A common trait you’ll find among entrepreneurs is that they have tons of ideas and routinely can be described as ADHD. Due to this phenomenon, SaaS products, and the web in general, make for an ideal medium as it affords an elegant manner with which to constantly tinker. In many cases, you can have an idea, see it live in production, and get customer feedback in a matter of days or weeks (with strong automated testing, of course!). What other types of products allow you to do that? Physical goods? No. Services? Rarely.
Constant iteration and innovation really is adrenaline for enterpreneurs. It doesn’t get much better than SaaS/Web for products.
This one is for entrepreneurs and not consumers: debt is your friend. Too often, first time entrepreneurs think the first step to starting a business is raising money from other people or venture capitalists. My recommendation is to get the business off the ground doing whatever it takes — including using your credit cards. I used credit cards for my business eight years ago and even played the game of applying for new cards that had no interest for the first X months and transferring balances between cards in an effort to minimize the interest rate. Having tens of thousands of dollars of credit card debt, like I had, isn’t for the faint of heart, and is not recommended for most people, but it is often times the only way to get access to money.
As for banks, the truth is that most entrepreneurs will never get a loan from a traditional bank unless you have collateral for 80% of the value (e.g. stocks, bonds, real estate, accounts receivables, etc). People think banks are in the market of loaning money but they are really in the market of buying physical goods on your behalf and letting you pay them back for it. They aren’t there to fund your dreams that involve intangible assets.
My advice is to seriously consider debt whenever possible.
Lance Weatherby has an interesting post titled “Who Wants Seed Money?” in which he discusses the idea of a Y Combinator for the Southeast. I’m a proponent of the idea and was part of the discussions last year with the people he mentions. Mike Landman and I hashed out the idea once again today at lunch and concluded that Atlanta really needs such a program. Mike is heading up the EO Accelerator program for Atlanta which helps entrepreneurs with businesses between $250k and $750k grow to $1 million plus so as to be eligible to join EO (which I highly recommend).
Naturally, Mike and I dove right into some of the details of doing a Y Combinator for Atlanta. We each have a couple thousand extra square feet at our respective corporate offices to provide a co-working environment. What are some of the other costs? Here are the initial thoughts on costs on an annual basis:
- Managing Partner – volunteer (~$5k in expenses to talk at regional organizations and schools)
- Part-time Program Coordinator – $20k
- 5 teams in one summer class @ $20k investment per team – $100k
- Office space (2,000+ sq feet for 20 people) – $25k (possibly less)
- Legal – $5k
- Accounting – $3k
- Miscellaneous (food, infrastructure, etc) – $7k
- Cushion (more people per team than expected, legal/accounting in future years) – $10k
Total: $175k annually
I joined the Entrepreneurs’ Organization (EO) three months ago and I have nothing but great things to say about it. According to the EO website, EO is:
The Entrepreneurs’ Organization (EO) is a global network of business owners, all of whom run companies that exceed US$1M in annual revenue. We engage leading entrepreneurs to learn and grow through executive education and other tools for business owners.
One of the most important aspects of the organization is what’s known as Forum. Forum is a group of 8 – 10 entrepreneurs that meet on a regular basis (usually monthly) and it acts as your own personal advisory board. This is an invaluable way to learn from other entrepreneurs and (hopefully) minimize potential mistakes and maximize opportunities. If you’re an entrepreneur, I recommend you look into EO.