Tuesday, November 22, 2011

TW's November 2011 Newsletter

Check out Tenacity Worx's latest newsletter.  Good stuff about our charity social with The Family  Giving Tree and a few pieces from the press.

Click here for the November 2011 Newsletter

Happy Thanksgiving!

-- The Tenacity Worx Team

Friday, November 18, 2011

Tenacity Worx Gives Back

Dear start-up community,

Over the last year, we've had the pleasure of meeting many entrepreneurs from all over. Many of you have had great stories to tell us, and we're really proud of your accomplishments. However, there's more to life beyond the creation of a new app or closing that deal.

We'd like to invite you, your family and friends to The Family Giving Tree to help fulfill the holiday wishes of thousands of children in the Bay Area. For a few hours on Saturday, December 3, 2011, we want you to put down your Macbook full of code and put away that Powerpoint deck and become a warehouse elf where you can wrap presents, sort gifts and put a smile on a face on those that are less fortunate in the Silicon Valley.
What: Change your world by joining your fellow innovators at The Family Giving Tree
When: Saturday, December 3, 2011 from 10 am - 2 pm
Where: 749 East Calaveras Blvd., Milpitas, CA 95035

We'll provide some refreshments so please sign up today!

About The Family Giving Tree

The Family Giving Tree Elves envision a world where every child feels like a valuable part of their community through a national belief in the power of giving. The Family Giving Tree fulfills the exact holiday wish and provides backpacks filled with school supplies to those children in the most need in our communities while inspiring the values of kindness, philanthropy and volunteerism. Find more about The Family Giving Tree at http://familygivingtree.org/

Monday, October 24, 2011

Tenacity Worx at FailCon 2011

Tenacity Worx will be at FailCon 2011 today. For those that need a last minute discount - coupon code, use "tenacity" and you'll save $100. =)

Tweet us @tenacityworx or if you see us walking around, then please come up and say hi.

Tuesday, October 11, 2011

Tenacity Worx October 2011 Newsletter

Wednesday, October 5, 2011

Is your startup prepared to deal with a death of a co-founder?

Today's events of Steve Jobs' death got me thinking about my company and what would happen if I or my co-founder died.  The results would be pretty tragic not only to our friends and family, but to our business, partners and customers as well.

Renelito and I are pretty sharp people, and I'm confident that a death would merely be a hiccup in the success of Tenacity Worx and our partners.  However, as I think out loud, there are a few things that we probably should know and prepare for in case the worse happens.  Some of these things may seem obvious, but with so many other priorities with you company, I doubt that you have everything ready.

Legal documents:  Have your operating agreement in place if you've formed your company and know your lawyers.  All founders should know their legal team and have their email address and cell phone number handy.  Looking over our documents, I see that a death would not terminate our company.  In our case, the other co-founder would take control of the business and any disbursements would go to the estate of the other co-founder.

Passwords:  While you can get into many servers without a password if you have console access, it would make it easier if there's a safe place that all of the passwords are stored.  Make sure your passwords are updated regularly and your entire founding team is aware of it.  Passwords should be written down for the production servers, customer related tools (CRM, etc.), DNS zone file, email provider, etc.  Even when your company balloons to thousands of employees, never let the disgruntled IT be the only one with the keys to the kingdom.

Finances:  All co-founders should have access to the bank accounts.  It would really suck if you just closed your financing, but you can't get access to it.  A simple trip to the bank with all of the co-founders should solve this issue.  Many companies have multiple bank accounts that are independent of each other such as the business operations' account and the payroll account.  Make sure all the co-founders have access to them all.

Backups:  Many backups are held in the cloud, so you should be okay in the event a server falls apart and your technical co-founder is not there.  I recommend that every once in awhile you copy your SVN repository to a CD and have a copy held at each of the co-founders homes.

Intellectual property:  Is your secret sauce kept only with one person?  If so, you may want to sit down and share the details and document it.

Apple, Inc. will go on and continue to make innovative and inspiration because the company was never really about one person, it was about it's 46,000+ employees and the ~7 billion people on this planet.  While your company may be one person, two people or just a small handful, you as their leader always should work hard towards your vision, but be mindful of the present.

You can follow Allan on Twitter at @allanscu.

Tuesday, October 4, 2011

Would you start a startup knowing you'll be fired in 18 months?

“45% of new businesses change CEOs within 18 months.... Firing Founders happens quite often and is not much fun.” -- Don Valentine, Co-Founder of Draper & Johnson Investment

I attended the 1st Annual Palo Alto International Film Festival this past weekend and “Something Ventured” was my favorite movie.  It examines the birth of the Venture Capital industry, and the rise of its dominant players (Sequoia Capital, Draper & Johnson, etc.).  Check it out if you get the chance, it’s making the Film Festival rounds this year and will be released in 2012.

One of the movie quotes that stood out most was Don Valentine’s assessment (above) on firing founders.  45% is a staggering number; I had no idea the CEO replacement rate was so high in startups.  I bet most founders have never heard this statistic either.

So for all you would-be entrepreneurs out there -- given that there’s a great chance you’d get canned and replaced by your Board of Directors (or Investors) within the first 18-months operation, are you now less likely to start the venture in the first place?

If your answer is “yes”, then Tenacity Worx probably isn’t the best accelerator for your business.  Starting a business is not for the faint of heart; we are looking for Founders who never give up, never stop pushing for their dreams to come true.  It’s the attitude we rally around, and everyone on the team (Tenacity + Portfolio Company) has to be tenacious or results won’t come as quickly.  

If your answer is “no”, then take a look at our Winter 2012 application because we want to hear from you.  A 45% replacement rate can be daunting, but we like how you didn’t flinch one bit.  Tenacity Worx is looking for businesses that are not afraid to go against conventional wisdom; these are the startups that dare to change the world, and we want to help them do just that.

Lastly, we’re not interested in firing the Founders of our portfolio companies.  In fact, our term sheets specify that Tenacity Worx does NOT have a board seat with voting rights; we only require board observer rights, so the closest we’d ever get to a Founder ousting is watching it unfold from afar -- like a reality show.

The article was written by Tenacity Worx' managing member Renelito Delos Santos.  You can follow Renelito on Twitter @frgds3.

Image from glassdoor.com.

Wednesday, September 28, 2011

The Media won't make your startup bigger or better

Raise your hand if you said one of these:

"If my startup could only get into GigaOM, then I'd get millions of users."
"I'm only an article away from getting noticed by VCs."
"My girlfriend would get off my case if Forbes would write up a piece on my game-changing technology."

Now put your hand down - you look silly.

I admit it, I've said one of those statements above in some form at a point in my entrepreneurial life.  I always felt that the press was the single biggest catalyst to making my start up successful.

Here's the truth:  the press helps, but you ultimately have to create something that solves a fundamental problem that people are willing to use.

The press is like a drug.  You chase after it, and you finally get that big article or video spot.  You hype it up on Facebook, you Tweet it, you tell your parents, grandparents and the kids that walk by your apartment everyday.  You'll be on cloud nine for as the user base grows and your revenue reaches at an all-time high.

Now brace yourself, ultimately they'll disappear if you have a piss-poor product.  Now you're back on the hunt for the next press fix.  You may get it and you may not.  In the meantime, you're wasting a boatload of company resources on PR instead of actually coding and building your product.


Here's are few pieces of advice for those that don't have the PR budget:
  • Go out and network.  Meet as many people as you can, and you'll probably run into tech blogger.  Follow them in Twitter, connect with them on LinkedIn and fan them on Facebook.  Don't ask for anything at the beginning - just nurture the relationship
  • Most reporters are measured by their page views, the virility of their articles and the comments posted - so do them all.  If you actively participate in their articles, then when you reach out to them about your new widget they'll be happy to entertain a conversation.
  • Focus on your business.  The media will come if you build something great.  As the title of this post eludes, the media won't make your product bigger or better - it's you that has to do that.  When you do reach that stage of success, don't forget the reporters that helped you get to where you're at.
You can follow Allan on Twitter @allanscu.

Tuesday, September 27, 2011

Lessons Learned: 5 tips to help you save on legal fees for your start up

Let's start off with a short story before we get into the meaty part of the post:

Once upon a time, in a tech valley far, far away, a company was on it's way to success. Sales were growing quarter-over-quarter, the engineering department was meeting every deadline and investors were throwing money to help the company grow.

Then all of a sudden, the good times started to become a little sour. Sales numbers were missed, projects were delayed and employees were quitting. Just when the company thought it hit bottom, one of the co-founders got into an argument with the other co-founder and she bailed - leaving the company, it's debt and problems for the remaining founder to handle, but taking the 100% vested shares with her.

Things got worse, the board of directors wanted complete control to salvage their investment, and before the remaining founder knew it, he was being sent to the unemployment line - palm planted directly in his face. You could hear him crying out, "What the heck happened?" in the distance.

And end scene...

A story like this likely happened a long time ago, and it probably had nothing to do with tech. It could have involved a land agreement between cavemen. Whatever the catalyst was that set the requirement of agreement documents, it instigated the the need for lawyers to be involved in every business deal or financing. To the business owner's dismay, an additional line-item of cost, in this case, lawyer fees, was required. If everybody was honest and fair, then agreements would never have to be used, but unfortunately this is not the case.

If you haven't involved a lawyer in your business yet, then you're lucky. However, if you're on your way to success and you see a requirement that involves the formation of your company, stock, taking on investments or even hiring an employee, you'll probably call a lawyer to hold your hand through the process.

As a startup, the last thing you want to do is to have lawyers eat up all of your bootstrapped cash or initial seed money. Here are a few tips, based on lessons learned that can hopefully save you thousands of dollars:
  • Get two books: Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist and The Entrepreneur's Guide to Business Law. Read them and then read them again. The books will set you back about $100, but it's money well spent. It will teach you about forming your company, what's involved in a term sheet and it even helps you with the negotiations with your investors.
  • Whether you're dealing with an investor, a co-founder or a partnership agreement, do as much negotiation away from the lawyers as possible. Keep in mind that you'll be spending anywhere from $200 to $700+ per hour with a lawyer, so every email, phone call and office visit will be tracked should you use them. You'd be surprised that a simple task such as a photocopy of a document can set you back 30 minutes or more. If you're working with an angel investor, then sit down with them and hammer out the terms of the agreement. Y Combinator has done a great job of open-sourcing their Equity Financing Documents (we hope to open-source ours soon too), so take advantage of them and go line-by-line with your investor. I'm sure they'll appreciate your honesty and the fact that you're not wasting money on non-product-related things. If the investor refuses to sit down with you, then maybe that's a signal on how your relationship will be with them. Once you have your documents set, then have your lawyer do a quick review of the docs - it should be no more than 1 hour of billed time for this.
  • Oh you have a deferred payment with your lawyer, so it's not a problem? Kudos to you for negotiating a deferred payment plan. You should be able get about $20,000 in deferred fees from the bigger law firms in the Silicon Valley before they bill you. Keep in mind that you're just running on credit. So add that on top of your already accumulated Capital One credit card debt, and you're in a bigger hole that you started with. Remember that between minute 0 and the time you reach that payment cliff, they're tracking each minute. Just as your last pennies are evaporating, you'll see a big envelope in the mail with a five-figure bill enclosed. (This tip isn't necessarily saving you money, but it'll be good for your cash flow.)
  • Don't waste knowledge or documents. Whenever you're with your lawyer, take careful notes so that you don't have to ask them twice. Also, if you're having your lawyer draft up the financing documents, then have them done so that you can reuse them with other investors. You'll probably be taking a lot of friends and family money at the beginning, so don't expect them to have their own legal counsel. In the early stage, you'll probably use a lot of convertible debt documents. They're pretty simple, and there shouldn't be much back and forth. Once you get into the seed stage where you're lining up your investors and it involves equity financing, then come prepared with a uniform set of documents. If you get a commitment from an investor, then it looks really impressive if you can get the documents together as soon as possible. Additionally, it reduces the risk involved in case they decide to use the cash on another Ferrari or house in hills. (This statement is assuming that your investor doesn't have their own set of docs that they want to use).
  • Choose your battles. Like any relationship, it's give and take. If you're a young company with first-time entrepreneurs, that have a small customer base and little to no revenue then I hate say it, but you have almost zero leverage against your investor. Definitely take what's given to you, and be picky when necessary but don't sweat the small stuff. (Do sweat situations where control of the company (i.e. board seats) come into play). Whether it's your co-founder or an investor, don't get greedy with them. For every battle that has to go between lawyers, you're racking up hourly charges, so think twice before you red-line that agreement. I'd rather have a small stake in something big then 100% of something that's going nowhere.
I really hope that this post has educated you and helped you be more prepared when you do close that next round of financing. For full disclosure, I'm not a lawyer, have never attended law school and it's been years since I watched Judge Judy, so when in doubt definitely use a lawyer before applying my advice above. If you learned something from my post, I'd love to hear your feedback in the comments.

You can follow Allan on Twitter @allanscu.

Image of The Simpsons' Lionel Hutz from the Wikipedia.

Monday, September 26, 2011

Why a startup founder needs a hot girlfriend

Scout #1: "I like Perez."
Scout #2: "He's got an ugly girl friend. Ugly girl friend means no confidence."

The quote above was from the recently released movie Moneyball based on the Michael Lewis book Moneyball: The Art of Winning an Unfair Game. If you haven't seen it yet, I highly recommend it.

The scouts were in the war room with Oakland A's general manager Billy Beane (played by Brad Pitt), and they were discussing which player they liked. Scout #2 didn't care whether the player was tall or fast or could hit or field a ground ball, it came down to whether or not the player had confidence.

I hate to say it, but it wouldn't surprise me if VC's used the same tactic to measure the investment worthiness of the companies that they fund. For those that have taken money or were on the verge of taking money, think back and see the investor invited you to dinner with your significant other just before they wrote the check (or didn't write the check).

It's cliche now in the VC community, but it's worth saying again - we invest in three things: People, Product and Market. "People" or your team comprise about 80% of our decision because at the end of the day you can have awesome technology that's attacking a huge market, but if you don't have the right people to take you from point A to point B then nothing else matters.

Investors use all sorts of methods to understand the founders (including the girlfriend-method above). Paul Graham of Y Combinator looks at a person's history on Hacker News while Dave McClure of 500 Startups gets personal referrals, and others will take the time to get to know the teams before they write that check. I usually will have a coffee or a drink with a team that I'm evaluating and I try to understand the answers to the following questions:
  • What are the responsibilities of the team members and how confident are they in their duties? I want to see rock stars in whatever they do. When starting a tech company you should have a business person and a tech person (although I'm not opposed to a single founder). Both of them should show the utmost confidence in whatever they do. While their answer should not always be "Yes", they should have that mindset.
  • Have you quit your job to work 100% full-time on this project? If I'm going to give you 100% then I hope you already are giving 100%.
  • Has your team worked together in some capacity before? You could have gone to school together, be related, built a web app together, worked at the same place or planned a camping trip - I just want to see if you've accomplished something as a team and understand how you've dealt with internal conflict.
  • Do you have any other distractions that could keep you from being successful? This is probably the least important team question and probably the hardest to gauge. I don't think any investor is opposed to somebody having a family even though that could be a time distraction. If you have other dreams such as going to med school, a deep desire to have the large house with a picket fence in the near-term or anything else that could cause you to lose focus then it may be something that your other co-founders and your investors should know right off the bat.
Investing in startups is a risky game especially in the early stage. Tenacity Worx (aka YC Reject) believes every startup company can be successful if they have the right resources whether that's money or introductions to the right people. We are a young investment company and we really scrutinize founders that we fund because we truly care about your success and we work closely with you. The work includes chasing after that intro that you're looking for or giving you product suggestions or investor deck feedback. We look for the best, the brightest and those that can get stuff done. As much as I would like to have class of 60+ companies every half-year, we couldn't give the T.L.C. that every young company needs, and we're happy with the results so far.

To sum it up, confidence is a key trait that many investors look for. Resourcefulness, determination, smarts and the shear hustle to execute are also in the pile of must-haves. However, it wouldn't hurt before you go to that next pitch event, hacker meetup, demo day or VC meeting that you take a long look at your girlfriend.

(The title of this post isn't necessarily fair. It also applies to having a physically attractive boyfriend.)

You can follow Allan on Twitter @allanscu.

Image from Wikipedia.

Monday, September 12, 2011

Tenacity Worx is proud to announce Cull.tv as their first company

We're proud to announce Cull.tv as the first company to come out of Tenacity Worx (aka YC Reject). Lots of hard work was done by co-founders Katherine de León, John Hurliman and the Cull.tv team. Congrats!

Check out the latest articles:

Cull.tv ushers in a new era of music television

Vator News, Ronny Kerr
September 12, 2011

Cull.tv Brings A Social Take To Music Videos

Forbes, Tomio Geron
September 12, 2011

Cull.tv is a visual treat for music video nomads

The Next Web, Chikodi Chima
September 12, 2011

Cull.tv launches to become MTV for the digital generation

GigaOM, Ryan Lawler
September 12, 2011

Tuesday, August 23, 2011

Tenacity Worx is featured on The Next Web

Tenacity Worx was featured in an article on The Next Web by Chikodi Chima this afternoon. Check it out here:

Update: Allan's name in the article was fixed. =)

They mention a co-founder by the name of Nathan Teruel. I'm not sure who he is, but I'll double-check our operating agreement to make sure somebody else didn't sneak in. =P


Tuesday, August 9, 2011

YC Reject is now Tenacity Worx

I know it's been awhile since I made a post here on the blog. We've been really busy working on our accelerator.

We're proud to announce that as of today, the project formerly known as YC Reject is now Tenacity Worx, LLC. Check out the main site at www.tenacityworx.com and make sure to follow us on our new Twitter account @tenacityworx. Also fan us on Facebook.

We'll be releasing more news shortly. Thanks for following!

Friday, May 27, 2011

YCR's Founder Speed Dating Events at pariSoma

Many of you have asked YCR to help find you a co-founder whether that be a technical ninja or a business guru. At first, we pointed you to another website to help you find your soul mate, but then we realized that wasn't right. So we took a step back and brainstormed how we can help the community.

We figured we might as well put on an event and see what happens. So mark your calendars for the following days for our inaugural YCR Founder Speed Dating!
Tuesday, June 7, 6 pm: pariSoma, San Francisco

What's speed dating?
Kind of like this video (NSFW) this but we're matching business folks and ninja hackers and we're not necessarily playing Cupid (but we're not opposed to what may happen).

What's the process to be apart of the speed dating?
  1. Decide if you want to go to the Mountain View or San Francisco event.
  2. Get a free ticket at Eventbrite (SF Ticket)
  3. If you want to participate in the speed dating please fill out a dating form (REGISTER for SF)
I still don't understand the process?

How do I REGISTER to date?

San Francisco pariSoma Speed Dating form

What will happen at your event?
Once we get your intent (by you filling out the form) to be a part of the speed dating event, we'll put you in groups of about 20 people (10 hackers and 10 business people). You'll have 5 minutes with each person, then we'll ring a bell and you rotate. Make sure you bring your business cards so that you can exchange info quickly.

How many can participate?
We're limiting this event to the first 40 people that sign up - so 2 groups of 20 people. So sign up now!

What's the address?
Tuesday, June 7, 6 pm: pariSoma, San Francisco, 169 11th St., San Francisco, CA

Do I need to be a single founder to be part this awesome event?
No. Maybe you already have two people in your group and you're looking for a third co-founder. So send at least one member from your company and make sure you properly fill out the form to indicate what type of co-founder you are looking for.

How much this incredible service cost?

Will you feed me and quench my thirst?
Food and drinks will be provided free of charge to the dating participants

Do I have to speed date to hang out at this event?
No. Come by and check it out and maybe you'll participate the next time we do this. You'll still need a "Just Hanging Out" ticket in order to get in.

What's the catch?
You have to follow us @ycreject and say hi to somebody from the YCR team before you leave.

Wednesday, May 18, 2011

I wish I could go back in time with YCR to track more data

YCR is a little more than a month old and it's been a whirlwind ride so far. I think I've kept my mistakes down to a minimum. However, one thing that I would go back and fix is tracking my how people found out about YCR as early as possible in addition to having a solid plan whenever I would go out and pitch YCR at meetings and events.

My game plan was to show up, shake a few hands and re-tell my story to draw interest into YCR. What I really should have been doing is all of the above, but making sure that I get a person's contact information, logging it somewhere and tracking to see if that person actually filled out an application for YCR.

I recently subscribed to Salesforce.com as my CRM tool of choice under the $25/month small business package. For each applicant, I'm tracking in a systematic way to see how one goes from a qualified lead (10% into my pipe) to fill-out application (20%) to interview process (50%) to offer (80%) and hopefully and acceptance of an offer (100%). I think I'm using SFDC in an nontraditional sense, but it works.

So far I've learned that StartupDigest has by far led me to the highest applicant submissions to converted interview whereas HackerNews has led me to the highest quantity of applicants. It's too early to tell how the leads that I'm getting from meetings and events will turn out. I'm experimenting with other methods to get the YCR name out there, and I'll update you as soon as I get more data points.

It was a pain in the butt to put all the information into SFDC, but once it's in there it's beautiful. I recommend that every start-up has some kind of track able sales methodology in place as early as possible so that you know where to invest your resources. I'm glad I caught this issue one month into YCR's life as opposed to a year or so later.

BTW: I'm going to be at From Founding to Funding - What's the Sexy Part? on Thursday, 5/19 in Palo Alto, CA. If you're there, please come up and say hi. I think I have 1-2 minutes to pitch YCR, so you'll know who I am.

Image by pnoeric used under the Creative Commons License.

Friday, May 13, 2011

Can you be too young to be a successful entrepreneur?

Last week I discussed how 30-year-olds are not over the hill despite what a VC that was close to Michael Arrington of Tech Crunch said. The VC said that younger entrepreneurs are more creative and imaginative and it's "not a guess, this is a data driven observation."

Many responded to my post and said that being 30+ is not a limitation of a great entrepreneur. They agreed that the 20-somethings have a bigger advantage because they have a lot less to lose, so there are more of them taking the chance. 30-year-old tend to have families and more responsibilities, so they are fewer of them in the entrepreneurship world.

So it got me thinking. Is it possible that you could be too young to be a a successful entrepreneur?

Before we answer that, let's define what "young" is:
  • 20-something is not young with Mark Zuckerberg and Max Levchin as good examples.
  • Let's take away the child celebs such as the Mary Kates and Ashley Olsen's.
  • Let's say anybody that was born before May 13, 1991 is already old.

A early success stories that come to mind include:
  • Josh Buckley (18) and Tyler Diaz (17), founders of the YC-backed company MinoMonsters.
  • Jessica Mah (19) when she co-founded the YC-backed company Indinero.
  • Ashley Qualls (14) when she started WhateverLife.
  • Ernestinte Fu (19) a Stanford student that is also a VC at Alsop Louie Partners.

To answer my question, these few examples (among the many that are out there) prove that you can't be too young to be a successful entrepreneur.

The problem that I have a hard time grasping is the known fact that venture capitalists are so risk averse. So I wonder how they can consciously write a check to the aforementioned teen techies - some of whom may not even have a checkbook themselves. Obviously, these are the few examples of proven and successful teen entrepreneurs, but for every success story, there must be a failure and that has to be wavering in the back of their head.

I'm not aware of any teen failure stories off the top of my head, but it's likely a failure on it's own if a teen came up to an investor with an awesome idea and a minimal viable product only to be shutdown because of their age.

(For the record, YCR does not discriminate based on age. We welcome all entrepreneurs regardless of when they were born.)

A Junior Achievement survey released in April 2011 said that 51 percent of teens would like to own their own business someday, but of those polled, 74 percent identified risk (39%) or failure (35%) as the biggest discouragements. So you have to wonder if that initial "no" from an investor prevented a gifted student from building the next Google or Facebook.

Many moons ago, when I was young and in my teenage years, I thought I was sharp and bright. Could I have run a Facebook or PayPal? Maybe, but it definitely was not the thing to do in the early 1990's. Most people were trying to figure out what those AOL discs were that populating their mailbox everyday, Apple was the computer with no right-click button, and our experience of UNIX was the one scene Jurassic Park that supposedly locked the doors and kept out the Raptors. Nobody was interested in started a billion dollar business back then.

What are your thoughts? Let's say you had an extra $100,000 lying around, and a 15-year-old prodigy came up to you and presented you with a solid MVP/business plan/etc. Would you fund them knowing that age poses a great risk?

Image by M.ADA under the Creative Commons License.