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.
Matt,
Excellent & informative post. I especially enjoyed the portion on “What We Thought” and seeing the actual outcome of said expectations. This is a true testament to the mindset of the aspiring and optimistic entrepreneur – usually nothing is as smooth or quick as expected in the realm of startups.
The segment of your article regarding hiring an office administrator early in the company’s life is a very interesting and intriquing point to make; my team and I quickly discovered this little neccissity while attempting to handle all tasks you mentioned ourselves. And as you mentioned, these tasks take EXTREMELY valuable time & energy away from the core competencies & vision of the organization; and while necessary, these tasks should definitely be left to a more qualified and focused team member so that the company can grow quickly and smoothly without administrative snags.
Overall, great post, Matt. I actually would like to contact you in the near future in order to receive your opinion and advice on a few company situations and “snags.”
Brandon Mullins
Co-Founder/CEO
BookMesh.com}
There was a French philosopher (recently deceased) who spoke of what he called a Simulacrum. Simulacrum is described by him (according to translation):
“Simulation is no longer that of a territory, a referential being, or a substance. It is the generation by models of a real without origin or reality: a hyperreal…. It is no longer a question of imitation, nor duplication, nor even parody. It is a question of substituting the signs of the real for the real”
Silicon Valley has become a Simulacrum. It is no longer about users, or software for that matter. Its about producing startups… and the product is secondary.
Ultimately a software company is supported by its users. Even if exceedingly complex licensing arrangements and end user agreements that no one ever reads are employed, the user still is implicitly supporting members who get $8000 sign on bonuses and roses for their wife. Someone ultimately has to pay.
It always seems to me that efforts such as this are impossibly over-hyped and laden with hubris. When did starting a successful business become a game show?
finally, why would a sincere effort sacrifice the element of surprise for low-value PR?
I cant help but suspect yet another churn and dump ploy. dot bomb 2.0.}
Brandon, thanks. Feel free to drop me a line at matt dot brezina at foo dot com (where foo == xobni)
Josh, Xobni is indeed a sincere effort. We feel it is important to communicate openly to our potential users and team members early and often. Plus, we are just excited.}
Matt, its good to hear you are excited. I for one can’t wait for email to be revolutionized. Your startup gets no ‘Lame’ points. When is the IPO?
Oh, and welcome to San Francisco, its good to have someone there who wants to do something other than flip condos.}
An interesting article for me because I have a hard time understanding the Silicon Valley method of business development. Clearly from Matt’s bio he is a smart fellow and the valley is filled with similar minds all feeding from one another.
It is simply odd to me that one week spent coming up with an idea then leads to a 4 plus million investment on something that is not really existent or proven in a market.
Is this commonplace?
What is the most common method used by entrepreneurs to find funding for their ideas in the valley? Is there venture firms on every corner or do you have to hit the pavement stalking known investors and rub up against them at a local pub?
If and when I can afford it, I need to make a trip.
Congrats Mr. Brezina}
Matt,
You and your team were obviously very innovative and talented and were for this reason able to reach where you are.
My question to you is, if you didn’t have the support of Y Combinator, what would you have done differently? I ask because most of us aren’t a part of such a construct…
thanks,
Aydin.}
Hi Matthew-
The idea evolved over nearly one year, not one week. We knew email was painful and we began the process by making tools for understanding how people use email. By taking that information and interacting with some of the best minds in the industry we were able to create the product and vision which garnered the interest of a lot of investors. We owe so much to our mentors and advisors.
Aydin-
YC got the ball rolling with respect to introductions, but more importantly helped us focus on the #1 most important thing, making something people want. It is YC’s motto, it is Xobni’s motto.}