Wednesday, May 13, 2009

From Employee to Entrepreneur: a Door64 Tech Fair presentation

Jonas Lamis and Kevin Koym, the founders of Tech Ranch, an incubator for Austin tech startups, gave a presentation with a self-explanatory title "From Employee to Entrepreneur". The presentation was packed -- whether because it appealed to an archetypal American dream, or because everybody who's out of work these days is dreaming of starting their own business.

Besides the obvious observations, such as "You should ask yourself, is my idea any good? The answer is, maybe, but only if you are able to build a business around it", the presenters gave some nontrivial advice. They quoted an example of some startup that found an ingenious method to gauge public interest in their business idea. They built a fake website for their business, bought Google Adwords, and waited for people to click through the adwords to their web site. Some of those visitors filled out the registration forms in the web site. Then the business owners contacted those people, told them that the web site was an idea test, and discussed it with them. Maybe even got their help in raising funding for the business? That wouldn't be entirely surprising, because whoever went through the trouble of giving out their contact information to an unknown web business must be really interested in that business.

Among the questions asked by the audience was one of utmost importance to aspiring entrepreneurs: before you can raise funding for your startup, how do you survive without a corporate paycheck? Of course, there is no panacea, only some tips that could ease the pain of the loss of steady income. Apparently it helps if you were laid of from work, instead of quitting (or, goodness forbid, being fired for a cause). Being laid off often gets you a severance package and a few months of unemployment benefits, plus you can extend your health insurance with COBRA. And under Obama administration COBRA will be paid 65%.

Half a year before Jonas Lamis was laid off from his last job as an employee, he could see it was coming, since company wasn't doing well financially. So he started building his business on his own time while still employed. After the layoff, he suggested the company's management hire him as a consultant. He knew there will be gaps in the company's business with no one left to do his job, and offered his services part time, so as to make up for at least a part of his lost income.

Some of the more interesting advice concerned chicken vs pig model of entrepreneurship. When it comes to eating breakfast, a chicken is a contributor to breakfast, but a pig is committed to it, since it donates its own flesh.

Obviously it takes less commitment to be a chicken. As an entrepreneur, at some point you may become a pig (i.e. heavily invested in the business), but at first you can choose, and you should postpone your choice as far as possible into the future. You should keep your options as to which direction your business should take as open as possible. Here are the examples of options. Do I hire somebody to do a certain job (e.g. software development), or do I put a framework in place so that people will work for free (crowdsourcing)? The latter is a chicken solution; hiring people is a big commitment, and thus pig solution. It is extremely important for entrepreneurs to keep their options open, because -- and that's another nontrivial point I took away from this talk -- most ventures that succeed rarely succeed with the same idea they started out with. That's true in pretty much every business.

A sure way of knowing that an entrepreneur is destined for failure is if he's being a pig on a lot of things. If you choose your commitments, you have a much bigger chance of success.

Pictures from Door64 Tech Fair can be found in my photo gallery.

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