News

Aloha to all you Chippy chipsters out there. It has been a long while since we blogged much about ChipIn or what the team is up to. Well, there is good reason. We have been very busy working on a new stealth project that will be unveiled at the DEMO conference on Jan 28th. I miss my normal rantings on this blog and have a bunch of postings Todd and I plan to write over the next couple of weeks that recap lessons learned from ChipIn that we hope will help others using widgets to fundraise and organize online advocacy. We just need to gather our thoughts and get things written down before unleashing them on the world.

We have been pretty open with our learnings here at ChipIn and today I thought I would share with you some stats from the past 12 months.

1) Our transactional volume each month grew from $20K to almost $300K

2) The number of new events grew from 600 to 2000 each month

3) The number of individual contributors grew from 500 to 7,500 per month

4) The number of new users at ChipIn.com grew from 500 to 1,700 per month

That’s pretty good growth for the site considering we have made no upgrades since we launched this version in Nov of 2006. We have big plans for a new version and about 75% of the code finished, but we don’t have the resources yet to make the final push to release the site. Maybe we should set up a ChipIn for ourselves?

One other funny fact to share with you all…. If ChipIn events selected the next president, then the following candidates are definitely in the lead (by number of ChipIn events set up for each candidate).

Dems
Obama - 20
Kucinich - 1
Clinton - 0
Edwards - 0
Richardson - 0

Repubs
Paul - 309 (!)
Guiliani - 0
Romney - 0
McCain - 0
Huckabee - 0

Today we bid farewell to ChipIn V1. It was not ago I wrote about our launch. We set out with what seemed like a simple mission: to help organizers collect money. Our business philosophy is to listen to our customers and build what people need and use. After four months of listening and watching how people use our site it became very clear that we needed to take the time to re-tool both our underlying systems as well as our user interface. We realize that we are not just helping people collect money, we are helping them do it smarter. . . ChipIn - The Smarter Way to Collect Money.

To all our existing users, hang in there, we are coming back with an amazing new system that will define a model for social payments. We will be launching a payment service that integrates into the conversations that occur between social media content creators and their audience. If you want to be notified when we launch our Beta test, please go to chipin.com and sign up for our mailing list.

Existing users should be receiving an email from me with instructions on how to end your current events and collect your money. If you have any problems, please do not hesitate to contact support.

I was reading Ev’s blog and came across a great list of 10 rules for web startups. It is a fantastic read and really help put many of the issues we are going through in perspective. We have been tossing and turning our code base for the past several months, and finally ready to launch sometime entirely different. Keep an eye out for ChipIn Version 2, “the smarter way to collect money”

#9: Be Agile
You know that old saw about a plane flying from California to Hawaii being off course 99% of the time—but constantly correcting? The same is true of successful startups—except they may start out heading toward Alaska. Many dot-com bubble companies that died could have eventually been successful had they been able to adjust and change their plans instead of running as fast as they could until they burned out, based on their initial assumptions. Pyra was started to build a project-management app, not Blogger. Flickr’s company was building a game. Ebay was going to sell auction software. Initial assumptions are almost always wrong. That’s why the waterfall approach to building software is obsolete in favor agile techniques. The same philosophy should be applied to building a company.

I tend to blog about a whole bunch of different things here, some about ChipIn and some about the process of starting a company. One of biggest hurdles we overcame early on was raising angel money so we could hire engineers and build the team around our concept. You have probably heard of many Web 2.0 companies these days starting on $200K or so. Well, that is nice and all when you are a social network site or browser add-on, but when starting a transaction based startup, the costs are substantially more. We are building V1 of ChipIn on barebones costs, but still, we had to raise a good chunk of angel funding. I found a pretty good article by David Cohen, a Boulder-based entrepreneur and angel investor on how angel investors make investment decisions. If you are raising angel money, it’s worth a read.

You never get a second chance to make a great first impression.

We made it through the early stages of our Beta testing and things are looking great. We have been slowly releasing a host of new features such as custom email messages, RSS capabilities, and increased event management for organizers. The team is humming along very well. We want to send a big thanks to all our friends, family and early beta testers for taking our system through its early paces. We definitely needed some fresh eyes.

I just returned from an amazing trip to San Francisco. I met with a whole bunch of folks and got to spend some quality time with a group of successful entrepeneurs who really like our approach to social ecommerce. We also grabbed some office space in a large warehouse, which is housing a bunch of startup companies. Now, when I say office, it really just means two desks in a huge room with about 6 other startups companies. The landlord is a great guy who supports startup companies by giving them some space in which to incubate. Our neighbors are going to be companies such as flixster, mollyguard, and tribe. Looks like I will be spending quite a bit of time commuting to and from San Francisco.

We have a pretty stellar new team in the Bay Area to fill our two desks. Todd has over 15 years of marketing experience at AMEX, Visa, Paypal, Ebay, and Xoom. Mike is a superstar business development maniac who sold his company last July and came on board two months ago. Mike and Todd are going to be our full time presence in the Bay Area with the rest of the team back at the Kahala office. Things are really starting to heat up! I am looking forward to all the fun we are going to have. Oh yeh.

One of the issues a young company goes through is how to determine the type of financing that will lay the groundwork for success in the future. There is no magic formula and many times it is a matter of art more than science determining what vehicle to use when raising funds. I found a good article today by Josh Kopelman regarding his thoughts on Bridge Loans vs. Preferred Equity. He gives a good perspective as an early stage angel investor and his opposing rationale shows the differing opinions regarding an approach to early stage investing.

Technorati Tags:
fundraising, startups

Things are starting to heat up at the ChipIn headquarters. We have successfully made it through an early alpha stage for the system and are now gearing up for our Beta testing. I am writing this email from somewhere over the Pacific returning from a week long trip to the Bay Area to do some fundraising and strategic planning. First off, we have brought on a new partner who will be based in San Francisco. He is responsible for business development and maintaining our presence in the thick of Silicon Valley. More about Mike in another post. Our office has been taking a beating this past week as torrential rains continue to fall on Hawaii. Our offices were partially flooded, but Jerome and Song managed to save the equipment. Unfortunately it has hampered coding progress as time was spent keeping the water out the front door. I guess these are the little bumps in the road no one ever writes about in business books. The team is going to have to make a big push the next couple of weeks and months. Certain wheels in motion are hard to stop, particularly the keen interest we generated in Silicon Valley. We also have our own internal deadlines to meet as we anxiously wait for the start of our beta group testing.

I feel like we are now at the launch pad with the fuel tanks filled and the countdown beginning for a shot to the moon. There many variables we can try to control, but it is the unknown about what happens when we begin to liftoff that makes this long strange trip. We just have to remember to have fun and enjoy the ride.

I just read a great post from Marc Hedlund at O’Reilly on Entrepreneurial Proverbs.’ ‘Lot of great advice summarized here.

Starting

• It’s good to be king — being an entrepreneur is the best job I’ve ever had. Every day your job is new and different; you constantly have to push yourself in new directions. You no longer have to say, ‘Well, I’m just an engineer, but…’ — you have a great excuse to take an interest in everything. Working in an environment you shaped to your own beliefs about how a company should be run is incredible (and humbling!). And of course there are sometimes financial rewards, although it’s still a great job regardless.
• Losing sucks — shutting down a company is unbelievably difficult. It affects your home life, your health, your job prospects, your financial stability. Professional investors are grown-ups, but it’s still extremely disheartening to lose the money people invested based on belief in you. If your backers include friends or family, it’s extremely difficult to have to tell them the company is closing and their money is gone. Most entrepreneurs fail several times before succeeding, so losing is both terrible and nearly inevitable. Fight as hard as you can against it.
• Building to flip is building to flop — this is taken from Jason Fried, and he’s right. People who start out with only one goal, to sell to a big portal, will find their options are too limited. Plan as many paths to success as possible for your company, and always have a Plan B when acquisition (or whatever path you choose first) doesn’t work.
• Prudence becomes procrastination — it’s great to research your market and talk to potential buyers about your ideas. It’s terrible to let an excess of this become a impediment to getting started. Too much prudence edges away from research and into procrastination.
• Momentum builds on itself — just start. Do whatever you can. Draw a user interface. Write a spec. Make something, anything, that people can see and touch and try. A prototype is worth ten thousand words. Once you start moving, you will find that people start to carry you along.
• Jump when you are more excited than afraid — lack of fear is irrational, and too much fear is debilitating. Make the jump into your business when you have considered the fear, and come out more excited than afraid.

The Idea

• Pay attention to the idea that won’t leave you alone — this is taken from Paul Hawken’s Growing a Business. Sometimes an idea catches hold of you and you find you can’t ignore it.  Pay attention to that! Just start working on it. Can’t get yourself to do anything on it? Move on. Find yourself waking up out of bed to write down new ideas about it? That’s a good one to choose.
• If you keep your secrets from the market, the market will keep its secrets from you — entrepreneurs too often worry about keeping their brilliant secrets locked away; we should all worry much more about springing a surprise on a disinterested market (anyone remember the Segway?). To quote Howard Aiken: ‘Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.’
• Immediate yes is immediate no — does everyone immediately tell you your idea is great? Run away from it. If the idea is that obvious, the market will be filled with competitors, and you’ll find yourself scrambling. One good test: when the New York Times Magazine puts out its annual ‘Year in Ideas‘ issue, is your idea in it?’ Then don’t do it.’ You’re already too late.
• Build what you know — this is the most basic advice of idea generation: scratch your own itch. To make a great company, stop and ensure that your need is broadly felt, and that your solution is broadly applicable — not everyone spends their life in front of a computer, remember.
• Give people what they need, not what they say they need — interviews are tricky. People will swear up and down that they would buy a product you describe if only it were available, and then fail to do so as soon as it is. Likewise, in conversation an idea can sound terrible, but in actualization the idea can become a compelling product. You have to sherlock out the truth in the interest people express, and ‘yes/no’ questions are usually less useful than ‘how much’ or ‘how bad’ questions.
• Your ideas will get better the more you know about business — engineers hate to hear this, but you can generalize up quite far from here: the more you know about everything, the better all of your ideas will get! If you want to start a business and your strength is in development, learning about pricing, sales, marketing, finance, and yes, even HR, all of it will make your product ideas stronger and better.

People

• Three is fine; two, divine — having too many co-founders makes decisions hard to reach; if you’re on your own, you have to bear all of the stress and worry about the success of the company. In my judgment, three people can do well together, but having two founders is best.
• Work only with people you like and believe in — I once heard Eric Schmidt say something along the lines of, ‘The older I get, the more I think all that matters is working with people you like.’ If you’re smart and talented, you’re probably going to like a lot of smart and talented people. Working with people you like is so much more fun, and often more productive, than fighting against someone who may be smart and talented but just isn’t a great fit for you.
• Work with people who naturally like and believe in you — maybe you are very persuasive, and can talk people into working with you against their better instincts. Especially for co-founders and early employees, don’t try that hard. Find the people that naturally want to work with you, and nudge them into the roles where you need them. You’ll have more fun and get more done.
• Great things are made by people who share a passion, not by those who have been talked into one — a corollary of the last; you can spark a passion in someone, but you can’t do it without some fuel to catch. It’s better to wait and find the person who is already inclined to believe in your cause. You may talk someone into co-founding a company with you, but will they stick with it through ups and downs if they had to be persuaded to join you?

Product

• Cool ideas are useless without great needs — this is the classic engineers’ entrepreneurial mistake (or at least I’d like to think so, since I’ve made it). Techies love tech, and a new technology can produce a lot of companies that don’t really meet a need. Better to start with the need, and then see how what you know can produce an answer to that need. (Marketers tend to have the opposite problem: real, pressing needs with completely unworkable solutions.)
• Build the simplest thing possible — engineers have the hardest time with this, with not overdesigning for the need they’re addressing. Make the simplest possible product that makes a significant dent in that need, and you’ll do far better than you would addressing two or three needs at once. Simplicity leads to clarity in everything you do.
• Solve problems, not potential problems — you can waste a lot of money implementing solutions for problems you don’t have yet, and may never have. Work on the biggest, most pressing problems today, and put aside everything else.
• Test everything with real people — it’s unbelievable how helpful this is. Go find civilians, real people who use computers because they have to and not because they love to. Find them in Starbucks, or at the library, or in a college computer lab. Give them $20 for 20 minutes, and you’ll be paid back a hundred times over.

Money

• Start with nothing, and have nothing for as long as possible — small budgets give big focus (probably another line I’m stealing from Jason Fried: it sounds like something he’d say…) Don’t go out and raise a ton of money right away. Instead, give yourself just enough to get going, and use the limits that imposes to motivate yourself.
• The best investor pitches are plainspoken and entertaining (not in that order) — think about what this implies. A plainspoken pitch is the surface of a very solid business. If you have to lie to get investors interested, why is that? If you’re running a great business, it is not hard at all to lure investors into it; the worse your business, the bigger (and more odious) your fundraising task is. Entertaining implies a fun person to work with, and VCs like working with people they like as much as the rest of us do. If you don’t bring the funny, bring the person who brings the funny.
• Never let on that you’re keeping a secret — telling an investor ‘I don’t want to talk about that’ is terrible. It’s the natural converse of being plainspoken. It’s good to be aware, though, that some potential investors will listen to you and then share your information with your direct comptitors, and not always because they’re invested in those comptetitors. Knowing that, you have to keep some secrets — but be as diplomatic about that as possible. Respond to the idea behind the question, without giving away more than you feel comfortable discussing. Learn to steer the conversation in the way you want it to go, and then give up more information as you become more comfortable with the potential investor.
• No means maybe and yes means maybe — you should never take a ‘no’ from someone you want to work with. Accept the no, ask for feedback, and then just keep sending them updates on how much butt you’re kicking in the market. During one company, three of the five term sheets I collected came from VC firms that told me ‘no’ originally. Conversely, though, the only money in the bank is actual money actually in the bank. Everything else is just a possibility, and you have to treat it as such. Don’t stop fundraising until you have a firm commitment for the funding you need, and don’t accept halfway promises like, ‘We’ll fund you if another firm comes in.’ Keep on driving until the wire transfer is complete.
• For investors, the product is nothing — the classic engineer’s VC pitch has ten slides about the product and two about the academic achievements of the founders. That’s a terrible pitch. One slide should be about the product, while the rest cover the market, competitors, financials, funding history, and the relevant experience of the team. The product matters far less to most investors than the reactions of potential customers, the properties of the market, and the credibility of the team. Obsess about the product on your own time; present your business in its entirety.
• The best way to get investment is not to need it* — if you have a running business with real customers and you’re paying all your bills, you are much more likely to get a funding round than if you need the round in order to survive or succeed. The pitch that goes, ‘We could accelerate our growth with more money’ is much more compelling than, ‘I need your money or our doors will close.’

Here is a great followup article…

Our coming out party should be sometime this month. Our team has been putting the finishing touches on many different aspects of the product, from programming and business development to marketing and branding. There is a terribly difficult balance between throwing out a prototype (Beta) and letting the market help clean up the bugs and releasing something our moms would be proud of. We feel that our product is going to change the way groups of people transact online, so it is important to make a fantastic first impression. We have been struggling to determine what is good enough and should get a better idea as we release an alpha model soon to test with our friends and family.

As exciting as it is to be forging new territory online, we also have a list of unknowns around the business model that we are solving daily. I guess that’s what makes a startup fun to work on. I think the old saying that inspiration is 1% and perspiration is 99% is very true. ChipIn would not be launching without the tremendous team we have put together. I am proud to have the honor of working with our startup team and look forward to bringing on new faces when we launch.

I remember trying to figure out how to juggle. I don’t use the term learn because that sounds too much like someone was teaching me or I referred to a book or other manual that gives pointers on how to throw the balls in the air and catch them. Starting ChipIn was at first more figuring it out than learning how to start a company. There are no books, manuals, or templates for starting a company and I think too many entrepreneurs constantly look for inspiration from other people. Our approach has been to gather up our raw ideas, business strategies, and thoughts first, and then package them in a way other people can understand. Our founding team has had a tremendous amount of experience with startup companies, but each time you start a new company you have to “figure it out” all over again. We were able to pull from past experiences, past mistakes, and our “should have, could have” list of changes and improvements we would make if given a second chance.
ChipIn in many ways is our do-over, though this time we’re older, wiser, and a bit more humble (well maybe not that humble if we consider ourselves wiser). The first thing you figure out after running a startup gig a couple of times is that there are a couple of key lessons (part 1):

1) Surround yourself with smarter and better people. Just because you are the CEO or whatever other big dog title you give yourself, doesn’t mean you’re more important than those you work with .

2) Bring a personal touch to everything you do, let who you are show by how your company interacts with other people.  Don’t put on a act, just be yourself, because most likely whoever you are talking/working with - from your vendors to your biggest strategic partner - will appreciate knowing that they can trust you. Also, when you are dead tired and talking, it is just too hard not to be you.

3) Be able to say NO! As a startup we are faced with difficult decisions many times a day when deciding on almost everything. The hardest thing to learn is how to say NO based on what you believe to be the best for the company long term. A good example is turning away money you know is not a good match for your long term strategy… take the short term setback and believe in your future success.

Ok.. I have to get back to Chippy stuff, so more rants on lessons learned from starting up and sitting down (hey, maybe a good title for the next post or a book?) in a couple of days.

On a ChipIn note, things are moving forward with the prototype with only a few delays. I must admit this was expected as it is almost impossible for an alpha product come out the door on time. Kev and Jerome are cranking away on the code and it was not realistic to predict a delivery date on a new platform based on our original scheme in Jan. I applaud the engineering team for continuing to produce excellent coding with our long term scalability in mind. This is a great example of Kev saying “NO” to releasing something that fit or schedule in the short term, but would have had a negative impact on our long term success.

A nice little suprise is going to hit the newstands next week… more on that soon. And oh yeh, welcome Jerome to our team! He should be landing soon to code with us full time.