And then there were four

It has been nearly fourteen months since my co-founder, “Adam Smith”:http://www.xobni.com/executive_bios.php#adam_smith, and I spent a week holed up in the East Campus dorm at MIT deciding what we were going to make out of a small investment from “Y Combinator”:http://www.mercurynews.com/business/ci_5657753?nclick_check=1 to deal with a big pain point, email. We’ve learned a lot since then, and plenty of our preconceptions have been disproved.

*WHAT WE THOUGHT*

*1) We’d launch our first product in two months.* We met with PG at his Cambridge home one week before the Y Combinator dinners started. We told him we’d have Xobni Analytics launched in less than 2 months. He grinned at our naivety. We still haven’t publicly launched 13 months later. To be fair, Xobni has become much more than analytics.

*2) $12,000 is a lot of money.* Through the miracle of consulting wages and the magic of Red Baron frozen pizzas, we lasted for six months on an investment of $12,000. We spent that much money on payroll and rent last week.

*3) Adam and I could launch the first product by ourselves.* Building desktop software that crunches massive amounts of data and integrates with multiple 3rd party applications is a huge undertaking. We still need more “engineering horsepower”:http://www.xobni.com/jobs.php.

*4) The hardest solutions create the most value.* Graduate school teaches you to find complex solutions to challenging problems. Users teach you otherwise.

*5) We would spend a month or two raising money.* Our series A took five months start to finish.

*WHAT HAPPENED*

*1) Approaching closed alpha.* We have expanded the scope of our software and we’re in search of “user feedback”:http://www.xobni.com/; we will be moving to closed alpha this summer.

*2) Evolution of our digs.* We’ve gone from an MIT dorm room, to a cheap Harvard Square apartment, to a San Francisco apartment with a view, to an awesome 3,200 sq foot office in central San Francisco.

*3) New team members every month.* We have doubled in size and we’re looking for more “great people”:http://www.xobni.com/jobs.php.

*4) Major investment.* We’ve raised over $4 Million dollars from “Khosla Ventures”:http://www.khoslaventures.com, “First Round Capital”:http://www.firstroundcapital.com/, two other venture firms and 9 angel investors. We’ve got a dream team behind us.

*WHAT WE LEARNED*

*1) Form D filings don’t have to be filed!* The SEC requires series A companies to file a document called Form D. These are public record and journalists can learn the details of your financing by searching through these documents. If you want to keep this information private (we did), don’t file the document!

*2) Millions looks like thousands on a bank statement; the mind has trouble parsing the extra comma and three zeros.*: The over exuberance of the late nineties has taught us to spend wisely. Our desks cost $50 at Ikea and our chairs were purchased used on Craigslist.

*3) Lawyers are expensive!* Angel round, series A, office lease, immigration, contracts, we’ve spent nearly $90,000 on legal fees this year. I don’t want to talk about it.

*4) Co-founders and community are crucial.* Running a startup consumes your life. It is important to surround yourself with fun interesting people at work because work becomes your life. Luckily, we have a lot of cool people involved.

*5) Your idea will evolve, or change entirely.* One thing has remained constant since Adam was back at MIT searching for a M.S. thesis topic: email contains an insane amount of underutilized data. What we are doing with that data is the result of hundreds of conversations and thousands of hours of experimentation. We’ve involved a group of very smart investors and advisors that have functioned as ailerons on the Xobni mothership – guiding us in the right direction.

*6) Searching for good deals on small items: phones, computers, food isn’t cost effective when you “bill time” at $50-$100 per hr.* My frugal upbringings are at conflict with this discovery. A good startup founder can create $50/hr in value (for successful companies, this number can be in the hundreds). If you spend an hour saving $20 on a $100 graphics card, you’ve wasted money. On small items, find the best deal you can in 10 minutes and move on.

*7) Office Managers/Admin Assistants are important earlier than you think – logistical and administrative tasks distract from your core roles and responsibilities.* I’m personally very excited to find someone to fill this role on our team. It is cool to learn about all the administrative elements of building a company: payroll, taxes, liability insurance, leases, banking, health insurance, bookkeeping, workers comp, but I’ve learned this work alone is a full time job. Hiring an office manager will allow us to focus on our most important job, “making something people want.”

*8) Hiring the best is difficult.* We’ll do whatever it takes to get a good employee: $1,200 last-minute flights, $3,000 referral bonuses, flowers for significant others etc. I suppose the enormity of this challenge is evident in the commissions charged by recruiters. They charge 20% of a hire’s first year’s salary as their fee. It is worth it. Your team is all you’ve got.

Fourteen months ago Adam and I were working in a dorm room and our only concern was what time Boston Market closed that evening. Now we are battling legal bills, digging deep into our personal networks looking for awesome engineers, negotiating office leases, preparing financials for board meetings, and answering questions for new entrepreneurs. It has been one hell of a year, and it feels good to hit fourth gear.