Colourlovers Buys Forrst to Build an Etsy for Digital Bling | PandoDaily
Creative community Colourlovers has acquired another creative community called Forrst in a bid to create the preeminent place on the Web where creative types can come together, make pretty things, help each other get better at making pretty things, share pretty things, and ultimately monetize them. The combined site wants to make great design simple and accessible and create a lucrative business doing that.
As someone who works with words, and usually words that are just black on white, the concept was all a bit esoteric to me, until I went on Colourlovers to check out what the site actually does. Hours flew by as I got consumed in what I could only call “playing” with color and patterns in a way I never had before.
I mean that as a huge compliment to the site. Colourlovers makes the art of creating colors and patterns come alive, even for non-designers like me, who’d never had the urge to “create” a color in a world where there are already millions of them. No matter how intimidated by design you are, you can quickly find yourself creating colors, pallattes, patterns, and shapes on Colourlovers and start looking at design in a completely different way. Imagine what people with actual talent can do with these tools.
I’m clearly not alone getting sucked into the site: Nearly 1.5 million registered users have shared more than five million colors, two million palettes, two million patterns, and nearly 160,000 templates. “It helps people discover their inner designers,” says CEO Darius “Bubs” Monsef IV. “We want to give you the tools to go from inspiration to execution and eventually monetization.” (I originally linked “Bubs” to the lovable, addled crack-head from The Wire, who is the only other “Bubs” I know. Monsef didn’t find it funny, so I linked to his Twitter account instead.)
Colourlovers has been around for seven years. Forrst is also a designer and developer community but is younger, smaller, and somewhat different. It is more focused on professional and career development and less on tools. The original concept was something like Tumblr, where developers and designers could share cool UIs and interesting libraries of fonts and design experiences, says founder Kyle Bragger.
Bragger hacked it together as a side project, while he was working on a wine social network with the infamous Gary Vaynerchuk. It started to take off, and Bragger wanted to devote more time to it, so Vaynerchuk invested along with a round from 500Startups. The total raised was about $205,000. Forrst was always sort of a kindred spirit to Colourlovers, and Bragger is happy to have more resources to help connect and inspire designers around the world.
Beyond all the feel-good prettiness of the site is a potentially disruptive vision of a Creative Market, which has the tongue-in-cheek tagline, “Handcrafted, mouse made.” The vision is an Etsy of individual made digital goods where people can browse and find all the different creative elements they need to build a site, whether it’s art, fonts, icons, templates, shapes — you name it. It takes the idea of stock art and applies to all aspects of designs. It hasn’t launched yet, but there are about 30,000 people on the list, waiting to see what it looks like, Monsef says. (Add your name to the list here.)
Colourlovers demystifies a lot of the design process, and whenever something is demystifying a process there are people who love it and hate it. But my guess is a lot of the community will love where Colourlovers and Forrst are taking them, because it’s a path towards making more money off of their creations the same way platforms like Facebook and the various app stores opened up the market for individual developers.
It’s a somewhat amorphous vision. At some level how do you “sell” a color or a shape? But it’s also an idea whose time has come nonetheless. Design has long been the unsung hero of the Web. Sure, it’s the first thing to get blamed if a site sucks. And in rare cases, the design is so great that it’s a site’s main differentiator. But usually design does its best work when it goes unnoticed: When it’s so pleasing that you focus on the site or app itself. It’s like a day with clean air or a beautiful blue sky.
Good design is simply table stakes for a site being successful these days, that means even basic sites without a top designer on staff need to up their design game. Colourlovers is seeking to build a business around making that simple. Expect more details on this ambitious vision in the future.
(I found that adorable “egghead” pattern on Colourlovers by Mariette. Seriously, there’s some awesome stuff on there.)
From YC Rejection to 10,000 Users in 1 Month | Codiqa
My co-founder Ben Sperry and I applied for the W2012 Y Combinator funding round last fall with Codiqa, our jQuery Mobile developer tools and services company based in Madison and Milwaukee, Wisconsin.
I interviewed with YC for the W2010 round with my last startup, which ultimately failed. It was a really great experience and I had a blast, even though we didn’t get funded. Being able to talk with really brilliant people in the orange room, meeting and pitching the partners, and exploring the tech capital of the world was an experience I will always cherish.
This time around, I was really confident we’d at least get an interview for Codiqa, so we submitted early and iterated on the application after that. A week before the application deadline we got a message on Hacker News from Robbert Morris with a question for us to clarify something on our application. I took this as a sign this would be the last time they checked the application. Too bad, since we made a ton of changes after that which might not have been reviewed (if that is true, it’s an argument against submitting early).
My good friend Ryan Oldenburg, now lead Android developer at Hipmunk, put me in touch with Steve Huffman, co-founder of Hipmunk and Reddit, for some much needed feedback on our application. He basically said that we needed to do a better job explaining why jQuery Mobile matters. In the end, we didn’t do a good enough job of that, and I think our other answers lacked substance and confidence (and were too MBA sounding). On Halloween night we received an email saying we were rejected, had a moment of sorrow, and moved on.
Not long after, the jQuery Mobile project started following our updates and expressed interest in what we were building. The fact that Codiqa is 100% dedicated to jQuery Mobile, we believe, set it apart from any other mobile app building tool. We began talking with Todd Parker, leader of the jQuery Mobile project, who was instrumental in giving us early feedback as we developed Codiqa, from its evolution as a desktop application to a web-based service.
We launched our private beta of Codiqa in January of 2012 to about 500 users. For two months we worked feverishly to build our MVP, fixing bugs and adding necessary features. We opened publicly in late February with an announcement to our mailing list and Twitter followers.
In February we approached Todd with a proposal to put a free, embedded version of Codiqa directly on the jQuery Mobile homepage. He loved the idea, and on the night of February 27th we went live directly on jquerymobile.com (scroll down to play with a basic version of Codiqa).
Since then, Codiqa has been growing beyond our wildest imaginations. By the end of this week we will have over 10,000 users, up from about 1,000 just a month ago. The excitement surrounding jQuery Mobile is huge, and we have people from all over the world using it. Here is a graph of total registered users over the last three months:
Here is a graph of new accounts per day over the last three months:
Codiqa launched with a freemium model: we have a basic builder that only allows HTML exporting, no saving on codiqa.com or using our sharing and theming tools. We try to upsell through saving your app instead of just downloading the HTML. Right now we are not satisfied with our conversion rate from free to paid. We are going to run some experiments, but we’d love to hear your ideas (NOTE: We just made a change which seems to be really improving this!). Here is a graph of free users and users with a plan (we just launched, so almost all users are still in their trial period):
And the conversion rate from free to paid:
We hit a major milestone yesterday: our first successful charge after a 30-day trial ended. We have about 1400 users in a free trial right now so we expect to successfully convert and charge a number of them to bring in some revenue.
For the next few months, our plan is to focus on our “hot dog” (see Rework) – the builder we’ve developed. We are going to be adding more components, fixing bugs, and updating our pricing to better reflect the use-cases we’ve heard from our customers. We are going to be launching an alpha version of our desktop builder in a month or so and are going to spend more time blogging and sharing our expertise with our users.
We are really excited for the next few months. We want to be very transparent about our growth as we bootstrap Codiqa. We would love to hear your feedback or any ideas you have on how we can grow Codiqa! Please leave a comment below if you have something to add. Stay tuned for more posts as we build Codiqa!
"Boy CEO" Mark Zuckerberg’s Two Smartest Projects Were Growing Facebook And Growing Up | Fast Company
From studying leaders he admired to taking elocution lessons, Zuckerberg made his evolution into a world-class CEO a personal project. Photo by Martin Schoeller/August
It was a minor meta moment, the perfect inside joke to kick off a September day that was otherwise all business. The occasion was f8 2011, the erratically scheduled, mostly annual conference for Facebook developers and social-media innovators, a gathering that now has a pilgrimage-like quality for the Facebook faithful. It is one of the few opportunities for legions of Mark Zuckerberg fans viewing the event live online to observe their spotlight-averse hero perform a rite native to the CEO species: the keynote address. Ladies and gentlemen, Mark Zuckerberg. The whoops turned to laughter almost immediately; it took only a few seconds for the assembled engineers, designers, brand stewards, marketing mavens, nonprofiteers, pundits, bloggers, and investors to realize that they were being punked.
On stage was the comedian Andy Samberg, fully in character as “Zuck Dawg” in a hoodie, jeans, and Adidas sandals. “I want to start by focusing on some key issues,” he said. “The first is the importance of authentic identity. I …” he paused, hand over heart, “… am Mark Zuckerberg.” It was a delicious moment for the Facebook staff, now 3,200 strong. For them, it’s always been about identity. Since Facebook’s February 2004 launch, the company has succeeded because hundreds of millions of people—slowly at first and then in crashing herds—became comfortable sharing their true selves on the site. It is precisely that authenticity that makes Facebook matter to its 845 million users. If Marshall McLuhan had lived long enough to have a Facebook profile, his status might read thus: The medium isn’t just the message; the medium has become us.Zuckerberg’s bet was that Facebook’s guiding essence, the Hacker Way, could be baked into a new style of management for a new type of company.
But the moment belonged first and foremost to Zuckerberg, who for years has had his own identity problem: “boy CEO.” Young, arrogant, and awkward—no one believed that Zuckerberg could survive the adult swim of real business, and thanks to his depiction in The Social Network, some folks will forever see him as the fatally flawed psychopathic robot nerd looking to steal your code, your personal data, your girlfriend. “I don’t think about it … much,” he once told me when I asked him how he handles all the noise, measuring his words as he always does. “I understand why people need to have these dialogues, to ask these questions. We have so much to do here, we don’t think about it if we don’t have to.”
I first met Zuckerberg and his colleagues five years ago, when Facebook had just 19 million users and was on the verge of opening up its platform to outside developers. Looking back on more than 400 hours of reporting with Facebook staffers, investors, and people in the site’s ecosystem, including a visit in late December, plus more than seven hours of one-on-one interviews with Zuckerberg, one fact is clear: The only thing that could have derailed Facebook’s climb to Internet domination was the inexperience of a young CEO. He had never held a proper job before and, by virtue of his own ballsy negotiations, could not be ousted from his position. (Facebook, citing IPO-quiet-period restrictions, declined to make Zuckerberg available for this story.) But what was largely interpreted as control freakery in service of a bigger exit strategy turned out to be a real vision. “So many businesses get worried about looking like they might make a mistake, they become afraid to take any risk,” he told me after the company moved into its first grown-up tech campus, on Palo Alto’s California Avenue, in 2009. “Companies are set up so that people judge each other on failure. I’m not going to get fired if we have a bad year. Or a bad five years. I don’t have to worry about making things look good if they’re not. I can actually set up the company to create value.”
You Know What’s Cool? A Billion DollarsNine of the big winners when Facebook goes public.
Founder, chairman, and CEO
The venture capitalist led an early $12.7 million funding round.
Cofounder and first CTO
The entrepreneur was Facebook’s founding president.
The PayPal cofounder was Facebook’s first angel investor.
The artist received stock options for murals painted at Facebook HQ in 2005.
(Plus an additional 39 million in restricted stock units worth more than $1.1 billion)
Cofounder and first unofficial spokesperson
The Washington Post Co. CEO has sat on Facebook’s board since 2008.
$45 million*Based on a $100 billion valuation
This February, as part of his effort to ensure that this remain true, Zuckerberg asked investors to back a company in which he will retain 57% of the voting stock. He outlined the company’s guiding principle, which he calls the Hacker Way, in a personal letter to potential shareholders that accompanied the IPO filing. This is the idea that gives Facebook its identity—as a company that questions assumptions, moves fast, takes risks, shares information, and learns from other smart people. Nowhere does this manifest itself more clearly than in the company’s regular hackathons, extended coding sessions where employees race to invent new products. “What you’ll hear over and over and over again is ‘why?’ ” says HR chief Lori Goler of a culture filled with millennials (average age: 28) who question the purpose of every feature and expect a logical answer.
Turning that “we’re all coding together in one big room, and we get great ideas and move fast because anyone can walk up to anyone else” ethos into a business required the young CEO to turn his hacker sights on himself. An experiential learner, Zuckerberg transformed himself with astonishing discipline into a CEO worthy of the company he was building. “Look, we were so young,” Zuckerberg told me back in 2007. “When we first got here [to Silicon Valley], we knew that there was so much we just didn’t know.” He was 22 years old when he made that poignant observation. He had arrived in Palo Alto when he was 20.
Zuckerberg is one of the few CEOs in history to come to significant power without his personality fully formed, and he was smart enough to take himself on as a project. His maturity as a CEO and Facebook’s open culture are the result of what can be considered the longest hackathon in history.
My first visit to Facebook, in February 2007, started as a typical one. I was to begin and end the day with a one-on-one with Zuckerberg, with a series of get-to-know-the-company meetings in between. He arrived 20 minutes late for our first meeting, holding a paper bowl of Cheerios and looking more like an overworked paperboy than a new-media mogul. (Later that day, then-COO Owen Van Natta, a Valley veteran and early Facebook “adult,” would roll his eyes and tell me, “The kids eat way too much cereal around here.”) Zuckerberg confessed that he’d been up early to “work on something” and had fallen back asleep. He appeared to be telling the truth: Sleep creases surrounded his red eyes, and he was wearing the same thing he’d worn at the Fast Company photo shoot the day before. He was an odd mix of friendly, quirky post-teenager and philosopher king in training. He would talk about his love of Guitar Hero and Chicken McNuggets, yet he’d always return to the ideas that openness and connecting people were all that really mattered to him, and that he thought Facebook could change the world. Zuckerberg had already faced numerous tests as the site grew, from opening it up to any person over the age of 13 to jumping into the crowded digital photo-sharing market with a simply designed product (tag your friends!) that blew the others away.
Zuckerberg’s most important lesson as a “boy CEO” came from Facebook’s first flush of popularity in corporate America. He spent a lot of time in 2006 talking to the likes of Viacom and Yahoo, both of whom were kicking the tires on acquiring Facebook for up to $1 billion. The mogulizing had taken him away from the company, which was burning through cash; his absence sent waves of discontent through a staff that didn’t know what its leader was thinking. Are we selling? Not selling? Raising money? “What were we going to do, not take the meetings?” recalls Facebook cofounder Dustin Moskovitz, defending his friend. “We were learning about the world by talking to these people.”
But Zuckerberg got the message. “I needed to be more open,” he told me. Encouraged by legendary Silicon Valley recruiter Robin Reed, he hired an executive coach to help him identify and hone the essential skills of running a fast-growing company. He began to study and evaluate the successful people and companies around him, tapping them for insider lessons in leadership. “He is a sponge for process—in a way I’ve rarely seen,” Accel partner and early Facebook investor Jim Breyer told me. Zuckerberg instituted regular all-hands meetings so people could hear directly from him what was happening, and he began to tackle the tough issues of organizational design and personal accountability. (One of Sheryl Sandberg’s first great acts as COO was to hold a public forum exploring women’s issues, including their scant numbers in the engineering ranks, with Zuckerberg’s support.)
As public interest in Facebook grew, Zuckerberg had to master grace under the judgmental glare of the public spotlight—amplified in large measure by Facebook’s own success as a platform to share information. He sometimes seemed like a boy trying on the role of a CEO. He overrelied on jargon and talking points during public presentations, and he exhibited anxiety, even in front of audiences of his peers, making him seem shifty, fragile, and untested. His first appearance on the Today show took so much out of him that he pushed back that day’s meetings to walk the New York City streets and decompress. “I’m trying to get Dustin to do more media so I don’t have to do it as much,” he told me, recounting the story later. “It’s not the most fun thing.” Though the protective cocoon that formed around Zuckerberg and his young cohorts (Moskovitz and fellow cofounder Adam D’Angelo had little interest in speaking to the public) had the unfortunate effect of obscuring his more heartfelt motives, it provided much-needed room for him to work on the product and gave him time to prepare for the crucibles to come.
Back at headquarters, the young Zuckerberg could be his true self and could help his company define its own true self as it grew. In 2007, MySpace was the dominant social network, with Facebook but one of many upstart competitors. Zuckerberg needed the smartest people; to hire them, he had to make the case that Facebook was their best bet. When Zuckerberg and I circled back that first day we met, I sat in while a fairly sophisticated HR team updated its CEO on hiring. Zuckerberg ran the meeting with a good-natured crispness. Facebook’s early-recruiting efforts focused on employee referrals, which were a good way to create a pre-vetted band of brothers. “Oh, that guy?” Zuckerberg said as they ran through the list of names. “He taught me and D’Angelo at Exeter!” The hiring strategy netted essential employees such as Andrew Bosworth, who had taught Zuckerberg at Harvard and is now the company’s director of engineering. (He’s also the one who later invented the company’s all-important BootCamp program, where new hires learn the history of Facebook’s code.)
They knew they were going to run out of former teaching assistants to hire. The company set up a recruiting program that deeply involved even rank-and-file engineers in the process of finding their future peers. All had interviewing duties. The normally reticent and overworked programmers did campus visits, attended tech meetups, and even traveled to a little event in Austin called South by Southwest (which was explained in detail to Zuckerberg). Knowing that their efforts were important and appreciated, they took on the recruiting effort with unalloyed enthusiasm.
Two things made all this effort remarkable and essential to Facebook’s success. For starters, the team built the first of many tools designed to help everyone work together efficiently. They cobbled together a wiki that let everyone share feedback, recommendations about candidates, and ideas of how to persuade the undecided to fall their way. The wiki made the lives of the recruiting team infinitely easier. To this day, regular employees are critical to finding and wooing potential hires. More important, perhaps, the team approached every hire with an eye on the future. “The people we hired were capable of solving the problems we knew were coming,” Bosworth explains, launching into a high-level riff on cognition theory and communication biases before boiling it back down. “You have to be prepared to jump in, make stuff, and grow.”
When I visited with Zuckerberg in late 2009, almost three years after our first meeting, he was more seasoned and yet very much the same. This was the year he wore a tie every day, to telegraph that it was a serious year for the company. As always, he had a good story to tell, this one about bumping into Intel’s bellicose former CEO Andy Grove, who was visiting an executive at Facebook’s new headquarters. Zuckerberg had been studying the history of Intel’s strategy, and after they were introduced, Grove offered some unsolicited feedback. “I said something about what we were trying to do,” recalled Zuckerberg, “not just trying to build the biggest business, but do things that were really good. Then Andy said …” and Zuckerberg modulated his voice to mimic the septuagenarian Hungarian-American’s, “ ’Oh, that’s the biggest bullshit.’ ” Zuckerberg laughed, at the memory and his own impression. “Andy went on to say, ‘All these companies pretend that they’re trying to do something good and really they just need to be competing and killing each other.’ ” Zuckerberg wiped his eyes. “I totally like him. He yells at me no matter what we’re talking about.”
Though grateful for the feedback, Zuckerberg didn’t change course. He was still exceptionally focused on Facebook’s culture. As the company and service grew—it had 1,200 employees and 400 million users around the time we met in 2009—he and his colleagues worried endlessly about the death-by-meeting blues. Facebook had grown into 135,000 square feet in Palo Alto and many locations around the world. It was a quarter-life crisis in the making, the sinking realization that you can’t stick it to the man if you become The Man. In Facebook’s world, Google had become The Man. Engineers there checked in code, then waited as it disappeared for days, weeks, even months. Tales of the company’s bureaucracy were becoming legend—especially at a company loaded up with Google refugees. “You feel like you have to make a choice at some point,” said Mike Schroepfer, Facebook’s VP of engineering. “Will the system be reliable or will the innovation be fast?”
The Hacker Way was designed to sidestep this Faustian bargain; Zuckerberg’s bet was that the guiding essence of Facebook could be baked into a new type of management system for a new type of company. The philosophy respects efficiency above all else. And that could be applied beyond engineering. “Can we take what used to take 10 clicks for someone to get the information they need and reduce it to three?” Zuckerberg told me, recounting a conversation he had with an engineer running the tools group about a better system for the customer-service team. “It saves time over thousands of operations. What can we do with that time?”Facebook is a company designed by millennials for millennials. “As we like to say, ‘Pixels talk,’ ” says Joey Flynn, one of the designers of Timeline. “You can do anything here if you can prove it.”
Everything about how professionals interact and communicate was up for grabs. “We were born out of a mission,” explains Goler, “so any process we have must serve a clear purpose. Since we started with none, we really thought everything through.” The only thing that mattered: Help people do their work faster. Nothing was too sacred. “Email is poorly designed and useless,” reported Zuckerberg, citing a study the company had conducted. “Most subject lines are ‘hi,’ ‘hey,’ or left blank. What’s that tell you?” Instead, a series of internal tools evolved to let people communicate in a way that was more informal and more natural to the projects they worked on, such as a quick acknowledgment-badge system simply called “thanks.” The company then embraced a comprehensive feedback tool called Rypple, much of which was built and evolved within Facebook, with engineering teams as guinea pigs. (It has since been acquired by Salesforce.com.) Gone are the workflow management systems of a manufacturing age. Instead, says Rypple cofounder Daniel Debow, the software created a social environment where people and projects can keep in touch in an easier way. “We’re just amplifying existing behaviors—like texting, posting on walls, and looking at photos—that help people communicate more efficiently in ways that they already do.”
Inside the New Facebook HeadquartersThe social-networking giant moved into its new Menlo Park, California, digs last December. Here are never-before-seen images from the expansive new campus.
"What should reviews look like?" asked Molly Graham, then the head of culture and engagement at Facebook, citing another standard management practice that was up for, well, review. "We struggled hard. In the end we developed a system that’s meant to fairly reward people for their contributions to the company and is meant to help people grow." The company encourages employees to form teams around projects of passionate interest, a natural way to craft a nontraditional career path showcasing competence, not brandishing credentials. "As we like to say, ‘Pixels talk,’ " says Joey Flynn, a product designer on Timeline. "You can do anything here if you can prove it." The company delivers promotions (and bonuses) twice a year. For millennials, who have grown up with the constant micro-interactions of pokes, badges, texts, tweets, and wall posts, the system fits their need for feedback and validation. As Graham points out, "This is a company designed by millennials for millennials."
The company does still make traditional calls—the era of riding RipStiks down the hall, for example, came to an end when an intern broke his wrist. But for an idea that has turned into a company, Facebook has done a remarkable job of using its collaborative philosophy to develop the workforce it had into the innovators it needed. Back in 2007, Matt Cohler, Facebook employee No. 5 (and currently a venture capitalist who invested in both D’Angelo’s and Moskovitz’s startups), put a very flat, bare-bones management structure in place. There were few vice presidents, for example, and Zuckerberg had only five direct reports. “We were determined to keep things as flat as possible,” Cohler told me. “The harder we make it for people to invent together, the faster we fall behind.”
When I last visited Facebook in December, employees were packing up “the Bunker,” as they call their old digs, in preparation for a move to a 1-million-square-foot campus in Menlo Park. Sitting amid the packed boxes and lightbulbs with some A-players, including Flynn and engineer Josh Wiseman, it became clear that the foundation that Cohler had put in place had held up under the weight of rapid, enormous growth. One of our group was former Google superstar Lucy Zhang, who decided to come to Facebook in 2011 when it bought her group-messaging startup, Beluga. “I left Google because I couldn’t take enough risks there,” she said unironically. “Here, I can really do things.”
At the end of my first visit, back in 2007, Zuckerberg spent the last hour quizzing me about what I had picked up about the company. He asked me about the themes that we’d talked about in the morning, particularly openness. “Did you find that to be true?” he asked me. “How did you know? What were people saying? How did they talk about the culture? Like, specifically?” It was the first of many times he’s turned the table on me, and one of the best ways a non-Facebook employee can feel what it’s like to have assumptions dissected by one of the sharpest minds in tech. He nodded as I spoke, listened, laughed at my impressions of his friends. But what he wanted to know was simple: Could my experience confirm what he hoped was true of his fledgling company?
And then he gave me a piece of advice, meant for my writing of the Facebook story. But it serves just as well as the underlying force guiding Facebook and Zuckerberg himself: “It’s iterative, right?” he said. “You’ll write it, then next year you’ll write another story, and another, and eventually, the story will be the way you want it.”
A version of this article appears in the April 2012 issue of Fast Company
Lord of the Files: How GitHub Tamed Free Software (And More) | Wired Enterprise
GitHub’s founders in their Executive Office (l-r) Chris Wanstrath, Tom Preston-Werner, Scott Chacon, PJ Hyett (Photo: Ariel Zambelich, Wired)
SAN FRANCISCO — When the founders of GitHub moved into their swank South-of-Market loft last year, the first thing they did was redecorate. They turned the floor’s biggest office into a parody of an executive suite — complete with fake fireplace, plush leather chairs, and a wooden globe that slides open to reveal a bottle of single malt scotch. Hanging from the wall is a painting of a cat, dressed as Napoleon, with five octopus-like legs. They call it the Octocat.
The point is that it’s not an executive suite. It’s a communal meeting room where anyone can hang out with anyone else, get some work done, and have a little fun at the same time.
“Everybody can bring their friends into that room and sort of impress them and stuff,” says Scott Chacon, GitHub’s CIO co-founder. You see, Chacon and CEO Chris Wanstrath and the rest of the executive team don’t have private offices. They work on the open floor next to the coders, glued to monitors with the rest of the staff, listening to LCD Soundsystem. Loud.
GitHub’s geektastic 14,000-square-foot loft mirrors its mission: to democratize computer programming. GitHub.com is best thought of as Facebook for geeks. Instead of uploading videos of your cat, you upload software. Anyone can comment on your code and add to it and build it into something better. The trick is that it decentralizes programming, giving everyone a new kind of control. GitHub has shaken up the way software gets written, making coding a little more anarchic, a little more fun, and a lot more productive.
And the software world loves it. GitHub now has more than 1.3 million users, and over 2 million source code repositories — eight times the tally from just two years ago. If you count snippets of code and Wiki pages that are stored on the site, there are more than 4 million repositories. Two years ago, GitHub was a team of eight, holding company meetings in San Francisco cafes. By the beginning of 2011, they’d grown to 14 “hubbernauts” — as GitHub employees are affectionately called — and a year later, they’re at 57. In July, they took over the former digs of blogging outfit Six Apart. GitHub is growing fast — and it hasn’t taken a dime of venture funding.
Once you’ve heard about GitHub, you start to see it almost everywhere. Sometimes, it’s hosting the code that underpins a big-name website. Other times, it’s driving a secret skunkworks project inside a Fortune 500 company. It has brought open source software that much closer to fulfilling its promise — but it doesn’t stop there. It’s also democratizing the creation of web pages and DNA analysis tools and maybe even the law of the land.
“GitHub has change the way that people approach development,” says Tom Preston-Werner, the company’s chief technology officer. “They realize that it doesn’t have to be so complex.”
Git Scratches Itch
Like so many other successful geek projects, GitHub began with coders scratching their own itch. About five years ago, Wanstrath and fellow programmer P.J. Hyett were both slinging code at Cnet, the tech news and reviews site. Their language of choice was Ruby on Rails, a programming framework that makes it easy to develop Web applications.Why Git?It’s the British slang term for stupid, despicable person — arse. The joke “I name all my projects for myself, first Linux, then git” was just too good to pass up. But it is also short, easy-to-say, and type on a standard keyboard. And reasonably unique and not any standard command, which is unusual.–Linus Torvalds
As they built out their sites at Cnet, Wanstrath and Hyett wound up making a lot of improvements to Ruby on Rails itself. But it they found it wasn’t so easy to get those changes integrated back into the open-source project. Following the then-dominant model of open source development, Rails was managed by a cadre of trusted coders who’d been given permission to “commit” changes to the project’s source code. To get one of their changes added to the central code, Wanstrath and Hyett would have to lobby one of those trusted coders and convince him that their change was worth integrating. That was often more work than writing the code in the first place.
They weren’t the only developers chaffing under that Trusted Gatekeeper model of open source. A decade ago, Linus Torvalds found himself struggling to manage his role as gatekeeper of the Linux operating system he invented. In the beginning, Torvalds hosted Linux on a website belonging to the University of Helsinki. If people found a bug in the code, they’d send him a file with the changes via e-mail. If Torvalds read the e-mail and liked the changes, he’d incorporate them into Linux. But Torvalds is notorious for not reading all of his e-mail, so as the project got popular, more and more submissions were slipping through the cracks.
This was the dirty little secret of open-source software. With the average free software project, large amounts of code — maybe even most code — never actually got used. It was often just too hard for casual users to show developers the changes they’d made and then easily merge those changes back into the open-source code base.
The Second Coming of Linus
So in 2005, Torvalds created Git, version control software specifically designed to take away the busywork of managing a software project. Using Git, anybody can tinker with their own version of Linux — or indeed any software project — and then, with a push of a button, share those changes with Torvalds or anyone else. There is no gatekeeper. In practical terms, Torvalds created a tool that makes it easy for someone to create an alternative to his Linux project. In technical terms, that’s called a “fork”.
Back in the 1990s, forking was supposed to be a bad thing. It’s what created all of those competing, incompatible versions of Unix. For a while, there was a big fear that someone would somehow create their own fork of Linux, a version of the operating system that wouldn’t run the same programs or work in the same way. But in the Git world, forking is good. The trick was to make sure the improvements people worked out could be shared back with the community. It’s better to let people fork a project and tinker away with their own changes, than to shut them out altogether by only letting a few trusted authorities touch the code.
On a rare sunny February day in Portland, Torvalds demonstrates Git for a Wired at his home office. With a few keystrokes, he quickly spots two new kernel submissions that change the same kernel code in different ways, a potential problem source.
The old regime “makes it very hard to start radical new branches because you generally need to convince the people involved in the status quo up-front about their need to support that radical branch,” Torvalds says. “In contrast, Git makes it easy to just ‘do it’ without asking for permission, and then come back later and show the end result off — telling people ‘look what I did, and I have the numbers to show that my approach is much better.’”
It may have been built for Linux, but Git quickly provide to be a godsend for any large organization managing giant code bases. Today, Facebook, Staples, Verizon and even Microsoft are users. At Google, Git is so important that the company pays Junio Hamano – who took over the project from Torvalds – to work on Git fulltime, and also pays the salary for the project’s second-in-command, Shawn Pearce.
Git Without the ‘Pain in the Ass’
The problem is that not everyone is Linus Torvalds, and not every company is Google. For the 99 percent, Git’s command-line interface is notoriously difficult to use. That’s where GitHub comes in. It simplifies Git. A lot. Its first slogan was: “Git hosting: No longer a pain in the ass.”
Tom Preston-Werner dreamed up GitHub and roped Chris Wanstrath into the project one night in October 2007 at a coder’s meet-up at Zeke’s, a San Francisco sports bar a few blocks from the downtown stadium where the San Francisco Giants play.
At first, GitHub was a side project. Wanstrath and Preston-Werner would meet on Saturdays to brainstorm, while coding during their free time and working their day jobs. “GitHub wasn’t supposed to be a startup or a company. GitHub was just a tool that we needed,” Wanstrath says. But — inspired by Gmail — they made the project a private beta and opened it up to others. Soon it caught on with the outside world.
By January of 2008, Hyett was on board. And three months after that night in the sports bar, Wanstrath got a message from Geoffrey Grosenbach, the founder of PeepCode, a online learning site that had started using GitHub. “I’m hosting my company’s code here,” Grosenbach said. “I don’t feel comfortable not-paying you guys. Can I just send a check?”
It was the first of many. In July 2008, Microsoft acquired Powerset, the startup that was providing Preston-Werner with a day job. The software giant offered Preston-Werner a $300,000 bonus and stock options to stay on board for another three years. But he quit, betting everything on GitHub.
“It was a little scary at the time to give up something like that, but I would not change anything about that decision at all,” he says now.
When Wired visited GitHub’s offices earlier this year, we found a bit of a geeks’ paradise. There’s an iPhone-controlled quadcopter and a four-tap kegerator, and a conference room that’s a low-budget knockoff of the White House’s situation room, complete with a massive 1970′s style red phone. But the toys aren’t what makes GitHub different. It’s the startup’s outright hostility toward corporate command-and-control that really sets it apart.
“We don’t keep track of vacation days; we don’t keep track of hours. It doesn’t matter to us,” says CIO Scott Chacon. “I’ve been here at midnight and there are five people here. And I’ve been here in the middle of the day on a Thursday and there’s nobody here.”
And yet it’s the most productive software development team he’s ever worked on, Chacon says.
GitHub has grown fast over the last three years — so fast we’ve had to compress the X-axis of this chart to accommodate it
Git to the Future
Preston-Werner’s bet has paid off. GitHub is now profitable. Users can sign up for free and start contributing, but they pay money if they want to privately host code there — starting at $7 per month. GitHub also sells an enterprise product that lets companies run your own version of GitHub behind the corporate firewall. That starts at $5,000 per year, but can cost hundreds of thousands annually for companies with hundreds of coders.
Ironically, though, GitHub’s die-hard fans don’t include Torvalds, who briefly moved Linux kernel development to GitHub last September following a security breach at its old home.
“I like GitHub a lot,” he says. “There’s a reason it became one of the biggest source code repositories rather quickly.” But he then unfurls a long list of all the “serious” problems he had with it when he hosted his code on the site — many of which have since been fixed. He couldn’t filter comments, the e-mail interface dropped attachments, the web interface messed up code contributions, and so on. The bottom line: GitHub makes it easy to code. But it can also make it easy to generate crap.
That may be true, but it hasn’t held the site back. GitHub users are seemingly everywhere. On recent afternoon in San Francisco’s North Beach neighborhood, Wired was discussing the site with GitHub director of engineering Ryan Tomayko. Suddenly the guy at the next table leaned over and interrupted, like a teenager overhearing two strangers talk about his favorite band. “I just have to tell you,” he said, “GitHub is amazing.”
It’s even feeding the Occupy movement. When Jonathan Baldwin wanted to write a cell-phone version of the People’s Microphone, used by Occupy pass messages around big crowds, he posted his code straight to GitHub. The site let him share his code easily, and quickly connect with other developers to hammer out technical issues. “GitHub is the best thing ever. If you don’t host on GitHub, it doesn’t exist,” says Baldwin, a student at Parsons the New School for Design in New York.
And software is only part of the story. Geeks are learning that GitHub can help manage other projects as well. Books and even transcripts of talks have popped up on the site. One GitHub user, Manu Sporny, published his DNA information to the site last year, in the hope of spurring development of open-source DNA analysis software by providing real test data to analyze.
When Scott Chabon wrote a book about GitHub, the first fork appeared within a month. It was a German translation of his book. Now, three years later, it’s been translated into 10 languages, with another 10 translations in the works. Half of the traffic to the book’s website comes from China. “Tons of people in China are learning Git because they can read [the book] in Chinese on my website, because somebody provided that,” he says.
Ryan Blair, a technologist with the New York State Senate, thinks it could even give citizens a way to fork the law — proposing their own amendments to elected officials. A tool like GitHub could also make it easier for constituents to track and even voice their opinions on changes to complex legal code. “When you really think about it, a bill is a branch of the law,” he says. “I’m just in love with the idea of a constituent being able to send their state senator a pull request.”
GitHub today is the darling of the open-source world, but this year, the company has set its sights on Microsoft. The company recently hired a pair of developers from the software giant, and it’s working on new software to rope in the still-considerable army of coders who write programs using Microsoft’s software development tools.
“I want to live in a world where it’s easier to work together than to work alone… where every part of the software development process is a joy,” says CEO Wanstrath. “And I think GitHub can make help make that happen.”
Editor’s Note: This isn’t just a story. Wired has also published this article as a Git repository on GitHub. Fork it, update it, translate it, send us a pull request.
BBC News - Singapore pushes ‘entrepreneurial nation’
Singapore pushes ‘entrepreneurial nation’By Saira Syed Business reporter, BBC News, SingaporeCan Singapore overcome cultural barriers and spur entrepreneurship?
The team at Jobs Bolega, a start-up from India, is hoping to transform the way workers find jobs in developing countries.
Jobs Bolega, which means “Jobs will now talk”, is aimed at people in the lower-income brackets who may not have access to the internet, but have a mobile phone.
"Using mobile voice technology, essentially we are getting employers and employees in a network like LinkedIn to get them a job," says Krishanu Dutta, a founding member of the team.
"We are creating a voice resume (CV) for them."
Krishanu and his team have come to Singapore as part of an accelerator program for start-ups from around Asia to develop their business ideas.
Jobs Bolega, and the other start-up teams from around the region, have 100 days in which they receive mentorship from experienced entrepreneurs and specialists, after which they will pitch to investors.The team at Jobs Bolega hopes to create mobile “voice resumes” for low-income workers looking for jobs
The programme is run by Singapore-based Joyful Frog Digital Incubator (JFDI) in a partnership with a subsidiary of one of the region’s biggest telecommunications companies, SingTel.
"I see Singapore as the technology and start-up capital of South East Asia, not unlike the US where you recruit from around the world and get them to come into Silicon Valley," says Wong Meng Weng, who helped to start JFDI, taking inspiration from the likes of TechStars and Y Combinator in the US.'Entrepreneurial nation'
There is a growing ecosystem to support entrepreneurship in Singapore, which gives it its hub position in the region. A lot of it has to do with the infrastructure available here, the business-friendly environment and an active push by the government to remove regulatory barriers.
In 2003, one of the recommendations a government economic review committee made was to make Singapore an “entrepreneurial nation willing to take risks to create fresh businesses”.
Ease of doing business ranking
2 Hong Kong SAR
3 New Zealand
4 United States
7 United Kingdom
8 Korea, Republic
Source: World Bank 2012
Less than 10 years later, Singapore ranks number one in the world for ease of doing business and number four for starting a business, according to the World Bank.
Universities and polytechnics now have entrepreneurship programs, as well their own incubators, and private players such as Founders Institute are seeing the opportunity to mentor young people starting out in new businesses.
Angel investors and venture capital funds alike are noticing start-ups coming out of the region.
It is considered a gateway to South East Asia, being a smaller market of five million people which investors use as a place to park their money but then invest in much bigger markets in the region such as Indonesia, Malaysia and the Philippines.'No right answer'
But Ron Mahabir, founder of Asia Cleantech Capital, says the entrepreneurial landscape still needs time to develop, and resources alone are not enough.
His company invests in and develops clean technology projects in the region. It’s a sector the government is eager to support.
Asia Cleantech worked with government agencies to bring the first electric vehicles to Singapore.
"While the government has done a great job of loans and grant programmes, culturally it’s very difficult to push entrepreneurship very quickly," he says.Hugh Mason Chief Executive of JFDI
The emphasis traditionally here is on conceptual learning, and being smart sometimes weighs against entrepreneurship”
One of the reasons for that, he says, is that in Asia failure is just not acceptable yet.
"In California, if you fail that’s not necessarily a bad thing," says Ron, who moved to Asia from the US to explore clean energy opportunities.
"But in Asia if you fail, it’s tough to turn around from that."
Hugh Mason, chief executive of JFDI, agrees that fear discourages young people from the inherent risks involved in going it alone in business to the point where most won’t even try.
"The emphasis traditionally here is on conceptual learning, and being smart sometimes weighs against entrepreneurship," he says.
"You’re taught in school, it’s all about getting the right answer - well, in early stage business there is no right answer."Local heroes
There is a move towards changing that, and a growing number of people in South East Asia are willing to take on that uncertainty and high-risk environment.
"There are people right next door who have said to their parents: ‘I’m going to disappoint you. I’m not going to be a doctor, I’m going to go start my own company,’" says Meng, pointing to the JFDI workspace, or the "jungle" as they appropriately call it.One of the founders of a Singapore-based incubator says the region needs its own success stories
Ask the aspiring entrepreneurs who they look to for inspiration and they name the usual suspects: Mark Zuckerberg, Steve Jobs and other Silicon Valley stalwarts.
But some say what they really need are success stories from this region to emulate.
While there have been successful “exits” by local companies who have sold their businesses to bigger international players, there are few with the kind of star power that would get people to take the leap.
"Once the heroes do appear, and it’s only a matter of time before they do, the stories will change, the greed will kick in and everybody will know that you can do a Facebook in Singapore,” says Meng.
Perhaps one of those heroes will come from this room.
Women Should Do Startups
December 12, 2011
Yesterday Penelope Trunk wrote a guest post on TechCrunch that told us all to “Stop Telling Women To Do Startups”.
Pardon me while I do just the opposite.
Startups don’t need to suck
Trunk’s article has a lot of arguments that just aren’t relevant to the problem of getting more women in startups. Most of them are an indictment against startups in general, and startups simply don’t have to work that way.
[Women] are complaining about the lack of jobs with flexible hours. And I don’t see anyone on TechCrunch addressing that when they address women.
I don’t mean to sound like a broken record, but hours are bullshit. You don’t need to enforce 9-5 hours at a company. You don’t even need a full 40 hour work week. Companies like GitHub, Heroku, Square, Simple… we’re still in the minority, but I think it’s safe to say that it’s okay to be successful without working 90 hour weeks and forcing everyone to come in at arbitrary hours.
But I can tell that all three times I’ve done it, raising money for a startup has been hell, so I think we should really be asking why anyone would want to try to convince someone to do it.
Yes! Definitely! That’s why I argue “women should join startups” and not “women should join startups and then try to raise a lot of VC money”. Raising VC is important for some companies, but the number of companies that need VC is plummeting each day. For web startups, we have open source frameworks, technologies, and methodologies with decades of investment thrown into them. It’s easier than ever to bootstrap a business. VC doesn’t need to be a limiting factor anymore.
There’s some crazy statements in Trunk’s article. Indulge me.
Whoever started the TED Women’s conference is pathetic. Which would you rather say you spoke at? TED? Or the TED Ghetto?
I’d be thrilled to speak at (and attend!) TEDWomen, and I think it’s horseshit to call it a ghetto. TED decided that the topic of women in tech is so important that they devoted a conference to the topic to try to help solve issues of diversity, exposure, and to perhaps help counter close-minded guest posts on sites like TechCrunch.
The people trying to give solutions are as lame as the people pointing to a problem.
Pro tip: if you ever see an argument disparaging both raising awareness and presenting solutions, then something is wrong with the argument.
Try that for a few years, and then tell all the other women you know, who are out-earning the men they know, or taking care of kids, to trade their life for startup life.
That’s an appropriate argument if everyone were money-driven. Startups do offer decent money compared to non-tech industries, but the vast majority of people I know in the industry do it out of love and passion for technology rather than money. We do it to build products, to change the world, and to have fun. If money were our motivator we would have studied asbestos case law.
Everyone should do startups
I want more everyone — including women — to be exposed to the idea of working at a startup or founding a startup. I think it’s one of the best careers on earth. More than any other industry, we’re able to work on interesting problems, create new things, maintain flexible hours, and impact lives across the entire world minutes after we launch a product.
I worry about girls and boys in middle school and high school who are turned off from our industry entirely because they’ve been influenced early on that programming is only for white, middle-to-upper-class, geeky boys. It’s important to raise visibility to everyone — especially young women — that our industry can be both fulfilling and accessible to everyone.
Women should really do startups
I think, for certain women just as much as it is for certain men, that working in a startup can be a wholly positive experience in their lives. That’s why we should encourage more women to join startups. But as much as that’s a nice, benevolent gesture, I also want this for entirely selfish reasons: I think having more women in tech will improve our products, improve our work environments, and improve our industry. Today, startups mostly have a singular (and male!) perspective. On top of that, it’s hard enough to find good talent lately. Hiring for tomorrow means we need to snatch up all of the killer talent that both genders can provide.
Gina Trapani gave a wonderful talk at CodeConf last year about the importance of community in open source software. One aspect was diversity. If you only surround yourself with like-minded individuals, you’re going to end up with solutions that suit that minority. It’s hard to change the world that way. By adding different perspectives to your project or company, you’re able to position yourself to better address the needs of a broader public.
I think it’s harmful for such a visible publication like TechCrunch to suggest we shouldn’t encourage women to join the startup world.
I think we should all be telling women to do more startups.
A day-by-day guide to Jack Dorsey’s 80-hour workweek - Nov. 13, 2011
Running both Twitter and Square is a round-the-clock job, so Jack Dorsey has developed a ruthless time-management scheme.
TUCSON (CNNMoney) — Twitter co-founder Jack Dorsey is trying to pull off an almost unprecedented trick: He’s simultaneously guiding two of the tech industry’s fastest-growing companies.
Turns out he’s got a minute-by-minute plan for making it all work.
"The only way to do this is to be very disciplined. I theme my days," Dorsey said during a talk Sunday at the Techonomy conference in Tucson.
He meant it literally. Each day, he focuses on one specific aspect of corporate development and tunes out the rest.
Here’s a rundown on the weekly calendar Dorsey keeps as CEO of payments platform Square and chairman of Twitter.
Monday: Management meetings and “running the company” work
Tuesday: Product development
Wednesday: Marketing, communications and growth
Thursday: Developers and partnerships
Friday: The company and its culture
Weekends are a bit slower: Saturdays are for hiking and Sundays are for “reflection, feedback and strategy,” Dorsey said. But from Monday to Friday, he clocks in eight hours at Twitter and then walks two blocks over to put in another eight hours at Square.
"There’s interruptions all the time, but I can quickly deal with an interruption and know ‘it’s Tuesday, I have product meetings, I have to focus on product stuff,’" he said. "It sets a good cadence for the company."
Dorsey’s 16-hour-days are a result of an unlikely serial-entrepreneurship collision.
The original designer of Twitter’s microblogging service, he co-founded the company in 2006 but was later forced out in a management clash. During his exile, he launched a new venture: Square, a small business-focused mobile payments service. But when Twitter came calling earlier this year in the midst of another executive shakeup, Dorsey returned — while Twitter’s other co-founders headed for the exits.
Dorsey opted to keep his job at Square, but he’s also going full steam at Twitter: He’s been leading a product-development overhaul that sent dozens of Twitter’s earliest employees out the door.
Executive departures have become almost a daily occurrence. In the past week alone, Twitter communications head Sean Garrett, consumer marketing leader Pam Kramer and media partnerships executive Robin Sloan have all resigned.
In his Techonomy talk, Dorsey steered clear of any discussion about Twitter’s ongoing upheaval.
Asked the perennial Twitter question — how’s that business model going? — he offered up this koan: “The business model is really focused around serendipity.”
Twitter’s strength is its ability to surface content users would otherwise miss, Dorsey said. Its moneymaking plan is to bring sponsors and their messages into that conversation.
Is it working? “The advertisers keep coming back and back and back,” Dorsey said.First Published: November 13, 2011: 8:36 PM ET
Cloud Work - Carnegie Mellon University
Matthew Swanson had a passion for both artificial intelligence and entrepreneurship. Now just two years out of school, the Carnegie Mellon alum’s startup, SpeakerText, has spawned Humanoid, a revolutionary new venture with backing from Google Ventures.
"I’m fascinated with modeling the human brain," said Swanson, who earned his masters at CMU’s Robotics Institute (RI). “I naturally chose Carnegie Mellon because it has the top researchers and facilities.”
"Entrepreneurship is in my blood. I knew I was going to start a tech company and CMU was the bridge in getting me there."
Swanson met his co-founders through another CMU alum. As he was graduating, the team moved into his two bedroom apartment on Craig St. and Bayard. One of the co-founders lived out of his dining room.
"We started as three guys working 16 hour days out of an un-air conditioned apartment. Its amazing how fast you can build a product when there’s two months on your lease and you haven’t secured investment."
They began SpeakerText with the goal of providing accurate video transcription.
"Online video content doesn’t get seen by search engines because Internet technologies rely on text," said Swanson. "The only solutions were purely automated. And without human intelligence, only 80% accurate."
The team turned to ‘crowd sourcing,’ where tasks are inexpensively routed to human workers via the Internet. They were shocked to discover a tremendous problem.
"In actuality, 40% of the results are garbage," Swanson noted. "It’s actually worse than automation. The very fact that you’re using crowd sourcing means you don’t have internal resources to verify the work."
With seed funding in place from investors Google Ventures and Mozilla chairman Mitch Kapor, plus customers TechCrunch and ESPN, the team was determined to solve the issue. After countless hours and multiple iterations they hit on a solution bigger than they’d imagined.
"It’s a combination of machine learning and worker modeling," explained Swanson. "We can put metrics on every piece of work and come up with statistical models that represent each worker and predict their future accuracy."
"At that moment, we realized the milestone we had achieved — quality assurance for crowd sourcing. We had just solved labor in the cloud."
Expanding focus, they rolled SpeakerText into Humanoid and recently launched a private beta. The self-serve platform features a drag and drop interface and quality assurance at $4.99/hour. The company expects to open the platform in approximately two months.
The current ten-member team includes another recent RI grad, Ben Morse, as well as a number of CMU student interns. Swanson would be pleased to bring on more.
"We’re looking for the great vs. the good because that gap is exponential," said Swanson. "CMU, in particular, is a valued resource because they have those great people."
Swanson is eager to strengthen the connection between Pittsburgh and Silicon Valley. He’ll be coming back to campus soon to participate in an RI entrepreneurship seminar series.
"The goal is for students to see fresh graduates who have taken that first difficult step," said Swanson. "I want other CMU people pursuing this to know that there is a network, that there are people like me who want to give back."
He added, “Carnegie Mellon was instrumental to where I am today. I received exposure to the state-of-the-art which was critical in designing my company, as well as a very valuable network of talented people that I can tap into, especially when I’m looking for other technologically talented people.”
And Carnegie Mellon continues to encourage startups like these through Greenlighting Startups, a consortium of incubators designed to accelerate the university’s impressive record of turning campus innovations into sustainable new businesses.
7 Ways to Finance a Small Business | Small Business Financing for Your Business Idea | Finance Your Business Idea | Business News Daily
The road to starting a successful business can be a long one, filled with many hurdles and obstacles along the way. Even if you have a great business idea, no business can succeed without a financing plan. While the process may sound daunting, there are many small business financing options, each with their own advantages and disadvantages. Here’s a brief summary of startup business financing options for anyone thinking of starting their own business in 2012.
- Small Business Administration Loan
The Small Business Administration (SBA) was started in 1953 to encourage small businesses and entrepreneurs to start their own businesses. Under the SBA, there are two types of loans that can help borrowers to get the capital they need to start their business: a 7(a) guarantee small business loan and the 504 fixed asset small business finance program. The
7(a) guarantee loans for small business are more common for small businesses and can be applied for at banks participating in the SBA loan process.
"Both programs look for businesses not in the startup phase," said Chuck Evans, managing director at the South Eastern Economic Development Company of Pennsylvania. “They look for businesses two years into business cycle that are generating cash flow.”
"The advantage to the borrower is they have more access to capital," said Evans of the 7(a) guarantee loan. "When borrowing with a loan, collateral or purpose often dictates the terms. If you look at real estate, you are looking at a 20- to 25-year term. If you are financing equipment, you look at the useful life and may finance it for five years. If you look at permanent working capital, you may only want to loan them for three years. With a guarantee from the SBA, banks can go up to 10 years for working capital, 10 years for equipment and 25 years for real estate. It gives the borrower longer terms and improved cash flow."
Additionally, banks may also be more willing to give these loans out as the SBA guarantees 75 percent of the loan.
"At a point, if that business goes under in the future and you have liquidated all of your collateral, acted like a prudent lender and done everything you are supposed to do, the loss is split," said Evans. "Let’s say on a million-dollar loan, if you sell a building from the business for $600,000, that leaves a loss of $400,000. With a 75 percent guarantee from the SBA, they will give $300,000 and the bank will take a hit of $100,000."
"Because the loans are sold in the secondary market, they tend to structure a lot of those loans on a variable basis," said Evans. "If you are getting a 25-year fully amortizing loan at prime plus 2.75 percent today, interest is going to be at 6 percent because prime is currently 3.25 percent. Three years from now it might be nine percent. The interest rate risk is greater on the 7(a) program."
Additionally, borrowers must make a smart choice when choosing the bank to borrow from, Evans said.
"If you take 100 banks in the state of Pennsylvania, maybe only 20 banks made more than 10 SBA loans last year," said Evans. "If you deal with that few loans a year, you are not going to be able to understand the nuances of a program that is constantly changing, so it can turn into a slow and cumbersome process. If you go to a bank that does it well and does it on a regular basis, you stand a much better chance of a more simplified process because they understand it."
- Friends and Family
Know of a rich aunt or a wealthy friend who has some extra money to throw around? Then you have another way to finance your business. Friends and family present an interesting alternative to traditional forms of financing, but those who take them risk muddying personal relationships with a business decision.
"You can take advantage of those sources when your business lifecycle is early," said Evans. "If you are in an early stage of business, you are going to be forced to go to friends and family because the banks may not entertain your requests. Also, friends and family are not going to be charge you a high price for that investment. This is available when you need it and with less contractual hassles.”
"The downside is that you risk lots of other things within the family dynamic," said Evans.
- Home Equity Loan
Home equity loans are based on the equity a potential borrower has in their home. For borrowers who have equity, the difference between what a home is worth and what you owe, in their home this form of financing makes for a great option to finance a small business due mainly to interest rates that are not only flexible, but also lower than traditional commercial rates. Interest rates for home equity loans can range from a half point under to one point over Wall Street prime, which is currently 3.25 percent. However, there can also be one potentially very large problem caused by this financing option.
"Home equity loans first of all are very cheap, rate-wise," said Al Engel, executive vice president of consumer lending at Valley National Bank. “It is a very low-cost form of borrowing that is very controllable by the entrepreneur as far as when he pays funds and redraws funds. The flexibility is tremendous.”
"The risk is you are putting your home on the line," said Engel. "If the business fails or you fail to maintain the terms and conditions of the home equity loan or line, you risk foreclosure. This puts the home over your families head at risk, meaning there is personal liability for home equity loans."
- Credit cards
Other people looking for additional financing for their small business can look no further than their wallets. While business credit cards are among the most readily available ways to finance a business, experts warn that there are some significant things to consider before swiping that piece of plastic.
"There are minimal advantages to using credit cards to finance your small business," said Ken Nickel, senior vice president of community lending at Valley National Bank. "One of the few advantages is that the minimum payment on a credit card is very low. If you are a new business who is just starting out and you don’t have a lot of money coming in or you don’t have a ton of expenses, you can put it on a credit card and pay the minimum payment."
"The downside to credit card financing is that it doesn’t go away quickly and it also costs you a lot of money," said Nickel. "Particularly if a new business gets started and then has trouble making the payments, the interest rates and costs on the cards can build very quickly. The commercial loan market right now is in a range of probably 5.5 to 6 percent for commercial loans. When you get into the credit card market, you can be looking at interest rates of 24 percent and over. It can be really devastating to a business over a period of time to have to carry that kind of debt."
- Angel investors
Additionally, those looking to finance their business can always look to an angel … investor that is. Angel investors have been responsible for helping in the early stages several prominent companies, including Google, Yahoo and Costco. This alternative form of generally occurs in the early stages of growth for a company, with investors expecting a 20 to 25 percent return on their investment.
"The principal advantage of an angel investor is generally that you have a friendlier atmosphere and a quicker decision making circumstance for a smaller amount of dollars," said Mark DiSalvo, chief executive officer at Sema4 Inc, a leading global professional services provider of private equity funds. “You are not going to the levels of time, experience and diligence that an institutional investor would require.”
Beyond this, angel investors can also help nascent businesses by acting as an advisor for them in their journey.
"More importantly, angel investors are an aggregate of smaller high net worth individuals that are going to afford fitting in a more appropriate amount of money," said DiSalvo. "Very few institutional investors today will invest less than $2 million, whereas angels will invest from $100,000 to $2 million easily. You are more likely to get an investor who has strategic experience so they can provide tactical benefit to the company they are investing in. That could mean that they have customers lined up for them. It can also mean they might have partnership opportunities for these businesses."
"In every stage, the investor and entrepreneur need to make sure they are the right partners for each other," said DiSalvo. "You have to fit the kind of investment with the need the entity has. That, however, is a difficult thing to discern."
- Venture capitalists
While venture capitalists are synonymous with the dot-com bubble of the late 1990s and early 2000s, the truth is that they may be a great source of capital if your business falls into a few categories. For small businesses who are beyond the startup phase with revenues already coming in, a venture capital investment may be for you.
Beware, though — venture capitalists have a short leash when it comes to staying with a company and they often look to recover their investment within a three- to five-year time window. However, for a fast-growth company with an exit strategy already in place, venture capitalists present a great way to quickly gain anywhere up to tens of millions of dollars that can be used to invest , network and grow their company quickly.
"The benefit of venture capital investors to a startup is that they can help them get the money and provide them with professional management expertise," said Brian Haughey, assistant professor of finance and director of the investment center at Marist College. "You may have a venture capitalist who concentrates on physics or nanotechnology. Because they focus on specific industries, they can generally offer advice to the entrepreneur on whether the product is going to fly or what they need to do to bring it to market."
"Sometimes the money comes in to easily," said Haughey. "During the dot-com bubble, the venture capitalists were throwing money at the startups and as a result, many startups forgot about what they should be focused on. A lot of businesses started thinking about fancy offices and they forget the commercial imperative that they needed to be making money. If money is too available, it lets some people get lazy."
Beyond that, Haughey warned of the imperative that venture capitalists always have in business decisions.
"They also have to make a return and usually have a five-year time horizon," said Haughey. "So they invest and you have to be able to show a profit in five years to return the capital. If you have a product that is taking longer than that to get to marke,t then venture capital investors may not be very interested in you."
- Strategic investors
In 2007, software developers began working on a then-unknown personal assistant application. That application Siri was bought by Apple three years later in 2010. One year later with the release of the IPhone 4s, Siri has become one of the most well-known and intriguing features of the new iPhone. Apple’s investment goes to serve as an example of what a strategic investment can provide an upstart company.
"Strategic investing is more for a large company that identifies promising technologies," said Haughey. "For whatever reason, that company may not want to build up the research and development department in-house to produce that product, so they buy a percentage of the company. It is a cheap investment, but the company could turn out to be the next Google or Facebook for them."
"The first disadvantage would be loss of control," said Haughey. "You have this great idea and now you have to answer to someone else and you have to give up a percentage of your company. The question then becomes, ‘would you rather have 100 percent of a tiny pizza or 50 percent of a huge pizza?’"
Beyond that, those using strategic investing must also think about the restrictions the investing company may place on them, as they can prevent dealing with any competitors and possibly even canceling the business relationship at any time.