Graphic from StartX - the Stanford Student Startup Accelerator
…and don’t forget to read Guy Kawasaki’s “Art of the Start”.
If there is a single thing, a single activity and a single metric you should care about when building a business (or a sustainable open project - which you should run like a business anyway), it is cashflow.
Cashflow is simple: Money in minus money out. If your cashflow is positive your business lives, if your cashflow is negative your business dies. Simple as that.
Yet I am befuddled by the lack of understanding for this essential fact of business. I literally haven’t had a single discussion about the actions which lead a particular business to get to positive cashflow or even the notion of cashflow with any of the many startups I’ve met over the course of the last couple of years. It seems that Silicon Valley’s obsession with growth and the vague notion of “we’ll figure out the business model later” led to a culture of people building companies with the single goal of selling them. And as Silicon Valley culture spreads throughout the world these days, founders all around the globe follow suit.
I cannot stress enough how important it is to get to positive cashflow as soon as possible. Unless you’re the next Facebook/AirBnB/Name-your-preferred-hot-startup and swim in heaps of venture capital (which to be honest you most likely won’t be - the cards are clearly stacked against you… just look at the stats) having positive cashflow means you are master of your own destiny. Cashflow puts you into the driver seat. It allows you to do the things you want to do. And even if you want to raise money to accelerate your growth it puts you into a position of power, not one where you need to beg for money.
So - unless you want to build your business as an acquisition target (nothing wrong with that - just know that the odds are heavily stacked against you) but want to build a business which lasts, read up on cashflow, understand the principals by heart and make it one of your key objectives!
And to that end - we’ll make cashflow discipline an essential part of Mozilla’s WebFWD program. Time to build the next crop of 100 year organizations!
P.S. Here’s some recommended reading for you - Don’t Build A Company To Sell, Build It To Last by Kanyi Maqubela and anything you can find by Norm Brodsky (a columnist at Inc Magazine), e.g. this piece on cashflow</a>.
Two days ago I mentioned that I intend to write a book about Open Innovation (the Mozilla way).
I am thinking about finding a company (ideally not in tech) which is interested in implementing an Open Innovation strategy into their business process and which would like my support/help to do so. It would help me refine my thinking and gain insights into challenges, problems and opportunities outside of Mozilla’s world and hopefully would help the company on their own journey (and make the book more useful).
This is all still pretty raw in terms of thinking - but do let me know if you represent such a company (ideally mid to large size) and are interested.
A little while ago I met the wonderful people from SecondSight, a Dutch think tank which publishes a quarterly magazine/book on future trends (their tagline is rather fittingly: “Open Your Eyes to the Future”). They asked me to write a piece for their latest edition titled “New More Free Power”.
After a long, engaged discussion with the team we settled on a story on the rewards you get from growing your mission as opposed to your headcount (i.e. you choose to stay small and forgo certain aspects of growth).
Here’s the article:
Your organization is growing rapidly, which is good. Or so you think. When organizations (including companies as well as non-profits) grow, they tend to hit plateaus they must pass to successfully continue on their chosen path. Unfortunately, growth rarely (if ever) happens linearly, and to scale an organization from garage to multi-national corporation you need to accomodate massive changes along the way. You will have to change the way you operate. Often this change is painful. When you were three people in a garage everyone knew about and helped out with everything. This won’t happen when you run and manage a multi-national corporation. Growth will change your corporate culture from one built on deep levels of trust to systems which include the awkwardness of more formal, scheduled performance reviews. This change will touch the very root of your organization: when a little sandwich shop that you start in the hopes of changing the world one sandwich at a time evolves into a national food chain, you start measuring success in three-letter acronyms. This challenge is compounded at the point you no longer become the sole master of your own destiny: shareholders demanding quarterly growth and board members calling for industry benchmarking change your focus. You inadvertedly find yourself, as Author Steven Pressfield once described, “in the belly of the beast.” And this beast demands to be fed by further growth. But your evolution need not occur in these ways. Organizations choose not to grow at any price. These organizations put their principles, values, beliefs - and quite often a specific mission - first. Take for example the backbone of Germany’s industrial success, the Mittelstand (loosely translated into English as “SMBs”: small- and medium-sized businesses). These companies are typically just a few hundred employees strong. They pride themselves in producing to the highest quality standards. They are the reason why “Made in Germany” is such an accolade. And they choose to be big fish in small ponds. They are typically family-owned businesses with strong beliefs and principles. These are companies where the founder typically hangs in the CEO’s office and is often his great-grandfather. What’s notable is how these companies deliberate choose to prioritize values (such as quality and the way they treat their employees) over growth. Quite a few of these companies would be highly attractive acquisition targets for large multi-national corporations or prime candidates for a public listing on the stock market. Yet their owners decided to grow slowly, organically and only to the extent that their values & beliefs are preserved, if not advanced. The Open Source movement is a fascinating angle on this approach to growth. In Silicon Valley (and now, effectively around the world) a growing number of founders, dissatisfied with the way business is done, start companies with Open Source at its core. They are out to change the world - but they are doing it under their own terms, with strong beliefs, cultures and missions. Mozilla, the maker of the popular Firefox web browser, is one of these organizations. Founded as a non-profit with a mission to “provide choice and innovation on the Internet,” Mozilla took on the mighty Microsoft Corporation and turned a virtually monopolized browser market (thanks to Microsoft’s Internet Explorer) into a thriving and competitive ecosystem. Firefox is a feather in Mozilla’s mission cap. To continue building on its mission, Mozilla is creating WebFWD, an incubator and accelerator program for mission-based Open Source organizations. Among the first organizations Mozilla is fostering is CASH Music, a non-profit startup founded by musicians to help fellow independent artists market themselves on the Web, effectively making artists masters of their own destiny. When CASH grows, Mozilla grows - not in revenues or headcount, but in expanding its core mission. Let’s return to that sandwich store. There is a wonderful story from the founders of 37 Signals, a software company which itself chose to grow slowly, carefully and organically. Their neighborhood has a sandwich shop which makes the best sandwiches. They use carefully-selected ingredients and ensure each sandwich is freshly-made. Customers love the little shop. Every day at lunch time long queues form outside of the shop. Usually the shop sells out long before meeting all the demand. They are often asked why they don’t produce more sandwiches, as higher production would allow them to serve more customers, grow their business and ultimately make more money, The owner’s response is: “it wouldn’t be the same shop. It would hamper quality as we couldn’t deliver the same product for our customers.” They wouldn’t be able to change the world one sandwich at a time. Building your organization around true values, beliefs and a mission gives it a human quality. Which can be far more valuable than growth and sheer profit. And just what we need. As human beings.
It all began with a rather innocent question: After experiencing the amazing qualities of operating completely in the open here at Mozilla, creating and leading some very exciting Open Innovation projects such as Mozilla’s Design Challenges & since last year our WebFWD accelerator program and thinking, analyzing, discussing and talking more and more about Open Innovation and how we do things here at Mozilla… wouldn’t it be great if we document this knowledge and thus enable more organizations to benefit from it?
This lead to a slightly less innocent tweet:
And so here we are – I am going to write this thing. And use this blog as a testbed for ideas, text fragments, discuss interesting source material I find elsewhere and generally rant about my inability to express myself properly in the English language.
To be clear: Anything I write will only be possible because I stand on the shoulders of giants. So many awesome people have done so much amazing work on this - both inside and outside of Mozilla. I am just a messenger.
Join me for the ride - and please provide feedback!
As you might know I am pretty obsessed with good artisan coffee making (espresso to be precise). Recently I found myself in the middle of a long discussion about the “right” equipment.
Good coffee is pretty much a function of 1) the right beans, 2) the right grinder, 3) the right machine, 4) the right temper and 5) skill. If you ever want to go down the espresso rabbit hole - here’s my current top 5 list.
Today I had the great honor & pleasure of keynoting the Technology Convergence Conference 2012, talking about Open Innovation, Mozilla and how to apply all this to your business.
The summary of my talk reads:
Open Innovation, Crowd Sourcing, Community-driven Innovation, Chaords (describing organizations which are a mixture of Chaos and Order) - the world around us is using "open" as the new default. Fearless leaders are unleashing the beast which redefines the core of many innovation practices. Pascal Finette recounts the inspiring story of Mozilla, the Open Source non-profit organization which managed to break Microsoft's stronghold on the browser market and today has more than 450 million users worldwide. Alongside this fascinating David vs Goliath tale you will learn how Mozilla won by being completely open, working with the wider community and redefining how innovation can be done. At the end of his session, Pascal will have enabled you to tame the beast and make it work for you and your organization.
Here’s the deck:
Every once in a while (and sadly more often than you would expect) I get an email from someone seeking an investment (be it through Mozilla’s WebFWD program, FoundersLink, the VC fund in Europe I am a venture partner at or my own angel investing) which just riles me. Take this prime example (details have been removed to protect the innocent):
Dear Sir / Madam ! Please, examine the project searching for investments. The ∎∎∎∎∎∎∎∎ project is oriented to USA market and the company will be located in the USA. ∎∎∎∎∎∎∎∎ is the project in the mobile area of business, providing ∎∎∎∎ ∎∎∎∎∎∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎∎∎∎ (∎∎∎∎∎, ∎∎∎∎∎, ∎∎∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎∎, ∎∎∎∎∎, ∎∎∎.) ∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎. ∎∎∎∎∎∎∎∎ is going to be an online ∎∎∎∎∎∎∎ ∎∎∎∎∎ ∎∎∎∎∎ ∎∎∎∎∎ ∎∎∎ ∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎ ∎∎∎∎∎∎∎. It has more than ten years of experience developing ∎∎∎∎-∎∎∎ ∎∎, ∎∎∎-∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎∎∎∎. ∎∎∎∎∎∎∎∎ project was implemented as a first attempt to ∎∎∎∎ ∎∎∎∎ ∎∎∎∎∎ ∎∎ ∎∎∎∎∎∎∎∎ ∎∎∎∎∎ ∎∎ ∎∎∎∎∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎. Its products are based on ∎∎∎ ∎∎∎∎∎∎'∎ ∎∎∎∎∎∎∎∎. ∎∎∎ ∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎∎ ∎∎ ∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎. ∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎ ∎ ∎∎∎, ∎∎∎∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎∎∎∎. ∎∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎ ∎∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎ ∎∎, ∎∎∎∎∎∎∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎, ∎∎ ∎∎∎∎∎, ∎∎ ∎∎∎∎∎, ∎∎∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎∎, ∎∎∎∎∎, ∎∎∎∎∎, ∎∎∎. ∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎∎ ∎∎ ∎∎∎∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎∎∎∎∎∎∎ ∎∎ ∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎∎ ∎∎∎ ∎∎∎∎∎∎ ∎∎∎∎∎∎∎, ∎∎∎∎∎∎∎∎∎∎∎∎∎ ∎∎∎∎∎∎∎∎. Investment costs - $867 549 Please, find Executive Summary of the project below. I will provide any other additional information if necessary. Thank you for your time and consideration. I am looking forward to hearing from you. Attached Documents: 3-Page Executive Summary & Financial Forecast
BEWARE - RANT FOLLOWS:
Here’s what’s fundamentally wrong with this email:
So - do yourself a favor (and significantly increase your chances that people will actually read your pitch) and do your research, tell us clearly what you do, why we should care and what you want from us.
P.S.: Found my rant a bit harsh? I just don’t want to waste your (or my) time. Read this.
Phil Morle, good friend and cofounder of Pollenizer recently sent me his reading list for disruptors. The list is too good to not share:
All credits for this awesome list go to Pollenizer. Go, check them out - they are fantastic folks!
After being on a panel at last years’ Social Capital Markets (SOCAP) conference Daniel Epstein, founder of the Unreasonable Institute, asked me about the importance of social entrepreneurship and innovation. Enjoy!
From time to time I find myself in discussions with entrepreneurs and startups about the value of (protected) intellectual property (IP).
The argument often goes something like this: Entrepreneur thinks that the IP she created, is the core of her company and thus needs to be private and protected. Yours truly argues that under certain conditions (and probably more often than not) it might make sense to open up the code with an open source license and work on building a community around it. Entrepreneur reacts in shock and continues to argue that her IP is a precious stone, not to be shared with anyone (though the lure of a community co-developing the product sounds mightily tempting). Yours truly makes his main argument: More often than not your IP is not the important bit. It’s your ability to execute. Entrepreneur is confused.
Let me explain my position: Very broadly speaking I see three classes of innovation (in software) – truly new inventions, innovative combination of existing building blocks and customization.
To make these three categories clearer, let me use a couple of pictures: New inventions are something which didn’t exist before. Sometimes these innovations are complete buildings, sometimes they are more like individual lego bricks.
Which brings us to group two - the people who combine existing lego bricks into new forms & shapes. Sometimes they need to invent their own glue - but the heavy lifting is done by stacking lego bricks in new and innovative ways.
Lastly you have people who customize - they arrange furniture in a barbie doll house to create an innovative arrangement which delivers value. These people tend to use mostly complete solutions, put a little veneer on or make some minor changes and deliver value through content and other areas.
Now - all three models are valid and valuable. But mostly only the first one might require strong IP protection (note that this is all very broadly speaking and thus a vast generalization) – as only in the first case the founder actually created something new and unique which truly didn’t exist before. In the other cases I would argue the “protection” for the startup is much more execution based. If you execute well, you’re golden. If you don’t, your IP isn’t strong enough to make it properly defensible.
Again - this is a sweeping generalization. But I find it helpful to think in these categories and seriously consider using open licenses for your IP to reap the benefits of innovating in the open and with a community.
Last year (jeez - is it really 2012 already?) I had the great fortune to host a bunch of entrepreneur/student groups from all over the world here at Mozilla.
I simply love interacting with entrepreneurs - especially when they are young and/or first time entrepreneurs. The energy is boundless, there is nothing holding them back and they have no fear. One thing which stood out for me was the fact that all these groups came from places outside of the US - essentially they came to the Valley to expose themselves to the culture, DNA and vibe which make Silicon Valley what it is. A truly unique place on earth.
Which brings me to my one advice for entrepreneurs (if you’re not in Silicon Valley anyway) - get the cheapest flight, the cheapest hotel and expose yourself to a couple of weeks of Valley craziness. It will change the way you see the world.
On that topic - The folks from Pioniergarage wrote up a nice summary of their trip to the Valley including a short video interview with yours truly. Enjoy!
And if you are part of a group of entrepreneurs coming to the Valley to visit - ping me and we’ll host you here at Mozilla and talk about some of my favorite topics such as “How you can win when you’re small”. :)
1,205,808... More than 1.2 million people are using Github today. A whole generation of developers & hackers all around the world are growing up with Github deeply embedded into their developer DNA. This is a whole generation of people for whom sharing code is the default (the vast majority of code repositories on Github are public - you have to pay for private repos). A whole generation which not only consumes Open Source software and code but decided that keeping code private is just not important anymore. This is the future. Learn, share and innovate in the open. It's all about execution, not your intellectual property. Now - go and check out what those 1.2 million hackers put into their more than 3.5 million code repositories. Learn from it. Share and give back. And let's create the third wave of Internet startups (after the first boom & bust in the late 90s and the current wave of social/web 2.0/whatever startups) which are built on top of the deeply ingrained ethos of Generation Github.
Release early, release often…
You know the drill, right? Today you want to get your product into consumers’ hands as early as possible, learn & iterate quickly and push out updates on a regular cadence. Lean startup and all that…
This works great when you are developing on the Web - where I get to experience your latest and greatest iteration without me doing much. It doesn’t when you do client-side software. So please, please dear iPhone (and Android) developers - be a bit more deliberate with your updates. It annoys the hell out of me (and a bunch of other people) when you update your app every three days - because unlike on the Web I actually need to install your update. Which sucks, is annoying and a waste of my time.
I don’t even have that many apps installed on my iPhone - but finding an update to at least one of my apps on a daily basis just leads to update fatigue.
I recently sat down with a good friend to go through some stats which show the harsh, ugly truth of Angel/Seed/VC funding. It essentially goes like this:
In the first half of 2011 there were about 175,000 startups looking for early stage investments in the US (note that this number is not limited to tech). Out of those, a mere 26,300 received angel and/or seed funding - that’s only 1 in 6.5 (or a 15% yield). Kinda scary if you’re in the position of looking for money. But it gets even scarier - out of the 26,300 startups which received angel and/or seed funding only 7% (a total of 1,850) received series A funding (aka institutional funding from a VC firm). Putting this together - your chance to receive institutional capital is pretty much exactly 1%.
Now - what that tells us is: Your chances to receive funding are slim. You could assume that you’re hosed. But fret not - first of all: There are 1,850 startups which get funding all the way to series A (and are thus well on their way to be successful - at least the odds are stacking up). And probably more importantly - focus on building a product people want to buy - that way you don’t need funding. Or can take funding for accelerating your growth instead of building your product. Which is the best way to do the VC dance anyway - as your leverage is much, much better.
So my friend - fret not! Go, build an amazing product which people love and are happy to pay for. And you will be fine! :)