MBAs creating their First Startup (Advice)

My Background
My Personal Background:
Computer Science degree
First 5 years of my career – focusing on mastering Software
Engineering
Second 5 years: Focusing on getting good at managing teams
Third 5 years: Building a startup from beginning to end
Microsoft for first 10 years. Shipped ~15 product versions
Managed up to 3 teams. Was a manager of managers
I don’t have an MBA degree, but…
I read a stack of books of the MBA curriculum when at Microsoft
to help my education
I spent a SIGNIFICANT amount of time doing entrepreneurial
planning during my 10 years at Microsoft

BLOG: bryanstarbuck.typepad.com

Lessons from my
First Startup

What I did WELL with Startup #1
Did I DID do well:
Wrote FULL business plans before startup the company
Did FULL Due Diligence on the idea to make sure it was worthy
“Taking the big leap”
I threw away ~15 business ideas after finding problems in due
diligence, until I found the one to create Startup Idea #1
I recommend this to everyone
In hindsight, the business model was solid
I focused on a business model that had strong valid economics to
monetize
Selected RoR Open Source as my platform
I am a closer (Needed to raise capital, hire, close sales, etc.)
Master the ability to raise capital
Keep spending VERY LOW


What I did WELL with Startup #1
Continued…

Did I DID do well:
Talked to a TON of target customers pre-launch
2-month Dev ship cycles (after launch)
I talked a LOT to startup people. Learning beyond
BigCo/MBA/Theory was absolutely critical
Worked in one of the big startup markets (Bay Area, Seattle, NYC,
etc.)
Focused on METRICS an ANALYTICAL analysis when managing
executives during growth
The Strategy (and strategic analysis guiding everything) was VERY
STRONG (saving us many times)
Built a great board of directors
Closed the acquisition

Learning PAINS during Startup #1
Mistakes MADE: (and then Corrected)
Should have done MORE and STRUCTURED validation talking to
customers
Started with a non-Microsoft co-founder (since I also didn’t have
startup experience)
I wasn’t great at designing web product UI. (My strength had been
at Desktop App UI design)
I should not have worked at Microsoft 10 years. I should have
worked there 4 years.
I should have worked at a Startup before creating my own


Painful when Running the Company
What I would change, if I know then what I know now:
I didn’t know the “Newest Cutting Edge Marketing”
It would have saved us ~8 months to 12 months and possibly
our one pivot
Focus on a deliberate company culture
Learned how to filter executives
Many small things during Sales-Learning-Curve
Great advances in UI design needed
Patents are often not needed in startups
Don’t start a company when a huge recession will start when
launching and ready to start selling
Don’t sell recruiting (hiring) services when companies stop
hiring, lay off and have massive unemployment


Advice to MBAs looking at Startups (1 of 10)
Startups are probably the MOST FUN and REWARDING career
(for the right kind of person)

Being a TOP PERFORMER is required to join a startup

Having the same Job Title for more than 4 years can be a problem

Only applicable to top performers

This frequently happens at big companies

A startup can enable greatly accelerating your career

ALL top performers can move to “VP of XXXX” by being
aggressive, moving companies, spending 70% of your career at
sub-200 person companies and keeping a startup
aggressiveness

A great career should probably look like this:

BigCo 2 years

Startup Employee 3 years

Medium-Co (100 to 200 employees) as a “Director” for 2 years

If starting this with an MBA at age 26, reaching “VP of XXX” for a
20 to 60 person company by age 36 to 39.

Or as a startup CEO of a funded company

Staying at BigCo 4+ years builds a fear of making changes like
this


Creating Pitch Decks, Business Plans and being in
Entrepreneurship competitions in the MBA program can be very
helpful

MBA programs are GREAT at:

Learning finance

General knowledge of building a mature company

Marketing fundamentals (Great theory and historic tactics)

Writing a Pitch Deck, Business Plan and competing in a
competition on those ideas


MBA Programs have you learn AFTER graduating:

Cutting edge new Startup Marketing

Startups need a more automated, mass scale, LOWER
COST of Acquisition and using new channels that didn’t
exist 2 years ago

“Balancing” areas of a company when managing a company or
product unit

Product building (but can easily be learned building product
elsewhere)


BigCo can make employees RISK ADVERSE

Happens at year #4 and beyond

There is NO RISK in joining a startup right after college. If you
have to leave it, it won’t cause a huge problem

People can build a dependence on requiring a $120k to $200k
household income

Moving to a different company every 3 years can start to appear
scary (when it shouldn’t, if that is the right career decision)

MBA Programs tell you how to build an Organization

In a startup, you do most of those jobs for the first few years


Don’t fall into the trap of multiple MBA founders

Internet startups almost always SHOULD look like this:

1 Founder to be CEO (can have MBA)

3 Co-founder or employees are all Software Engineering types

This is the first team of 4 FTE

Multiple MBA founders magnifies blind spots

Be careful of the company using the Microsoft tech stack (.net).
Ensure you know why 90% of valley startups don’t use it, before
making an informed decision on your startup


Channel Strategy:

Internet B2C Channel strategy is VERY NEW

Old Generation #1 Channels: Wholesale, Retailers, Shelf-Space

Old Generation #2 Channels: OEMs, VAR Resellers

New Internet Channels: Absolutely nothing like the above

New Channels for B2C Companies:

Some companies generate lots of traffic and are hard to
monetize. Some monetize well but can’t get traffic. You should
partner with your opposite

Affiliate deals

New Channels for B2C Companies: (Continued)

Acquire traffic from a partner company

Thinking strategically shows traffic flows behave like channels:
SEO, SEM, CPA, etc.

Facebook: Via Apps, API to create posts, etc.

Viral: Facebook, Linked-In, etc.

Much more…

STRATEGIC NOTE on CHANNELS: Think of micro-channels and
then assess each for either: a) Marketing to, or b) using Channel
techniques against. All internet traffic is a micro-channel or
originates from one, so start strategic analysis there.

Be careful of Out-sourcing Software Engineering:

It fails for startups 95% of the time

It fails even more often for MBAs who aren’t Software Engineers
or Program Managers

For almost all startups and investors: Out-sourcing results in
failing and is unfixable

Validation from Customers

This is absolutely critical. Far more critical than non-startup
people realize

Read the LEAN STARTUPS book. It is an absolute must read.
This is the BIGGEST mistake first time entrepreneurs can make


Seriously consider cycling between: BigCo ($1 billion+ revenue),
MediumCo (100 to 300 employees), and in a Startup

Each will remove a blind spot

Each enables advancing career wise vs. learning from people
who master in deep discipline

BONUS: The earn-out period after an acquisition is a great time
to learn from BigCo or MediumCo


Startups are
Incredibly FUN

I absolutely RECOMMEND it for all
highly driven employees

Ex-Microsoftee Founded Startups
Microsoft Founders of Startups (Acquired, IPOed, or Significant revenue):
Jonathan Sposato @ Picnik: ACQUIRED
Dan Shapiro @ SparkBuy.com (Shell) ACQUIRED Rev, Acquisition or Market Cap

Mike Matthew @ All Stars Directory ACQUIRED Amount:

TA McCann @ Gist.com (Exchange) ACQUIRED
$1+ billion: 3
Joe Giordano @ PayScale Companies
Rich Barton @ Zillow & Expedia IPOed
Mike Slade @ Starwave ACQUIRED $100+ million: 6
Companies
Kevin Merritt @ Socrata
Jordan Schwartz @ Pathable (MSN) $30+ million: Many
Bill Bryant @ Qpass, Visio, Mixxer, etc.
Hadi Partovi @ Tellme Networks & iLike ACQUIRED
IPOed

5
Alex Castro @ Delve Networks (Shell) ACQUIRED
Rob Glaser @ Real Networks IPOed
Gabe Newell @ Valve
Alex St. John @ WildTangent Companies
Bryan Starbuck @ TalentSpring (Shell) ACQUIRED
Numbers are often confidential. Some information came from people in the companies listed BLOG: bryanstarbuck.typepad.com

Anatomy of a Startup CEO
Direct Learn in MBA Program Often learned after MBA Program

Cutting Edge CEO Balancing managing the
Classic Marketing
Startup Marketing company

Corporate Finance Startup Disruptive Ideation:
Business models, break through marketing, etc.

General Great Product Building Strategic Analysis to ensuring
Company Building (Design, Software creating an idea for a startup
Ideas Engineering, etc.)
School Level writing
Business Plans, Pitch
Decks


The END

Next Steps:
Create your company and have a BLAST
Join the “MicrosoftStartup Learning” mailing list
Join here: http://groups.google.com/group/Knowledge-Startup-to-Microsoft
Bryan Starbuck’s Blog: bryanstarbuck.typepad.com

MBAs creating their First Startup (Advice)

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