The Art of War

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How does a first time entrepreneur raise money in the Silicon Valley? One with no assets other than a smelly futon, a MAC and an idea, someone that has a network so weak that they have more X-Box Live friends than real friends and their financial prowess could only be described as barely able to throw a small, but crappy, pizza party.

After 20 years of creating startups (and I’m still not done mind you), I did my best to compile the best of the lessons that I have sometimes joyfully and sometimes painfully learned. I also attempted to maximize information that is not found in other essays, writings or blog posts and has high utility value so that it could serve as a reference for current funding situations, but abstracted in such a way that its value has permanence.

FF, Super F and plain old F'd

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Prior to 2005, deciding on the capital structure of a startup was a very simple affair.  Most capital structure included 80% common stock for founders, 20% for the employee stock options pool (ESOP) and then investors got preferred stock which diluted common and ESOP equivalently.  But today, founders have more options including having Series FF Class Preferred, which allows you to sell a portion of your founder shares at an institutional round without causing a tax effect on common and Super F shares which gives founder shares expanded voting power.  

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10 Rules for Writing an Essay or Advising Anyone

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So, I should warn you, I'm about to release a new short form essay called "Galapicon Valley and the Rise of Black Frankenstein" in about a week or so (it's currently under draft review).  Some people have asked for early access, so if you want to get early access you can do it here.  This essay is part one of a five part compilation of essays which together represent a kind of state of the union'ish essay that may just end up being the longest blog post in the history of the Internet.  I really don't know if anyone will read it, but I didn't think anyone would read the Cult Creation essay either and it now has over 40,000 views.

But before I post my next essay, I thought I would share my thinking on how I came up with the rules that I try to follow for writing any essay.  I'm interested in what you think, or if they can be improved.

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Galapicon Valley and the Rise of Black Frankenswan

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One of my favorite movie quotes comes from “Men in Black,” when agent Kay says to the newly minted Agent Jay: “There's always an Arquillian Battle Cruiser, or a Corillian Death Ray, or an intergalactic plague that is about to wipe out all life on this miserable little planet.”

In some weird, and sometimes inverted way, that’s how I feel about the Silicon Valley.  Whether it’s the blog-o-sphere, the quora-sphere or the hackernews-o-sphere, the cognoscenti seem to constantly offer proof that there’s always some new incubation model, some AngelGate dinner meeting, or some evil venture partner that is about to change life as we know it on our angsty little startup planet.  Here are questions that I have: 

• Why has YC become so hot? Why has their been an explosion of YC Brethren? and is any of this permanent or is it a sort of combinator bubble?
• Why is Yuri Milner and SV Angels offering $150K with no cap and no discount to all YC Startups?  that seems crazy and unsustainable; but is it?
• Why did AngelGate happen?  Why does it feel like there is some weird battle going on between YC, TechStars, Angels and VCs?
• What is really behind all of these things?  Has something fundamental changed or is this some kind of blip in our path?
• What does all of this mean to us? founders... What should we do about it? 

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Cult Creation

Updated on Monday, October 25, 2010 at 4:15PM by Steve Newcomb

I couldn't resist using photoshop to rip my face off to reveal my skull - AWESOME! (you can click the image to see it larger) Tweet [eMag] or [pdf]  

(Total Views as of 12/31/10: 39,908)
Over the years, I've been accused by the press of many things, but one of my favorites is the articles that claim that I create cults or even religious orders in my companies.  While you’d think I might be pissed, there’s a lot of truth in those articles. In fact, I’m quite proud of being recognized for creating cult-like cultures in my companies, because it’s actually part of my plan.

Why? If you are a founder of a startup, then burn the following info into head.   Having a good team, or even an excellent team isn't enough - you need to build a “cult.”  And by "cult" what I mean is a group of super high quality people who trust each other and have similar ways of thinking, learning, reacting, problem-solving and working together.  Further, this team needs to bond together under a leader they trust and respect.  They must not be afraid of any type of challenge; they must be willing to walk through fire when their leader asks them; and they must believe they deserve to be the ones that will change the world.  

Do this and you and your team can handle anything.  Don't, and you'll be heading to the dead pool.

As a founder, I can tell you that one of the very few things that will enable you to get some sleep at night is knowing that you’re not the leader of just a company, but rather a cult following.  

If you're like nearly every founder I know, you worry a lot. 

What happens when founders try to sleep at night is this: their mind spins uncontrollably between scenarios that result in a glorious success and scenarios that result in a burning death crash.  Most founders I know ride a fine line between seeming to be in total control and going nut balls.  

All I can say is welcome to the club - you're normal!  

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