StartupCafe

This guest blog is brought to you by Jennie Lees, co-founder of Affect Labs, blogger at Trendpreneur, and social media extraordinaire… We’re very excited to get the gossip from her on this exclusive event in San Francisco. Also note that Y Combinator graduate Alex Ohanian, co-founder of Reddit, will be speaking tomorrow and Thursday in Edinburgh.

Not to be confused with Doug Richards’ UK-based School for Startups, Startup School is an annual event organised by Paul Graham of Y Combinator, an early stage investment firm in Silicon Valley. This year I was lucky enough to go along – as were 800 other people – to listen to pearls of wisdom dropped from an entrepreneurial A-list.

Paul Graham himself kicked the event off with a talk on what startups are really like – the key lessons being themes that are frequently cropping up in many startups’ lives, from finding the right co-founder (it’s like a marriage) to being surprised at quite how much of an all-consuming rollercoaster startup life becomes. One of his most interesting points was that we’re so surprised by startup life because it’s “different” – different from the traditional 9-5 that we’re conditioned into accepting from an early age. Once you stop comparing startups to jobs, things become a lot clearer!

Following Paul, Greg McAdoo from Sequoia Capital spoke on a fairly well-trodden subject – why now is a great time to start up. However, it was reassuring to hear these words coming from a Silicon Valley VC. Importantly, if you start up in a recession where money is tight, you’re likely to pick a business model that generates cash out of customers – something that serves you well regardless of the economic climate. Another point he raised that I’ve seen repeated is the value of introductions. If you send a VC a business plan cold, chances are he won’t give you the time of day. However, if you’re doing your homework on that investor and chat to their existing portfolio, they’ll often be happy to help you out by providing an introduction for you, greatly increasing your chances of not ending up in the bin!

On a similar recession-based theme, Jason Fried spoke about bootstrapping, and why cash is king: bootstrapped companies have to make money, whereas funded companies have to spend it, creating a crucial difference in financial attitude. Other interesting points he raised were that charging for a product, as 37Signals do, forces you (as a supplier) to create something good – and gets you a honest level of feedback from customers. Also, you’re never creating just one thing. Everything has a byproduct, and often that byproduct – whether it’s experience, ideas, or Rails – can be monetised or otherwise spun out. (Even experience can be turned into a blog, book, talk or podcast!)

Chris Anderson continued the business model theme with a look at freemium, one of Web 2.0’s trendy emergent pricing structures; give away 90% of a product, charge for the remaining 10%, and encourage users to make the jump. As any dealer knows, once you’re hooked, you’ll pay; this is why so many successful freemium products centre around capturing value from the user, and then taking the user to the point where they want more, and can’t switch because they have invested time in the product (imagine exporting all your photos from Flickr). Games work especially well in the freemium context, as older players tend to have more money than time and, by the point they need to pay, have already tried and liked the product.

On the subject of games, Mark Pincus of Zynga gave an expressive talk about his journey as an entrepreneur and CEO. One of his messages was about “death by a thousand compromises”, the problems that happen when you’re young, inexperienced and running a VC-backed company. In effect what happens is the VCs – often junior partners as you’re a young and untried firm – step in and try to run the company for you, often insisting on more experienced hires (who, in turn, don’t want to work for inexperienced CEOs, so demand the CEO title). It was a refreshingly honest viewpoint from an entrepreneur mired in accusations about scams, but with the usual caveat that not every story ends that way.

The heavy hitters of the day – Biz Stone and Evan Williams of Twitter, and Mark Zuckerberg of Facebook – were interviewed onstage by Jessica Livingston, and a lot of their content would be familiar to anyone who’s followed both companies on TechCrunch for a while. An interesting point from Twitter was how it spun out of Odeo because they realised they just weren’t engaged in their main product. They didn’t care. So they took two weeks off (as a company) to hack on new things, and out came Twitter. Zuckerberg’s best point was on Facebook’s growth; when Facebook was young, students would ask Facebook to launch a version at their college. Facebook chose to launch at colleges with low demand, the harder nuts to crack, because then they knew they could launch anywhere.

An interesting theme from the day was to compare the backgrounds of the various companies, all extolling the virtues of entrepreneurship and representing rockstar startups. Despite the fact that now’s a great time to start up, many of the entrepreneurs talking had started businesses in relative security, incubated within existing startups or launched as side projects. It just goes to show that despite the glittering stardom of going it alone, often having your feet anchored in the real world (and some way to pay the bills) can be just as valuable. Launching a company with ready-made capital feels a little like ‘cheating’, but only through jealousy!