What The Dot Com Implosion Taught Today’s Startups

Start ups are a lot smarter today.  People are still cranking out features disguised as products, but by and large, they’re not raising $150 million to create a profitless new wheel.  A key lesson we seemed to figure out was that staffing too much and too early is a disaster.  A great post appeared today on the Feld Thoughts Blog highlighting this issue. My experience with a moderately successful start up during the late 90’s reminds me that people have figured a few more things out today that if nothing else, extends their company’s longevity.

  1. Small is good.  Small is cool.  Now with "Web 2.0" technologies, etc., people can be Two Guys In A Garage, Inc. and get a lot of software written in a short time.  It’s a badge of honor to say that, "It’s just me and my buddy."   Back in 1997, I was mocked because I hadn’t yet hired 20 people to eat snacks at my expense.
  2. Don’t lavish stupid things on your employees.  Diet Cokes are fine but spending tons of cash on feeding underpaid staffers, giving them massages, etc. is ridiculous.  It’s far more wise to spend that money on a company that will professionally value your business, audit your books, or pay that super expensive CEO that will push the founders beyond the boundaries of their "baby".
  3. Don’t lose money.  I actually had a VC dude stroll through my booth at Comdex (ancient history now) and say, "So how much are you burning per month?"  My response was something like, "Well, we’re getting closer to break even now and we have 7 people."  He chuckled and said, "You’re NOT BURNING ENOUGH to be considered by us.  If you’re not burning at least $100k per month, forget it."  It didn’t make sense then or now…but frame it in the times of WebVan and Kozmo and it will make sense.
  4. Control your direction.  I have some very smart friends running a company now that have controlled their destiny this time around by shunning the side projects, features, and customization that would lead to a new business model that is labor intensive and support driven.  Their top line would probably have some bigger names and a few more zeros…but it’s still a couple guys, some contract help, and a killer app.  Smart.  If you don’t want to become a professional services firm…don’t offer them.
  5. Your address and office image don’t matter much.  I recall having prolonged discussions with developers who were begging to move so we could "Attract the right person," and that "No one is gonna take this job because our office looks like crap."  We had the cheapest space in the best zip code.  It was ugly but you know what, it probably saved our collectively payroll butt more than once since rent was minuscule.  Now I proudly share an office with the UPS Store.  I’m in the "Business District" and have my own suite..(and I go there once a day to pick up my mail) shhhhhhhhhhhhh.
  6. Blue blazers are still cool.  Sorry.  I went to so many functions that I literally wore out a few of those things.  They’re cheap and simply hanging one on a rack in your office will allow you to fit in most anywhere if you maintain at least a business casual foundation. There’s still nothing wrong with being the best dressed person in a room.  No matter what, that commands respect and says, "I took the time to look good." Of course you need the substance, but combine substance and nice suit and people listen.  (It doesn’t hurt to have gray hair too)

I’m sure I’ll find more of these lessons down the road that I’ve skipped so feel free to add. 

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