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Archive for July, 2007

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An entrepreneur is an event driven person and is usually not a good disciplinarian. So every entrepreneur needs a person who has the same passion but is process driven. This key position has to be someone the entrepreneur can totally rely on. Traditionally, it has usually been a family member or a close friend. A good example is what Steve Ballamer was to Bill Gates. As Aristotle says “You are what you repeatedly do. Excellence is not a event – it is a habit.

No one has achieved peak performance without a coach. Education + Coaching = Growth.

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Every entrepreneur needs to know and have a plan of action for the next 90 days and 10 years hence. But the crunch is that only an entrepreneur can think that far, the rest of the planet ( those who work for him ) needs to know what is to be done immediately and so the 90 days plan. This is  an extension of the daily/weekly huddle.

Whoever learns faster wins.

What do you do when your company is in trouble? Verne says the best thing you can do is to go out and talk to your customers. 

 

Talking to your customer on a regular basis is the key. Also what you ask determines your growth. One of the common mistakes and a bad question to start with is ‘Are you satisfied?’ . A better way is to know your customer and focus first on is “how he is doing”. What are his goals, what kind of problems he is facing on the way, what’s new in his industry, etc. Then comes the questions about your competitors because it is always smart to know what you are up against. The last question can be about how the customer feels about you, your product/service.  more

 

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Wiki on Google

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Wikipedia founder Jimmy Wales said on Friday he is putting the building blocks in place for a community-developed Web search service that would rival search engines such as Google or Yahoo.

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His commercial start-up, Wikia, has acquired Grub, a pioneering Web crawler that will enable Wikia’s forthcoming search service to scour the Web to index relevant sites.

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“If we can get good quality search results, I think it will really change the balance of power from the search companies back to the publishers,” said Wales, chairman of San Mateo, California-based Wikia. “I could be wrong about this, but it seems like a likely outcome.”

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Wikia has acquired Grub from LookSmart Ltd., which had halted work on the project.

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Terms of the deal between Wikia  and LookSmart  were not disclosed.

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Wikia has raised $14 million in outside financing, including its latest round of $10 million from Amazon.com, according to a regulatory filing by the company.

[source]

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While searching, I stumble upon a Nice Presentation by Ben Holmes of Index Ventures at the FOWA Conference in London “Everything you need to know about Venture Capital“. He put the presentation on World’s Best Presentation Winner Slideshare.

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Zonbu PC, a concept it hopes will break the pattern of big, expensive, and power-hungry desktops. As previewed in May, the company offsets the initial costs of most PCs by shifting most of the storage demands from the computer to the Internet. While the PC itself only contains a 4GB flash drive, the optional subscriptions offer between 25GB and 100GB of online data; the space hosts much of the user’s apps, updates, and normal working data, guaranteeing that receiving a replacement system will never mean losing crucial information.

The box is pre-loaded with a host of open source freeware — Linux, Firefox, OpenOffice, Skype, etc. – all supported online. That includes online backup.

There’s no floppy disk, no external drives of any kind. Just plug in your current keyboard, mouse, Ethernet, up to six USB devices, and you’re good to go.

Zonbu combines a host of trends — Internet computing, open source, cellular business models, laptop design, SaaS – in one box. It will be fun to see if this takes off.

The total PC draws a fraction of the average desktop’s energy at 15 watts, saving users roughly $10 per month in power. Carbon dioxide emission also drops by roughly one ton per year and is effectively reduced completely through the company’s carbon offset program.

Pricing changes depending on contracts: the $99 up-front cost comes with a two-year subscription to any of the online plans, which range between $13 and $20 per month depending on storage. Buyers can reduce the commitment to one year by buying the PC for $199 and can purchase the system outright without online backup for $249. Systems are ready today with a beta version of Zonbu’s custom

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How to prepare a good plan for granting stock options to employees in Startups.

Following are Four steps in Planning and Distribution of Stocks in Startups.

Lay the foundation

(A) Forecast all the rounds of venture capital you will need up to the day you go IPO.

You will need several rounds of financing, typically three in three years. It can be several more. Life science requires at least twice that number of rounds. The first two financing events are the Seed Round and Round A. The third is Round B. The naming is confusing, I agree. Just be clear and understand what each round is intended to accomplish. Each round needs the following information:

  • Pre-company valuation in millions of dollars
  • Cash to be raised this round
  • Pre-company number of shares. This includes stock options.
  • Ignore for now the difference between common and preferred shares.

With this information you can calculate the number of shares to sell the investors.
Now you have the total number of shares of the company: founders, employees and investors.

(B) Forecast all the employees you need up to the day you go IPO. Use as much detail as you can. Work from CEO to VP to Director to Manager to Employee.

(C) Do your first estimate of how many shares you will need for your stock option grants.
This becomes your stock option pool. For now, ignore the cost of the stock per option per share.

(D) Add the stock option pool shares to your total shares of the company.
This includes founders, stock options and investors and together equals the total shares.


Classify employees

Classifying the employees. I hope you have at least guessed at the numbers for Step 1 (see yesterday’s blog). Guessing is what serial entrepreneurs do. Then they modify their initial estimates. That is how they build their plans. It is like shaping a lump of clay into a beautiful statute.

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Classify Your Employees

  • Pick layers of employees. For instance: CEO, Vice President, Director and Employee. Each layer is often named a classification.
  • Add the layers to your forecast model. Use Excel or equivalent spreadsheet.
  • Forecast the number of employees for each layer. Do it for each of the first 24 months and each year thereafter, up to the day you plan to go IPO.

Now you have your company’s employee forecast. Congratulations, you are already ahead of 95 percent of the rest of the startup CEOs who are competing against you for venture capital. You will look very professional when compared to them. The investors might even think you know what you are doing!

Note that with this classification it is easy to begin to add wages to your financial forecast. That will account for 60 to 80 percent of your costs. More detail gives you a higher quality forecast. And you look even sharper to investors.-

Price the stock option per employee

To understand this you need to grasp how to structure the capital of a world-class venture backed startup.

CAPITAL STRUCTURE

  • Common stock goes to employees and preferred stock to investors. The price per share of the common stock starts on day one equal to one tenth the price of the preferred stock. That gap will close year by year as the day for IPO approaches. For more details on what is going on here, see Chapter 9 of High Tech Start Up.
  • Form a simple legal corporation not a partnership. LLCs and S corporations and others get you into blind alleys and will eventually trigger intellectual property, tax and stock option messes that are terribly hard to repair.
  • Get an experienced lawyer to set up your capital structure. Mistakes are costly.

COST PER SHARE

  • Start pricing each round of preferred stock. As noted in Step 1, you need a plan for each round of stock sold to investors, year by year. Calculate the price per share of preferred. This is what is used to determine the value of your company.
  • Price the common shares. Gradually close the gap between preferred shares up to the day of IPO. This will be the strike price, the cost per share to the employee when they exercise the stock option (buy shares).


Test the market
The final step is to determine how rich each employee should expect to be on the day of the IPO. With an IPO value per share (Steps 1 and 3) you can then calculate the number of shares to grant to each employee. To do that you need to know your local labor market, especially how much wealth it takes to attract the people you plan to recruit. Here are things you need to do:

FIRST TASK

  • Dig to discover the wealth people expect to earn on IPO day. That requires knowing both wages and stock wealth requirements for each class of employee. You learn that by spending time talking to recruiters, lawyers, accountants, human resource managers, and doing your job as a manager in a real corporation. That on-the-job experience will reveal what IPO wealth targets are expected by the talent your startup needs. “A vice president of engineering will expect something like $10 million in today’s market for startup talent for a company in this early phase of its growth” is what you will end up concluding.
  • Add the wealth target to each classification of employee. Add the dollars of wealth at IPO per employee to each class of employee, the classes you set in Step 2. Yes, there will be a range of wealth expected. For now, use a single number. That makes your task easier. You can add highs and lows around the number later.
  • Calculate the number of shares for each employee and add them up. With the dollars of wealth per employee times the number of employees in each classification, take the price per share at IPO time (see Steps 1 and 3), and divide it into the dollars of wealth per person to get the number of shares for the stock options. Add all the shares up and you have the total you need for your stock option pool.

When you have completed this task, you can calculate a table per year of the percent of the company each employee will get each year. That is the shortcut, the end point, used to negotiate during recruiting. “The vice president of biz dev will get 1.2% of the company” is what is meant by this.

SECOND TASK

  • Use risk reduction to modify the number of shares granted each year for each classification. A director of product marketing joining in year three will get fewer shares than if he joins in year one. A growing startup will reduce risk each month as it makes progress to IPO date. Less risk means less stock per option grant. Reduce the number of shares following the price per share curve you got when you sold stock to investors. This will alter the total number of shares in your option pool, most likely greatly reducing the number required. Alter your plan accordingly.
  • Set the strike price for each option each year. The price per share will be projected to grow each year so the strike price will also grow each year. It will rise faster for common stock than preferred stock and gradually close the gap, rising to the same price as preferred stock by IPO day. In the early days of your startup it is common to increase the strike price per month during the first twenty four months.


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Young Bill Gates Coding

This is the summary of speech Given by Alex Stepenov (Principal Scientist, Adobe Systems) at Adobe India on 30 Nov 2004.

1. Study , Study and Study
– Never ever think that you have acquired all or most of the knowledge which exists in the world. Almost everybody in US at age of 14 and everybody in India at age of 24 starts thinking that he has acquired all the wisdom and knowledge that he needs. This should be strictly avoided.

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– You should be habituated to studies…exactly in the same way as you are habituated to brushing teeth and taking bath every morning. The habit of study must become a ‘part of your blood’. And the study should be from both the areas: CS, since it is your profession, and something from non-CS…Something which doesnot relate to your work. This would expand your knowledge in other field too. A regular study, everyday, is extremely essential. It doesnot matter whether you study of 20 minutes of 2 hours, but consistency is a must.

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– You should always study basics and fundamentals. There is no point in going for advanced topics. When I was at the age of 24, I wanted to do PhD in program verification, though I was not able to understand anything from that. The basic reason was that my fundamental concepts were not clear. Studying ‘Algebraic Geometry’ is useless if you donot understand basics in Algebra and Geometry. Also, you should always go back and re-read and re-iterate over the fundamental concepts.

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What is the exact definition of ‘fundamental’? The stuff which is around for a while and which forms basic part of the concepts can be regarded as more fundamental. Of course, everybody understands what a fundamental means.

2. Learn Professional Ethics
– As a CS Professional, you are morally obliged to do a good job. What this means is that you are supposed to do your job not for your manager but for yourself. This is already told in Bhagwatgeeta : Doing duties of your life.

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– The direct implication of this is: never ever write a bad code. You don’t need to be fastest and run after shipping dates; rather you need to write quality code. Never write junk code. Rewrite it till it is good. Thoroughly test every piece of code that you write. Donot write codes which are “sort of allright”. You might not achieve perfection, but atleast your code should be of good quality.

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– Let me quote my own example in this context. You might have heard about STL, The Standard Template Library that ships in with C++ compilers. I wrote it 10 years ago, in 1994. While implementing one of the routines in the STL, namely the “search routine”, I was a bit lazy and instead of writing a good linear order implementation of KMP which was
difficult to code, I wrote a best quadratic implementation. I knew that I could make the search faster by writing a linear-order implementation, but I was lazy and I did not do that. And, after 10 years of my writing STL, exactly the same implementation is still used inside STL and STL ships with an inefficient quadratic implementation of search routine even today!! You might ask me: why can’t you rewrite that? Well…I cannot, because that code is no more my property!! Further, nobody today will be interested in a standalone efficient STL …people would prefer one which automatically ships out with the compiler itself.

4. Follow your culture [MUST READ]

I have seen the tradition that whatever junk is created in US, it rapidly spreads up in the rest of the world, and India is not an exception for this.This cultural change creates a very strong impact on everybody’s life.

Habits of watching spicy Bollywood or Hollywood movies and listening to pop songs and all such stupid stuff gets very easily cultivated in people of your age…but believe me, there is nothing great in that. This all just makes you run away from your culture.

And there is no wisdom in running away from your culture. Indian culture, which has great Vedas and stories like Mahabharata and Bhagwatgeeta is really great and even Donald Knuth enjoys reading that.

You should understand that fundamental things in Indian culture teach you a lot and you should never forget them.
Finally, I would like to conclude by saying that it’s your life…do not waste it on stupid things…develop your tests, and start the fight.

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The open-source movement is quickly gaining ground and replacing proprietary technology – if you believe the hype. As with anything that excites the market, vendors are not slow to jump on the bandwagon, although their commitment is sometimes less than total and their offerings often owe more to PowerPoint than time spent on R&D.

When switching your business to open source software, you lose the licensing fees but may pick up other costs.

When businesses hear the term “open source” software, it often translates into another word: free. And while open source code technically is just that — free for all to use — it doesn’t mean that there are never any costs associated with deploying open source.

“The philosophy of open source is more about freedom — to look at the code, modify it, and that there’s no copyright,” says Michael Goulde, senior analyst for Forrester Research, of Cambridge, Mass. “Companies can save money on their expenses, especially if they don’t need all the bells and whistles that a commercial software package has. An open source package might have all they need.” Still, he warns that there are hidden costs of open source and small and mid-size businesses “can get in over their heads really quickly.”

Many businesses say cost is not even a factor when moving to open source. They simply pick the best technology for the job. But companies should consider the following before committing:

No. 1: Packaged open source comes with a price

No. 2: Support isn’t always free

No. 3: Consultants can cost you

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The people promoting open source are keen to talk about cost. So let’s look at cost as it relates to one piece of technology heavily promoted by the open-source movement, MySQL.

MySQL has almost singlehandedly reignited interest in the database market. But the first thing to note is that open source does not equal free in this case. A professional licence from MySQL costs $495.

Entry-level technical support costs $1,500. That’s scotched the idea of anything about it being free.

Jeremy Zawodny, who is described as a MySQL database expert at Yahoo. This is what he has to say:

” One doesn’t need weeks of expensive training and a shelf full of manuals to make MySQL work well. Also the MySQL support is truly outstanding. “

There we are. Cost again. If it’s so easy to use and it is reliable (one assumes it’s reliable since apparently Nasa is using it to run missioncritical applications, although that would put me off becoming an astronaut), why am I asked to shell out $1,500 for entry-level support? And support costs can go as high as $62,400 – hardly a cheap option.


The fact that MySQL comes from an open-source background does not make it anything special. It is using open source as a tagline to gain attention, as are many other IT vendors, large and small. MySQL is a commercial database marketed on the back of interest in open source. source

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