How to Speed Up Your Startup

When it comes to launching Internet companies, you can't be fast enough. Here are lessons in speed from a leading VC, the founder of an e-business incubator, and a team of anthropologists studying work and life in Silicon Valley.

Memo from the fast-moving world of Internet startups: Life in the fast lane keeps getting faster. Consider the messages offered by the following three people, who spend virtually all of their time wrestling with the implications of the accelerating pace of work and life.

Four months: That's the narrow window of opportunity that a would-be Internet entrepreneur has to transform an idea into an actual product that's available on the Web, insists J. Neil Weintraut, a general partner at 21st Century Internet Venture Partners, in San Francisco. "Time to market is the only advantage of being a startup," he explains. "Put simply, it's four months — or game over. If you have an idea that you want to ponder for half a year, you might as well forget about it. On the Internet, if you can, then you must. Because if you don't, someone else will."

"You can always get more money, but you can never get more time." That's a favorite saying of Jeff Levy, founder, president, and CEO of eHatchery, an Atlanta-based e-business incubator. And it's a credo that is repeated frequently by the entrepreneurs who populate the sleek, loftlike, converted ice-cream factory — and who gladly give up equity in their companies for the chance to slice weeks or months off their product-development and marketing plans. "Time waits for no one," insists Levy. "If you don't do it now, the opportunity will be gone forever."

Where does work end and life begin? As the pace of work accelerates, and the demands of work increase, "home" becomes a metaphor for all aspects of life, argues Chuck Darrah, who's part of a team of anthropologists studying the harried lives of people in Silicon Valley, particularly those of dual-career couples with kids. "These people 'work' on everything, including their families," Darrah says. "Relationships are something that they have to work on. So is marriage. And kids. And family. They see everything in terms of work."

We may not always like it, but it is, for better or worse, a fact of life: Business is moving faster than it ever has before. And if you can't keep up — as a company, as a team, as a leader — you will be left behind. One way to move faster is to learn from people who know how to keep up. What follows, then, are provocative insights and hands-on techniques from speed demons of the dotcom economy.

Venture Capital's Speed Demon

Among the hundreds of business plans that circulate through the offices of 21st Century Internet Venture Partners, based in San Francisco's South Park neighborhood, are countless variations on the same idea. In one six-week period last year, J. Neil Weintraut, 41, read 10 different proposals on using the Web to sell pet supplies. That wasn't necessarily a bad idea, but it certainly wasn't an idea big enough to support 10 entrants. "If you have an idea, you have to act on it now," he emphasizes. Winning startups aren't the ones that outthink the competition; they're the ones that outexecute the competition. "With the Internet, an idea has no time to evolve," he continues. "It has to happen now."

Weintraut should know. As a venture capitalist, he provides the early funding that helps entrepreneurs turn ideas into companies in just a few months. He's been a player in the Internet space since it mushroomed in the mid-1990s. During his career, he's built the Internet practice of Hambrecht & Quist Group, an investment bank that underwrote the stock offerings of such pioneering Web companies as CNet, E*Trade, Lycos, and Netscape. (The bank was acquired by Chase Manhattan Corp. in 1999 and is now known as Chase H&Q.) Today, at 21st Century (which Weintraut cofounded in 1996), he and his partners oversee a fund that specializes in early-stage investments in Web companies. They funded AdForce, which has since been acquired by CMGI for $1.5 billion; CareerBuilder, which now trades on the NASDAQ; and When.com, which America Online acquired less than a year later.

What does it take to move that fast? The answer is not mountains of cash or cutting-edge technology. To build a fast startup, says Weintraut, you first need to hire fast people. More important than time to market, he says, is "time to hire," since the latter will determine the former. "An entrepreneur has only one job: to hire," Weintraut explains. "Starting a company is no longer about raising capital; it's about raising teams. The single biggest challenge for any startup is finding people who will enable you to move fast."

That's why, when screening companies for potential investment, Weintraut and his colleagues look not just for innovators but also for team builders. "We ask ourselves, 'Is this person going to be a hiring person or not?' " he says. "The mark of a successful entrepreneur in this environment is the ability and the attitude to hire and to let other people do things. CEOs who tell me how hard they're working don't impress me."

Nor is Weintraut impressed by startups that commit what he considers to be one of the cardinal sins of fast hiring: recruiting junior people now, with the expectation that you'll fill the senior positions later. His reasoning: Bringing in one untried contributor doesn't increase the number of people who can hire other people, whereas bringing in a more-senior player adds to the number of people who can recruit for your company. "Hire high," says Weintraut, "and hire the hirers. Your first job is to hire people magnets — people who are seen as leaders by their peers."

Of course, that's easier said than done. Weintraut estimates that in the past few years, the number of startups has increased fourfold, while the pool of top people available to work at those startups has only doubled. "Pitching to venture capitalists is trivial," he tells company founders who visit him. "The hardest thing that you'll encounter is pitching to a potential vice president of engineering."

One simple way to tell how fast you're moving on the recruiting front is to ask yourself a question: How many job interviews are you conducting today? By Weintraut's calculations, a successful Internet startup will grow from 2 to 100 people within a year. Since you'll probably have to interview about 5 people for each person you hire, you should be conducting 500 interviews a year — or, almost 2 interviews a day. If you're not, then you're falling behind already.

Another secret to speed is simplicity. For an Internet company, the key to outcompeting a gaggle of well-funded rivals is to present a product or service that is so distinctive and so compelling that customers are quick to recognize its superiority. That doesn't mean that you should load your offering with lots of features and options. Quite the opposite. Less is more, argues Weintraut: "Instead of having a product that's full of features — Microsoft-style software — offer a service with one key feature. Simple equals fast. What is the one feature that the largest number of customers will find immediate, obvious, and useful?"

When.com, one of Weintraut's fastest success stories, is a case in point. The company started out with a grand plan that would essentially re-create Microsoft Outlook on the Web. But realizing that such a complex technical endeavor would take too much time, When.com changed its strategy — by embracing simplicity. Instead of focusing on a broad technical vision, it offered something very basic: a calendar. The company then cut deals with more than 50 content providers to include event information on its calendar. That shift in focus radically shortened development time. "In one day," explains Weintraut, "we could sign a business-development agreement with, say, the Weather Channel or a local newspaper, and fill a calendar with that client's information, whereas developing a new feature on the calendar could have taken months."

The decision to do less technically in order to go faster also enhanced another objective: It made the calendar immediately useful to users. By gathering event content from many sources, When.com provided an obvious benefit to large numbers of people. "Benefits to customers are the only barriers to entry," says Weintraut. Indeed, Weintraut discourages his companies (including When.com) from trying to lock in exclusive relationships with partners in an attempt to erect barriers against competitors. "We live in a customer-centric world," he says. "The only thing that customers care about is how something will benefit them." And forget about hiring lawyers to protect your ideas. You're better off moving quickly to the next idea. "If you're not afraid that Yahoo! will copy what you're doing, then it's probably not worth doing," Weintraut quips.

There's one more core competence for fast startups: They must pick fast partners. Sure, in a world powered by the Web, partnerships are a crucial asset for success. And there's a strong temptation — especially for startups, which are eager for credentials and credibility — to partner early on with big-name firms that sound impressive to potential customers and to the media. But that's almost always a mistake, says Weintraut. "Even if those companies are going to be your best customers, they won't move fast enough," he argues. "Remember, you've got four months to get to market. It's probably going to take four months for a big company's lawyers even to consider your initial proposal."

So what's the alternative? Get up and running now; seek big-name partners later. When a fledgling When.com first began courting big portal companies — Netscape, Yahoo!, and the like — they didn't take serious notice. It wasn't until When.com had created its calendar site, signed up hundreds of content partners, and launched a service with obvious benefits to customers that the big companies began to show interest. "The best thing that a startup can do is to go out and take control of its own destiny," Weintraut says. "Create a stand-alone business, and the partners will follow."

How to Hatch a Company

The founders of the nascent companies that are sprouting up at Internet incubator eHatchery — companies such as FigLeaves, Simply Collectible, TradeUps.com, and VetExchange — have one pressing objective in mind: to save time; to squeeze it, compress it, maximize it; to launch their companies at a faster pace than all of the all-nighters and sweat equity in the world could make possible. John McCallum, 30, cofounder of Vet-Exchange, an online service that aims to help veterinarians operate their practices, estimates that his company is about four months further along than it would have been without the incubator's help. FigLeaves, another Web-based company, shifted its focus from bargain shopping to retail sales of intimate apparel after just a month at the incubator. Founder and CEO Ari Straus, 31, guesses that without eHatchery, his company would have taken six months just to realize that it needed to switch its focus. And, he adds, eHatchery cut the company's business plan from nine months, "which we already thought was fast," down to three. "Without eHatchery, it would have taken us an extra six months to get to where we are today."

Time is money — literally. FigLeaves, VetExchange, and other eHatchery companies give up as much as 50% of their equity in return for, at most, $250,000 of capital. But they're really paying for all of the connections, skills, services, facilities, and technology that eHatchery offers — resources that they believe will get their products and services to market, and their business plans in front of venture capitalists, faster than any other route.

Welcome to the latest self-reinforcing wonder of the Web. Incubators might just be the fastest-growing startups on the Web. Indeed, eHatchery is a second-generation Internet incubator, an operation modeled on Bill Gross's idealab! — the incubator based in Pasadena, California that's famous for such successes as CitySearch, eToys, and GoTo.com. In a move that can only be adequately described as the incubation of an incubator by an incubator, idealab! has both taught and invested in eHatchery. And Jeff Levy, eHatchery 's founder, president, and CEO, is himself a second-generation Internet entrepreneur, having cofounded RelevantKnowledge, an Internet-audience measurement firm that was acquired by Media Metrix in 1998.

EHatchery, which opened its doors last August, is a laboratory model of what an Internet entrepreneur might do to maximize his or her time. "EHatchery equals speed," says Levy, 36. He remembers the ramp-up phase at RelevantKnowledge, when he focused on details such as phone systems and IT installation and office space and furniture and long-distance carriers — practically everything but his actual business. "For the first three, four, five months, I spent approximately 80% of my time on administrative stuff," says Levy. The process of raising the first round of capital was also arduous and slow. Back in 1996, the founders of RelevantKnowledge spent six months raising their first round of capital, roughly $925,000 (in $10,000 and $25,000 increments). Taking that long will put you out of business today. "If it takes you six months to raise startup money, you're almost sure to be dead in the water," says Levy.

EHatchery does make seed investments in all of the companies that it incubates, but money is the least of what it provides. "Investors' hard work ends when they write a check," says Levy. "Our hard work begins when we write a check."

On day one, the early-stage company's handful of team members move into eHatchery's 25,000-square-foot, two-story office. Complete with Herman Miller Aeron chairs, the space has more in common with a trendy LA ad agency than with the proverbial startup garage. All legal, finance, accounting, HR, administrative, and operations functions are immediately handed off to eHatchery's in-house team, which comprises about 40 full-time staffers, including 6 key leaders such as COO Bill Wallace and director of marketing David Berney. EHatchery's staff far outnumbers that of any of the startups, and it maintains a higher level of talent than a new company could attract on its own. "Just by walking through the door, you double or triple your management team," says McCallum. "And you really get to focus on your job."

Call it "in-sourcing" — tapping skills and functions that are essential (but secondary) to the mission of the organization and that are provided by a team that sits just a few feet away. About half of the eHatchery team is made up of engineers who have developed the incubator's technology platform, called Hatchware — an open-source e-commerce product that can be tailored to fit each company's Web site. Since roughly 75% of the Hatchware code can be reused, eHatchery doesn't have to build each site from scratch. Given how hard it is to recruit IT talent these days, the on-site engineering staff is a serious boost of acceleration. "Every new company that comes through here is going to take advantage of what the previous companies have built," says McCallum, noting that the team is modifying the architecture previously built for FigLeaves to create a product for his company, VetExchange.

But the real speedup begins as the entrepreneurs get initiated into the eCeleration process — eHatchery's philosophy of time, which aims to take entrepreneurs and their ideas through three key phases. "ECeleration is an attempt to apply real process to the chaos of the earliest stage of a startup," says Levy, who adds that the process is patent-pending.

The first stage is "ignition," a startup's first 30 days with eHatchery, during which the incubator's management team works with the entrepreneurs to clarify their business model and craft a strategy. This period of reflection may sound as if you're slowing down to go faster. But, Levy explains, it is absolutely critical: "It doesn't matter how fast you run if you're not heading toward the finish line. When you're working 24 hours a day, and 10 people are doing 100 tasks in one room, it's easy to race pell-mell down a blind alley."

It was during the ignition stage that FigLeaves changed its focus, avoiding months of potentially fruitless work. During ignition, companies create a "survival checklist," formulating objectives that have to be met before moving to a viable Web pilot and getting the next round of funding. "In order to change the world for the long term, you first have to survive long enough to change the world," quips Mike Dickerson, 36, eHatchery's entrepreneur in residence, who oversees the eCeleration process. One of FigLeaves's survival issues: Could this unknown startup get access to branded products? Setting a tangible goal of a specific number of brands, and a date by which to achieve it, became an item on that company's checklist.

The second stage of eCeleration is "momentum," during which the company begins achieving the goals on its survival checklist. During momentum, rapid application development takes place, and an initial marketing plan is formulated. In the final stage, "overdrive," entrepreneurs test and define their concept, raise an initial VC round, and transition out of eHatchery.

Such acceleration would be difficult to achieve without the help of eHatchery's management team. Last December, for example, when four entrepreneurs, led by CEO Mike Fowler, joined eHatchery to launch VetExchange, they knew that they had a problem. It was less than six weeks before the crucial North American Veterinary Conference, in Orlando, Florida. The team hadn't yet developed its product and didn't have enough time to launch even a viable working pilot site. Meanwhile, the Western Veterinary Conference, in Las Vegas, was also fast approaching. Fowler and his team needed to act fast to make an impression on their target market, but they were loath to put up a vaporware site just for the show. Besides, what exactly would they put on the site?

So the eHatchery team consulted with former Coca-Cola marketing whiz Sergio Zyman, the chief marketing officer at Z Group and an adviser to eHatchery. He's just the kind of high-level talent that a four-person startup wouldn't be able to bring in on its own. His message to the VetExchange group was clear, recalls McCallum: "If you don't make a big splash, then you should pack up shop, because it will be another year before you'll see those people again."

Zyman also cautioned the entrepreneurs against wasting money and energy on delivering a message that they'd later have to take back or reframe. So, rather than trying to craft a marketing message that would guess at what its customers wanted or to cover up the fact that VetExchange didn't yet have a product, the team decided to use the veterinary conference as a high-profile listening exercise. David Berney, eHatchery's director of marketing, used a business contact to facilitate a deal with Land Rover: EHatchery would buy a two-year lease from Land Rover and give it away as a prize to a randomly chosen veterinarian who completed a VetExchange questionnaire at the Orlando conference. Of some 4,000 veterinarians who attended the convention, roughly 2,500 filled out a survey. It was an innovative mind flip: Don't come up with a hastily put together marketing message for a product that doesn't yet exist; instead, find out what your potential customers need, and let them know that you wish to create it.

The big lesson behind this small example is this: It is better to be first with less than to be last with more. Success on the Web isn't just about time to market; it's also about "time to learning." That's the real advantage of being the first mover in a category, of working hard to stay a few weeks or months ahead of potential competitors. "The point is not to have everything on day one," says Levy. "The point is to be out in the market, learning what people want."

For FigLeaves, being "out in the market" meant launching not in mid-February, as the company had originally planned, but in late December. Recalls Ari Straus: "Jeff Levy said, 'Get the site up as soon as possible. The sooner you're up and running — even if your selection isn't as wide as you'd like, and your functionality isn't as sophisticated as you'd like — the sooner you'll understand how people are shopping and what they're looking for.' "

Another way to accelerate learning is for company founders to compare notes and share lessons. As FigLeaves's entrepreneurs closed their first private-placement round of financing, recalls McCallum, the VetExchange team peppered them with questions and requests: "How did you find funding? What did you do? Show us your private-placement documents. Share with us the things that helped you, the things that you found useful."

McCallum also remembers one five-hour rap session with Vikas Singla, the founder of SimplyCollectible Inc., during which Straus picked Singla's brain about the search-engine registration process. And Singla remembers a conversation with Straus, during which each man offered the other a job at his company. The whole point is that entrepreneurs can compress time by accelerating learning. "Go to a day-care center, and look at the children who are walking," says Straus. "Some start walking at 8 months. Others start walking at 14 months. It's almost always the same story: The ones who are walking earlier have older siblings. You learn by example, by guidance. That's part of the process."

Students of Speed

There's a nagging personal question behind the acceleration of strategy and tactics in the Web economy: If I work on Internet time, does that mean that I have to live on Internet time too?

No part of the world feels that question more deeply, more urgently, more viscerally, than Silicon Valley — which is why it's fitting that three anthropologists (all of whom are based at San Jose State University) have been watching the people of Silicon Valley struggle with that issue at work, at home, and always in real time. Along with hundreds of student researchers, Chuck Darrah, 51; Jan English-Lueck, 46; and James Freeman, 63, have been conducting a 10-year ethnographic study of Valley culture — from the perspective of everyone from project managers to hairdressers. They've interviewed hundreds of employees at such companies as Adobe Systems, Apple Computer, Cisco Systems, and Hewlett-Packard about work, home, identity, and community.

Now these anthropologists are engaged in perhaps their most ambitious, and certainly their most in-depth, investigation of all: the Families and Work in Silicon Valley Project, a painstakingly detailed study of the lives of 13 dual-career couples who have children. The project involves shadowing each family member — husband, wife, and kids — for at least three full days. In total, the three anthropologists spend between 170 and 200 hours observing a family's behavior. They endure grueling schedules — spending up to 13 hours a day with a family member — as well as periodic angst. As one teenager said to a researcher who accompanied him to school (no doubt trying to hide his anxiety): "There's nothing you might see that could embarrass me."

Years of field research and interviews have provided the anthropologists with a wealth of textured observations about the realities of how people in Silicon Valley live, work, and cope. Many of their findings corroborate the feelings of stress and anxiety that so many of us feel as we struggle to keep up. But their overall perspective is not one of doom and gloom. "One of the great lessons that we've learned is that people adapt," says Darrah, who notes that many of the Silicon Valley subjects he's studied are satisfied, despite the frenetic pace of their lives. Darrah quotes a typical sentiment: "I'd like to make some changes, but I'm generally pretty happy. My work is meaningful, and I enjoy my job, my coworkers, and my kids."

Another big-picture point: Many of us confuse two different phenomena. There's no question that certain aspects of business are speeding up. (How many companies used to launch products only every few months?) But much of what confuses us is our apparently insatiable desire, in an era of material abundance and limitless opportunity, to do more things — as opposed to just doing the same things faster. "People have crowded their lives with an incredible amount of stuff," says Darrah, "but that stuff isn't necessarily moving any faster than it used to. There's just more of it."

How do people cope in this do-more-faster age? One reaction is to break tasks down into discrete chunks. What was once a one-hour meeting becomes a series of brief conversations in a hallway or in a parking lot. Likewise, tasks that used to get done in relatively uninterrupted large blocks of time become distributed throughout the day, several days, or even weeks. "It's a strategy of breaking everything down into manageable pieces that you work on whenever you have time," Darrah explains. "People seize any opportunity to take care of business, because they don't want to let a minute go by unused."

To be sure, that coping strategy raises its own challenges. For one thing, the desire to find time with fewer interruptions is a constant theme among the people whom the anthropologists have studied. For another, the place where knowledge workers find the most uninterrupted time is most often at home — which raises a whole new set of challenges. "When I look for the boundary between work and family, I can't find one," says English-Lueck.

That's true in both directions. Home life permeates the workday, with frequent phone calls and emails zipping among husbands, wives, and kids, confirming and modifying the family's "daily strike plan." On the flip side, discussion of work pervades the home. Couples often go beyond using each other and their kids as sounding boards, drawing on their talents for help. "It's as if there's an unpaid consultant in the other spouse," explains English-Lueck. "Often, companies aren't just hiring one person; they're hiring an entire family — all of the skills and knowledge of that pool."

What's more, it's not just the demands of work that are infiltrating our personal lives; the language and mentality of work also affect life at home. "If you listen to families talk today," says Darrah, "the concept of management — backpack management, time management for homework — is ubiquitous."

Silicon Valley residents are constantly attempting to create a boundary between work and life: "No working at the dinner table" and "No working in bed" are common household rules — rules that are frequently broken. Some people, though rare, deliberately don't have a computer at home. Others create a geographic boundary by living in a remote location, such as the Santa Cruz mountains, so that a lengthy commute becomes a border. Explains English-Lueck: "The thinking is 'If I have to spend 90 minutes commuting, then by the time I get home, I'll really be home.' Of course, that's not exactly true."

What she means is that work persists in entering the home. "You might not bring a briefcase full of work home, but you're still thinking about work," says English-Lueck. "The work is in your head, and that's much harder to manage."

It's the knowledge worker's ultimate work-life dilemma: If work is just as much about thinking as it is about doing, then how can you ever truly get away from it?

Katharine Mieszkowski (km@salon.com), formerly a senior writer at Fast Company, now holds that title at Salon.com. Contact J. Neil Weintraut (neil@21vc.com) by email, or visit 21st Century Internet Venture Partners on the Web (www.21vc.com). Contact Jeff Levy (jeffl@ehatchery. com) by email, or visit eHatchery on the Web (www.ehatchery.com). Contact Jan English-Lueck (jenglish@email.sjsu.edu) and Chuck Darrah (darrahc@email.sjsu.edu) by email, or visit the Silicon Valley Cultures Project on the Web (www.sjsu.edu/depts/anthropology/svcp).

Sidebar: Dual Career or Duel Career?

"The daily strike plan." That's the term that a team of anthropologists uses to describe the logistical schemes that guide Silicon Valley moms, dads, and kids so that they can all get where they need to be — work, day care, school, after-school activities, doctors' appointments, friends' houses — when they need to be there. What's notable about these plans, whether carefully or carelessly wrought, is that they almost always change at some point throughout the course of a day. Life has become a daily dance of negotiating and renegotiating household activities — while family members are at work or at school. One subject emailed Jan English-Lueck, one of the San Jose State anthropologists, quipping: "I don't think it should be d-u-a-l career — it should be d-u-e-l career."

In their studies of two-career couples, the researchers have observed a frequent, even on-the-spot, shifting of priorities between spouses, depending on who has the greatest flexibility. Explains English-Lueck: "Who pays attention to work? Who pays attention to kids? It isn't as simple as one person having the kid role and the other person having the work role. You're constantly shuffling back and forth, as the demands of each role change."

During his research, anthropologist Chuck Darrah watched as a Silicon Valley worker made and received 26 phone calls in the course of a single day, 18 of which were personal. But this wasn't a goof-off employee, slacking away the day gabbing to friends and family on the phone. Almost every call was less about chatting than about arranging and orchestrating the logistics of family and home life.

Coworkers often act as a kind of personal safety net to remind one another of their familial obligations: "Don't forget that you have to take Samantha to the dentist at 4 PM today." A frequently expressed concern among parents is the fear of losing track of a child for a few hours, by perhaps forgetting to pick that child up from day care.

Sidebar: The Business of Speed

J. Neil Weintraut, a leading player at 21st Century internet Venture Partners, isn't really in the venture-capital business; he's in the speed business. "Success is not just about being fast," he argues. "It's about doing all of the things that allow you to be fast." According to Weintraut, there are at least three defining strategic elements to speed: fast hiring, focused offerings, and smart partnering. And there are also lots of tactical issues.

Fast startups use simple contracts.

"When you operate at Web speed, by the time the ink is dry, a contract is pretty much obsolete," Weintraut says. "So, instead of telling your lawyers to write a 10-page contract in a week, ask them to generate a 2-page contract in two days."

Fast startups spend fast (but smart).

"Historically, the fundamental challenge for the entrepreneur was to conserve capital," notes Weintraut. "Now the challenge is to spend smart, because there's so much of it." Consider HotJobs.com, one of countless Web-based career sites before it ran an ad during the 1999 Super Bowl — which, at the time, was considered an extravagance. That one ad helped propel the fledgling company into what is now nearly a billion-dollar publicly traded concern.

Fast networking beats big spending.

Big Words, a Web-based textbook seller, spent just $50,000 and took just one month to set up relationships with more than 25 publishers. It then put up a Web site, ran ads in eight college newspapers in California — and wound up selling books to students at more than 250 universities across the country. "Before the Internet," says Weintraut, "a company like Big Words might have achieved sales at 8 or 10 universities at launch time. But Big Words reached 250 in one month. That's fast."

Add New Comment

0 Comments