My last couple of posts have been about finding technical cofounders, either at the start or over time. Many of you have chimed in with your own experiences and thoughts. And I’ve promised to talk about what it takes to find cofounders. Here goes.

The Ideal

You hear about it all the time. Three friends leave Facebook along with two friends from Google to start a new skunkworks project. It gets some traction, some revenue, some press, raises some money, gets huge and then sells out to Google or Disney or whoever. And then the process starts all over again.

This all sounds great, but outside observers often make a fatal mistake; we think, “Wow, that was a really great idea. If I had that idea, I could have done that.” Or even worse, “I totally had that idea. I would have done that but I couldn’t find anyone to help me past my prototype.”

What the external observer fails to account for is the power of pre-existing relationships. How do companies like this get started? At bars, parties, over lunch, and over time. Notice that the company was formed by “friends.” That’s really how it works. So, how to get started?

Making Friends

Many people, especially engineers, are not particularly extroverted. But at the end of the day, if all good entrepreneurial endeavors are born from relationships, it is necessary that you be a social creature. That means cultivating many personal relationships — and not just on Facebook or Twitter either. A good litmus test? If you know somebody well enough that they would consider inviting you to their house for a party or dinner, that’s a good indicator of a strong relationship. We’ll call these “strong ties.”

There may be countless other relationships which are not quite that far along, and you’ll need those too. These are your “weak ties” and will be the people who can help you find accountants, lawyers, customers, and vendors. Some of these relationships will ultimately evolve into “strong ties” as well. You need a lot of both.

So how do you go from being “just you” to having all of these relationships? One stupid thing you could do would be to move to Silicon Valley. In one move, you will manage to weaken your existing strong ties, blow up your weak ties, and force yourself to rebuild all of that from scratch. But too many people assume this is the only answer. (In fairness, there are a lot of great people in the Valley, and if you know people there already, it might help you move forward; but that’s a subject for another post.) But even there, you have to be a relentlessly social creature and meet anyone and everyone who might be potentially interested in what you’re doing.

When I talk about becoming “social” I am not talking about being some kind of socialite, bon vivant, or “party animal.” I think we all are frustrated with the constant barrage of networking events and the people who want to “be seen” at them. I’m as cantankerous and introverted as the next geek, yet I’ve made it my business to become extremely well socially connected — and not because it’s cool to be connected, but because I’ve sought out people in my area and around the world that care about the things I care about.

Getting Out There (in Engineered Contexts)

One way you can become more social is to go to events and meet people. Startup Digest (which I co-curate here in Baltimore) is a great way to find out what events are going on in your area that might be relevant to startups.

Many “businesspeople” feel out of place at “geek” events, and vice-versa. But if you are really serious about starting businesses, you need to get to know people of all stripes. Go to each event and tell people your story and even more importantly, ask people about theirs. What’s your story? “You’ve been doing X for Y years, and now you want to try to do Z.” Nothing more than that. People want to help you succeed.

As I mentioned, we all get frustrated with traditional networking events — stand around drinking a beer, talking to 10 people who find you odd, and pretty soon you’re checking the clock. So, instead of going to generic networking events, think about ways you can “engineer the context” of the event. Here are some:

1. Events with a speaker plus networking are almost always better than events with none.
2. If there’s no speaker, make sure there’s a focus or targeted community you want to understand better.
3. Events with multiple speakers (like Ignite) are even better because they expose you to many points of view.
4. Raise your hand, ask questions; share your expertise and passion publicly and let others find you.
5. Be the speaker. Find a way to present to a community you care about.
6. Be authentic. Don’t pass yourself as expert on something you’re not.
7. Hold your own events, or sponsor others. Host a Tweetup, targeted to people you want to attract.
8. Befriend thought leaders; ask how you can help with later events.

These are just a few ways you can go about building your network of potential cofounders. But these all pale in comparison to what I’m about to tell you.

Start Coworking Today

If you really want to start building your network of potential cofounders where you are, there is simply no substitute for spending time with a lot of them on a regular basis. Coworking is a great way to do that.

Coworking is a worldwide movement based on shared workspaces for creative professionals. They’re run by their respective communities with the goal of getting teleworkers out of the house and making friends. In Baltimore, I helped to form Beehive Baltimore in February 2009, and it’s grown to include over 100 professionals in its ecosystem. On any given day, there are between 10 and 20 professional programmers, designers, marketers, and entrepreneurs that participate in our community. That same story is repeating itself in every city in every country around the world.

There’s simply no substitute to being around people, sharing ideas and the occasional laugh with them, and getting a feel for what makes them tick. In a sense, you’re engineering the kind of workplace context that occurs when “friends from Facebook and Google” leave to form a startup.

You’re creating the same opportunity for after-work drinks and weekend interaction. You’re creating a shared context for the reinforcement of ideas and exploration of imagination. And it’s vitally important you do this with others.

Relationships First, Ideas Second

Ideation is a social exercise. But ideas are cheap. If you have an idea but haven’t yet strengthened it by sharing it with others, odds are it’s still a pretty weak idea. (And if you’re scared to share your idea with someone, gosh, well, I’ll get to you later.)

I keep a list of about 150 business ideas at any given time. My idea list over the years has included ones closely resembling Google Earth, e-Bay, Foursquare. These ideas, while great, were in many ways obvious and “in the air” at that time — what mattered is execution, and others beat me to it. And that’s OK. It just shows that execution is the only thing that matters.

Sharing ideas with others allows you to get buy-in from other potential cofounders. If you are able to get three or four of your coworking friends excited about an idea, and one of them suggests a tweak that makes it even better, chances are you have something pretty strong there. Run with it. Get that team to build it at night and on weekends. They very likely will, because they believe in the idea. (IndyHall Labs is a great example of this dynamic.)

Your Cofounders Are Your First Investors

If you can’t convince technical people to at least show interest in working with you on your idea, you are likely going to have a very hard time changing that later by waving money at them. At the end of the day, people want to work on stuff they believe in. Start from there.

Also, investors will be excited to look at a team of eager people who are already working together to attack an interesting problem — much more so than a lone entrepreneur who needs to “raise money” to “find programmers.”

Put Yourself Out There

In the end, entrepreneurship is not something you really control. You have an idea of where you want to head, but almost always you end up someplace else. That’s fine. And that’s the point. Entrepreneurship is something that happens to you.

And so, if you start today and get yourself out there, talking about ideas, asking people about theirs, developing weak ties and pushing your weak ties to become strong ties, you’ll get there. And people will start finding you. Because over time you’ll learn that some of your ideas resonate, some don’t. And you’ll pursue the ideas that resonate.

Resonance drives interest. Your cofounders will find you. If you build something awesome, customers will find you. If customers find you, investment will find you. A large percentage of VC deals happen not because someone pitches them, but because VC’s find a hot growing business that’s attracting attention.

It’s been said that advertising is a tax for being boring. And there’s probably an analog in startup-land. Don’t be boring. Be remarkable. Get out there and meet the people you’re going to build your future with. That’s how this process works, and it can happen anywhere in the world if you employ the right approaches and understand that it’s relationships that drive the startup engine more than anything else.

Some interpreted my last post (about finding technical co-founders) as advice to “do nothing” — to wait until the stars align to start working on an idea. And in a way, that is what I’m suggesting. But that observation is really part of a larger picture of how a fully functioning entrepreneurial ecosystem works. In such a system, both ideas and businesses are born from personal relationships. However, outside of a few niche industries in a few niche geographies, these ecosystems do not (yet) exist. What then?

Start With What You Have

You may know I am a big fan of Dr. Saras Sarasvathy, the entrepreneurship researcher (now at University of Virginia’s Darden School of Business). Her clear-eyed analysis of the entrepreneurial process suggests that entrepreneurship is a behavior and a process. She believes that entrepreneurs are made, not born. And I absolutely agree with her.

The last thing she would suggest that an entrepreneur do is “wait” before taking action. Instead, she suggests that all entrepreneurship is a series of successive “small bets” — specific kinds of bets, with “affordable” downsides and higher, or possibly even uncapped upsides. By participating in this process, the entrepreneur actually changes the world around them and influences the success of their later activity. In short, they begin to mitigate the risks of their own bets, enhancing the upside and lowering the downside of the entire entrepreneurial process.

And this is exactly how entrepreneurship works. In this model, you never “wait around” — you start right away, taking successive small risks, and then going from there.

Doing It Right (and Wrong is OK too)

Matt Mireles wrote in on the last post to express his objection that he felt that I was suggesting that folks “never even try to get off the ground.” And I realized that wasn’t my intent at all.

Matt wrote (among many other thoughtful comments):

At least in the stall spin you have altitude to lose! Your advice seems to be “don’t even try to get off the ground.” This bothers me.

Who cares if you throw the prototype out? Who cares if you switch from PHP to Rails? That’s all sunk costs. The only thing that matters is that you make progress, build the team and get customers.
…
Case in point: SpeakerText. My original co-founder built the site in PHP and the app in Flash. The product kind of sucked, but there were some cool features, it got the idea across and we used it to get some good press. He ultimately wasn’t ready to commit and we did the whole stall spin thing you describe (although we parted ways amicably and he still helps out from time to time). Burned through some cash, our angel round imploded, etc.

Matt’s experience, of working with mercenary developers, getting it wrong, losing some cash and probably also causing a certain amount of misery in the process, is not uncommon. And it’s perfectly awesome. It’s exactly what entrepreneurs should be doing, which is failing early and failing often! Think of the lessons that he’s now learned!

Does this contradict my other advice? Not at all. Because Matt did one key thing that victims of the “stall spin” never do, which is to control their downside risks. Matt lived to tell the tale. In flying terms, he gave himself enough altitude to live through the stall spin and recover; his willingness to learn from mistakes and his awareness of what he didn’t know made it possible for him to live, where most people die.

And that’s really what the last post is all about: how to avoid making fatal mistakes by aligning common interests, which is (in effect) a way of capping downsides.

I promised a follow-up post about finding technical cofounders, which will further explore what a functioning ecosystem looks like. But here’s a preview to ponder: in functional startup ecosystems, you see more alignment of interests, risk taking with capped downsides, and strong pre-existing relationships (by way of meshed social networks). Can’t wait to share those ideas with you.

In the meantime, take Dr. Sarasvathy’s advice and start now. Just control your downside risks, learn from failure, and know what you don’t know! And meet lots of people who can help you along the way. You’ll do great things!

Pride, Passion, Talent on Display at Startup Weekend Seoul

I believe that Silicon Valley may soon be going the way of the floppy disk.

For the last two weeks I have been traveling around Asia with a group of tech entrepreneurs, on a trip called “Geeks on a Plane” organized by Silicon Valley investor Dave McClure. I took the same trip last year.

Why take a trip like this? The answer gets at some very real and seismic shifts taking place in the startup world that will be big news over the next few years.

Startups Cost Less

Ten years ago a successful Internet startup might require one to five million dollars in outside funding. Data centers, engineers, and software licenses were hot commodities and could easily drain a startup’s resources.

Now it is possible to get a startup to the point of testing it in the market — with real customers — for $25,000 to $50,000. This effectively removes VC’s from the equation at these early rounds and turns things over to angel investors. As angel investing becomes increasingly professionalized, success rates increase and more people become involved with it.

“Silicon Valley is a State of Mind, Not Necessarily a Real Place”

Pay attention to this one! This is a quote by Dave McClure and it captures what is happening perfectly. Everywhere you go, there are techies and entrepreneurs who follow the tech business scene, and they are all ideological peers.

Silicon Valley is all about embracing the idea that the world can be changed for the better, and that one can (ultimately) realize rewards by changing it. If you believe this, you are a part of Silicon Valley. What about that statement is related to place?

In Shanghai, Beijing, Seoul, Singapore and Tokyo I have seen first hand the buzz and excitement that comes from people who believe that they can engage with the problems of our world imaginatively and productively. And they are not moving to Silicon Valley.

3D Printer at Singapore’s hackerspace.sg

Place as a Strategic Differentiator

Not being in Silicon Valley is very helpful if you are trying to tap into developing markets like those in China, Korea, and Japan. It is also helpful if you don’t want to have to pay Valley salaries and sucked into the echo chamber there.

As an example, a skilled developer in Silicon Valley might cost you upwards of $120,000 per year; the same person in India would cost $12,000 per year and in Singapore they would cost $48,000 per year.
If you are trying to build a product to serve the Asian market, wouldn’t you rather base your company in Singapore?

Being in “a” place is more important than being in “the” place

It is widely assumed that internet technologies like Skype and email crush distance and make global distributed business possible. True, but there are exceptions.

Real creativity, trust, and ideation has to happen face to face. This is where the magic occurs. If you don’t spend time with people you can’t create.

New-technology tools can help with execution, but only after the team dynamics are in place; they are great for keeping people connected and plugged in, but suck at creating an initial connection.

Love your place. Find the other like minded souls who love your place and start companies with those people. The creativity you unleash in your own backyard is the most important competitive differentiator you have. No one else has your unique set of talents and point of view. Leverage it.

Every City is Becoming Self Aware — All at Once

I do not know of a city anywhere in the world that is not presently undergoing a tech community renaissance right now. This is a VERY big deal.

Every city in the United States along with Europe, Asia, and South America is now using the same playbook — implementing coworking, hacker spaces, incubators, angel investment groups, bar camps, meetups and other proven strategies that will have the effect of cutting off the oxygen supply to Silicon Valley.

Let me say it again: Silicon Valley is getting its global AIR SUPPLY cut.

For the last few decades, Silicon Valley has traded on the fact that people are willing to move there to start companies. The MAJORITY of valley companies are founded by foreign born entrepreneurs. What if they stop coming? What if they find the intellectual and investment capital that allows them to self-actualize in their home turf, where they already have a competitive advantage?

The fact that we have made it so hard for new immigrants to come to the valley and create startups just makes things that much worse. That is why the Startup Visa concept is so important if America – not to mention the valley – wants to keep excelling in innovation and the economy of ideas.

“Soul-crushing Suburban Sprawl” – Paul Graham

The Valley Kinda Sucks

Everybody says that the big draw to San Francisco is the weather. True, it can be pretty nice at times. But it can also be pretty miserable.

The reality is that the weather makes no f*cking difference if you are slaving away 26 hours per day on your startup; and the fact is that humans only really perceive changes in weather anyway: you’ll notice a nice day if it has been preceded by 10 rainy ones, or vice versa. Studies have demonstrated this. Look it up.

Paul Graham said it best, “Silicon Valley is soul-crushing suburban sprawl.” And he also suggested that places that can implement a bikeable, time efficient startup environment without sprawl have a significant competitive advantage over the valley.

Nearly every major city is becoming that place for its community of entrepreneurs. All at once.

So Why Travel?

It’s simple: to go to where the startups will be coming from. Investors who wait around for startups to show up in the valley are going to miss out on serious innovations and investment opportunities.

This means leaving the Lamborghini parked on Sand Hill Road and cabbing it to a gritty hackerspace in the Arab section of Singapore to meet the innovators who are building the future. And this is something that most investors think they are too good and too important to go do.

Fortunately there are scrappy, forward-thinking folks like McClure who are willing to go out there and embrace the future and begin the creative destruction the next wave of innovation will bring to valley culture.

Our challenges are too great to demand that innovation happen one way, in one place, with one set of people. Innovation needs to be systematized and distributed, and this is the opening act.

The Future of Entrepreneurship

I had a great conversation with Dr. Meng Weng Wong today, founder of Joyful Frog Incubator in Singapore. We pondered questions:

• In the future, will companies form teams and then try to get funding, or will entrepreneurs just gather, form ideas and try things?
• How do bands form? And are incubated startups just boy bands?
• Are we not always just betting on individual ability to execute?
• Doesn’t team (and execution) always trump idea?
• Is entrepreneurship a cycle? Shouldn’t exited entrepreneurs come hang out with first time entrepreneurs and try ideas together?

These are important questions in their own right, but the most important thing is that we are asking them. And so are people around the world. And it has nothing to do with Silicon Valley, the place.

Want in on the ground floor of this next wave of innovation? Understand the change that is coming and leverage it in your own backyard. Get involved.

Because I guarantee that in five years the Valley will be a very different place and that we will see thriving startup communities bearing real fruit in every major city.

Why go to the Valley? Good question.

A couple of acknowledgements: Shervin Pishevar pointed out that he and Dave McClure have been talking up the “Silicon Valley is a state of mind” concept for some time; he deserves proper attribution. Hats off, Shervin — the idea certainly resonates with me and I applaud both you and Dave for recognizing and acting on its power.

Thanks to everyone for engaging in this conversation!

The recent discussions of entrepreneurship here prompted several entrepreneurs to contact me, both via email and in person. Here is one kindred-spirit’s story, reproduced (and edited) with permission.

Hey Dave,

I’ve been reading your blog for the last week or so, and I wanted to let you know I appreciate your thoughtful angle on entrepreneurship, design, and intellectual life. Like many of your posts indicate, the challenges of developing personal creativity and starting something new are profound in our current culture. Last June I graduated with an engineering degree from the University of Maryland. Instead of acting on ideas to change the world, I did, as most graduates do these days, took the full time job that paid the most. (Chris Dixon’s post on the topic hits it). Add consulting and government consulting to where all the talent goes in the DMV. To a college kid, the prospects of a $70,000 salary are blinding. And if you consider yourself a self-starter, you realize quickly that you are fighting a powerful majority that would call you crazy for not taking such a lucrative offer.

That said, I have devoted a lot of my free time to developing my startup ideas through mockups and requirements. Yet, despite my engineering background, I just don’t see myself as the technical co-founder that many think is the necessary half of successful startup teams. I can spend hours reworking code, but developing from scratch is beyond me. So the question I have been struggling with is how do I find the real technical partner? As you posted, startups are about the people, but finding that passionate partner is incredibly difficult.

My current idea that I have been toying with revolves around [redacted]. From mobile app, to website … I am at a point where I would consider outsourcing app development, just because I believe in my idea and want to make progress. However, say a couple months into the future, I now have an iPhone App (and a lot less money) but I still don’t have a team to further the idea. In addition, I am not so sure my concept has clear profitability, but at my age (23) what’s wrong with idealism as a starting point?

Sorry for the length, but I wanted to offer some of my thoughts as to what it means to be on the outside of entrepreneurship, wanting in. Any return advice would be great!

Regards,
Lance

My response to Lance:

Lance,

Thanks for writing! Certainly sounds like you have the right spirit about things, and I agree with you re: Chris Dixon’s post. He’s got a very good take on things.

Some things I’d recommend:

1. Subscribe to Startup Digest Baltimore. Go to http://thestartupdigest.com

2. Go to Innovate Baltimore on Wednesday 5/19 and introduce yourself. http://innovatebaltimore.com

3. Come hang out at Beehive Baltimore. It’s where the community is centered. http://beehivebaltimore.org

4. Let’s find a time to talk some more. I am out of town for two weeks starting next Friday but we can find a time in June. Pick something: http://tungle.me/davetroy

Looking forward to meeting you!

Do you mind if I share your note, along with my response, on my blog?

I want to keep reminding people that there are LOTS of people like you out there…

Best,
Dave

Response from Lance:

Sure. No problem. If you could edit out the sentence or two about my current idea, that would be great. Also, I currently live in the Northern Virginia area, so I’ve been on the DC and Baltimore Startup since I was introduced to them at BootstrapMD. I just started looking for resources like InnovateBaltimore and BeehiveBaltimore around DC. Any suggestions?

Thanks,
Lance

My response to Lance:

OK, thanks.

You should consider moving to Baltimore as the startup + coworking scene is now a lot more active. Innovate and Beehive are just the tip of the iceberg.

There are some OK things going on in the DC area (Founders Institute, Launchbox Digital, Social Matchbox, DC Week), they run on weird schedules and are not active all the time. Baltimore’s scene is a lot more persistent and becoming much more interesting. Affinity Lab is like an expensive corporate version of coworking. Beehive is real coworking.

Anyway, I’m biased, but this is something we’re serious about in Baltimore and we’re committed to making it happen, all the way from the Governor to the Mayor to each individual startup.

Hope to see you around the Hive soon.

Best,
Dave

Why is being an entrepreneur considered so unusual in our university culture? I have a theory.

Bill Gates: dropout. Paul Allen: dropout. Steve Ballmer: dropout. Richard Branson: dropout. Warren Buffett: dropout. See a pattern?

Entrepreneurship is the opposite of University culture, which celebrates progressive levels of achievement, with the ultimate goal of becoming a college professor. Entrepreneurs create the circumstances of their own success, by changing the world around them and making their own game.

I’m not suggesting anyone dropout, but we do have to ask: is our educational system creating maximum value for society? Or is it just creating clones, steeped in the idea that there is only one true path to security and achievement, which are then manipulated by true entrepreneurs and leaders who really know how to shape the world around them? And which are you?