Paul Graham on Startups

When I began this blog I made a deal with myself that I would not post more than once or twice a week, but lately I just can't help it. I could use the excuse that I'm on holidays, I suppose. It's the Orthodox Easter over here, and Greece is covered with a smell of roast lamb. It's a sunny weekend, people walk around at a snail's pace, birds singing, flowers blossoming, you know how it is. I just got inside for a minute to check on my e-mail (I know, I know) and I discovered pure gold: Paul Graham's essays have an RSS feed! I don't know how long it has been out there, but I just stumbled upon it, and man, did that made my day! That and the roast lamb, of course.

After subscribing, I found out there were a few recent essays that I had missed. The one I want to particularly mention is Why to Not Not Start a Startup. Since this is a topic I am very interested in, I read it without even blinking. That alone could explain the tears in my eyes, but there is more to it. I've been a Paul Graham fan for quite some time, even though I'm not into Lisp. His writing style is marvelous and his wealth of experience, invaluable. I would like to take this essay and stick it in the faces of various investors we've met over the years. Not that it would change anything, but it would make me feel better, at least. I had been planning to write about a few of his points myself, but since I could never hope to be so eloquent, go read them straight from The Man.

There were moments of discomfort, I must confess. Like when I read the following:

"If you don't think you're smart enough to start a startup doing something technically difficult, just write enterprise software. Enterprise software companies aren't technology companies, they're sales companies, and sales depends mostly on effort."

Ouch. I know it's true, but it always hurts to admit it.

There are other well-established observations in there, like the consulting-to-product business transformation:

"What you can do, if you have a family and want to start a startup, is start a consulting business you can then gradually turn into a product business. Empirically the chances of pulling that off seem very small. You're never going to produce Google this way. But at least you'll never be without an income."

The chances may be small indeed, but, hey, it worked for Joel.

Also on the well-known territory:

"In a good startup, you don't get told what to do very much. There may be one person whose job title is CEO, but till the company has about twelve people no one should be telling anyone what to do. That's too inefficient. Each person should just do what they need to without anyone telling them."

Yep, I can fondly remember why we started it all.

Envy

"I'm just a jealous guy". Reading the news about Oracle acquiring Tangosol instantly brought John Lennon's voice in my head. It's Tangosol of course that I'm jealous of. As a matter of fact, I don't know of anyone who would be jealous of Oracle. Larry himself is a different story. He's got that ultra-luxurious feng shui mansion of his that I would die for, but I guess that's what you would expect from a gazillionaire. Tangosol, on the other hand are (or at least were) some regular guys just like me, working their asses off developing software. Except that I'm a software developer of the garden-variety, whereas they're of the genius one.

Still, I don't believe that's the only thing that made them filthy rich. At least I hope they are filthy rich. I don't have any inside information, but from what I've seen on the Net, Cameron Purdy & friends are really nice guys and absolutely deserved to be rewarded like Sultans. Something that cannot be said about other Java celebrities, that are now dancing with their red hats in their own dollar ponds. Anyway. Acquisitions are very hot lately with RedHat acquiring JBoss and Exadel, IONA acquiring C24, BEA acquiring SolarMetric, etc. It appears that the dot-com bust days are behind us for good.

What I particularly like about Tangosol is that they appear to have made it without any VC funding. Hats off to them if that is the case. We've been trying to pull the same lonely stunt where I work and it has been really hard so far. Most people we talk to, consider it a raving success that we're still hanging on our own after seven years, in such a small and distorted market. I mean, yeah, in theory we're doing the right thing, but if you consider the way the IT services sector functions in Greece, it's pretty much a leap of faith. The reasons are manifold:

Small market: many small fish can survive in a big pond, but as the pond gets smaller, the big fish have to eat more than their fair share to survive. And if they ever sense the inner fear of survival, then you can forget about level playing fields and gentle sports. Getting a contract gets ugly.
Cost sensitive market: being the best girl in town isn't as important as being the cheapest. You may be providing cutting-edge technology, state-of-the-art solutions, or the cure to world hunger, but unless you can beat their price, you are irrelevant. This should come as no surprise if one considers the characteristics of Greek economy. Large state sector, small private sector. State is a big spender, but non-deterministic in meeting obligations, payments, even deadlines. On the other hand private companies are obsessed with shrinking costs and conservative spending. It is sad how few companies actually consider Information Technology as something that would significally affect their competitiveness, ergo their bottom line.
Risk-averse VCs: VCs, like everybody else around here, would like to make big bucks without doing anything hard or, heaven forbid, risky. Recently I've heard of a successful Greek startup in microelectronics that failed to attract Greek VC funding, despite the exceptional prospects of their business plan. What the VCs told them, was that they couldn't back them, but if they could find foreign VCs willing to invest, then they would ride along. That's like saying, hey, I'm rather incompetent at evaluating business plans, but if you can find someone who knows this stuff and says it's OK, then I'll join you guys! Yeah, like we'll need your sorry arse then. What a bunch of wimps. From personal experience, when we were presenting our business plan to a local VC once, the guy that would evaluate it was at the same time preparing his proposal on a different business plan, from a local tavern. Judging by his eventual comments on our business plan, he must have had a hard time figuring out which is which.

It's funny, but I can't think of a single acquisition in the IT sector in Greece that was made in order to obtain the valuable IP of the acquired company or to enhance the product or solution portfolio of the acquirer. Here, big companies usually buy smaller ones in order to get a grip on their distribution channels, or to expand their customer base and get some more leads.

Maybe they are right. After all, who ever prospered around here by simply being better? Perhaps only in the souvlaki business.

Lucky bastards those Tangosol guys. The Oracle thing was easy. Pfff. Come and pull this stunt in Greece if you dare!