'd need to see the bloody stumps his programmers now have for fingers along with the pulped skull fragments from the imploded head of Writely's, Project Manager.

Survey Says: This one is a split decision, while Michael, Narendra, Sam and Vishen thought it was key to be the first out with a product. Tim and Munjal, whose applications are a bit more involved, thought the uniqueness of the idea was as important as getting a product out fast. There was general agreement that faster was better, but in the absence of speed uniqueness was the next best thing.

2) What was your approach to consumer research (focus groups, surveys etc…)?
Sam Schillace says "we didn't use formal user research, we just talked to the users, we listened to their concerns, and sifted through all our feedback. I think it's more important to have lots of little interactions constantly, than to have formal events like a focus group. The data is better."

Vishen Lakhiani answered this way, "Ummmm…..we prefer to put things up, gather feedback, respond to it within 24 hours and evolve the product to suit the customer. Focus groups or surveys? Never done them."

"The product was intensely debated among the three of us during the initial 3 month development phase." says Narendra Rocherolle, of 30boxes "Once we had something working we solicited the feedback of a smaller group of about 20 folks." Hmmm, I'm gonna go ahead and put this one in the "no" column.

Munjal Shah's "no" was more direct. "No, mostly because what people tell you they'll do isnt necessarily what they want." While there was some usability testing done for Riya it was "nothing remotely exhaustive" said Munjal.

Survey Says: None of entrepreneurs we spoke to had formalized consumer research in place and little if any interest in getting it. They were more interested in putting their product in front of users and seeing how they responded to it. The lesson seems obvious: Build, listen, reformulate, listen, repeat.

3) Did you do a formal business plan with financial projections?
"Yes we do." said Vishen Lakhiani of Blinklist, "But our business plan is something we evolve in our heads over time." Besides being an interesting example of confabulation, Vishen's approach to business plan seems to be fairly standard. He continues, "we launch two kinds of products. E-commerce products with a set financial goal. And innovative new products that are experimental and fun to do - but with no clear business model… yet. We forecast demand for our e-commerce products by doing keyword research on the web. For our innovative products like BlinkLife - we can only hope to put them out and see if they catch on. There is no reliable way to forecast if these will be hits."

Sam Schillace put it in clearer terms "No, we never did a formal business plan. We started as an experiment, it was popular, and we just kept working on it and iterating it. I'm always confidant that you can make money if you give people something of real value."

Michael "the Don" Robertson has a unique approach to business plans, "No. I sit down with my team and tell them what I'm envisioning and they go and build it. I use my own intuition to determine if I think there will be demand." I guess when you've managed to piss off both the music industry as well as the beast in Redmond and still walk away with money in your pockets, people listen to your vision. Must be nice.

Narendra in true effectual entrepreneurs style, summed it up this way "We have an outlined business strategy, a firm understanding of our cost structure, but have not spent the time to forecast revenue per se."

"Yes, but I dont think they invested because we had a well thought out biz plan." says Munjal Shah, "We just built. Because I have done it before he [Peter Rip] knew I didnt have to write it down."

Survey Says: If you have the money or ability to do it yourself you probably dont need a formal business plan and not having one isnt a determining factor in the success or failure of your venture. Given the experience and track record of this group its a lot easier for them to raise money but only marginally easier for them to execute. In other words you still got a chance.

4) What resources did you have (financial and otherwise) to implement the idea?
Michael Robertson quipped "I'm probably in a relatively unique situation because I can simply use my own checkbook to get an idea started. The first thing I look for is a President who is a bright, hard working, generalist who can supervise every aspect of the company. I hire this person and then turn over the rest of the responsibility to them." However all the entrepreneurs we spoke to said they had done the same thing.

Narendra Rocherolle, whips out the checkbook when opportunities present themselves, he says its because he has "had two successful outcomes [with] Internet consumer products. In 2004, we sold our company Webshots to CNET…"

The checkbook is aways out at MindValley, with Vishen stating that "MindValley reached profitability in it's second month and we're continuing to grow, hire, launch new sites and see monthly profits go up." Sweet!

Sam Schillace kept up the luxury bootstrapping theme when he said that they had funded their ideas themselves and that all of the founders were able to fund ventures that interested them. I guess the royalties from Dreamweaver are pretty sweet.

"I was able to invest time in the entire idea generation process and not get paid for 6-7." stated Munjal Shah. This allowed him to develop the idea in a low stress environment at a very low cost. Which he says increases "the chances that you'll hit the market window." What Munjal didnt mentioned, was that as one of the founders of Andale and a few other ventures he could also whip out the checkbook and fund the idea himself.

Tim Westergren of Pandora was the only standout having worked a part-time gig to pay the bills while he and John Craft hatched a plan to build a Music Genome and eventually open Pandora's box (sorry I couldnt resist).

Survey Says: I'll have to find a group of first timers without the war chest and experience that this group brought to the table in order to get a better sense of how you build a venture while holding down a full-time gig. Its obvious but this group brings home the point that you get the most traction when you already have lots of traction.

5) Who was the first person you called to move the idea forward and what was that conversation like?
"I had this idea and I mentioned it, in passing, to John [Craft], who said 'why not?'" responded Tim Westergren.

Michael Robertson said he will "test ideas and hone them with my wife and trusted business associates… Then I'll spend lots of time collecting data on the net."
Sam "I remember having a conversation with a friend of mine who happens to be a venture investor. I think I pitched the idea to him as "something like Flickr, but for documents instead of images". He thought it was a great idea, so we tried it out."

Survey Says: Ask clearer questions. What I hoped to learn with this question is how this group went about soliciting support for their ideas and rallying people around it.

The One Big Insight:
Web 2.0 is made up of a lot of folks who made money in Web 1.0. It seems that if you have money or friends with money, time or friends with time, tons of experience (or none at all) as well as the ability to build something and a willingness to let everyone test it out, you to can have a killer Web 2.0 venture. Oh, and its good to have a boatload of luck too.