Many people have heard the story of how the Mac user interface was born: Steve Jobs toured Xerox PARC and was shown some basic window-based computer. It was a short demo. When he went home, he tried to reproduce what he had seen. Except he hadn’t noticed the limitations, such as the fact that windows can’t overlap. And so Apple went on to create the GUI we all know today.

On a smaller scale, I had a similar experience. One day (this is the late 90s), my boss told me to drop whatever I was doing and start working on building some fancy debug system for hardware designers.

I was a pretty junior engineer and didn’t know any better. So I assumed I was really supposed to build such a system. I didn’t know it was impossible and didn’t make any sense at all.

It wasn’t easy, but I eventually figured a way. After a few weeks, I had a prototype. It worked! I showed it to my boss. And my first patent was born (the story of what happened to that patent after that is better left for another day).

What did I learn from that experience? In the startup world, there is a lot of love for young founders, because many believe only they can be disruptive and come up with innovative startups. As I get older, I should resent such a preconception, but I agree with it.

And now I understand why it is so: the more experience I gain, the better I am at knowing right away if something is going to work or not. But what I gain in efficiency, I lose in innovation.

How many ideas did I not pursue because I knew they didn’t make sense? I would pass on a 140-character messaging system, but it may be fun enough for kids to build. Who am I to judge.

I was tired of people saying “how come the co-founders meetup is only in Silicon Valley”. “We need one where I live.”

Fine!

If you live in Austin, just sign up on the Meetup website. Locally, Ricardo is graciously helping me organize it.

How does the Meetup work?

It’s a great evening of fun, where 10 founders have 3 minutes each to pitch the audience of 100+ to find a co-founder. Before and after the pitches, we provide food and drinks so people can network freely and meet other entrepreneurs.

Mostly, it’s a lot of fun.

What are the rules to present?

You have 3 minutes to cover what you are looking for, what your project or skills are.

But more importantly, you should also cover one of your passions that is not directly related to the rest of your speech. Listening to 10 pitches back to back is tough on the audience: if you sound like any other business, soon your message will be lost. You need to communicate what your are passionate about. Better yet, reveal something personal, so people get a feel for who you really are.

Otherwise, you’ll sound like a business robot with yet another boring business plan. And no co-founder will call you back.

If you need inspiration for the passion part, think of these questions from the Y-Combinator application:

Please tell us about the time you most successfully hacked some system to your advantage

Please tell us in one or two sentences about something impressive that you have built or achieved

Surprise us!

Please, no more than 3 slides to help you support your presentation. Your contact info must be on the last slide, because that’s when people will pay attention, assuming you did a good job during your 3 minutes.

Make sure that one of your slides clearly indicates the skills you are looking for and whether full-time or part-time/moonlighting are acceptable. This is critical info for the audience.

How Can a Business Person Convince a Developer?

You can’t ask a “rockstar” iPhone developer to work for you for free, just because you have a “great idea.” Understand your audience. The best hint I can give is copied directly from a great post on Hacker News:

1. Become a domain expert – know the problem you are trying to solve inside and out. Know the market size, sales cycles, etc. Make connections in the industry.

2. Find Customers – Bring an idea, along with a 14,000 name mailing list that you generated via blogging on the subject.

3. Bring a design – Actually mock up a set of flows for an MVP. Show it to 20 people, and iterate on their feedback. Find out what is important so when you do start building you build traction right away.

Logistics

Please send me a draft of the slides, in Powerpoint format so I can merge everything into one presentation (and don’t call your file “co-founders meetup.ppt”: I have hundreds of these – use your name or your company’s name instead). Do not plan on bringing your laptop to present, we can’t switch laptops or give live demos.

Once all the materials have been received, I’ll send you an e-mail to tell you whether your pitch was selected and also give you feedback on the content to make it as compelling as possible.

One last thing. You should assume that the content of the slides is public, so do not put down confidential information – keep it for the pitch.

UPDATE (12/9/2011): you may want to read this advice on how to give the best pitch.

Q: I just met someone who looks like a potential co-founder for me. What should I ask to tell if he is the right co-founder for me?

A: It’s actually quite simple. Good co-founders are all about doing, not talking. So here’s the one-month plan to find out.

Week 1

Meet for coffee and pitch your idea in more details. Does the other person want to meet again that same week? That’s a good sign. At coffee meeting #2, expect the other person to contribute some ideas. If he just shows up but offers no twist on your project, something is wrong. It means he hasn’t obsessed about it.

Week 2

By week 2, you should be brainstorming and exchanging random thoughts on instant messenger. That’s when you settle on a first goal together.

Week 3 & 4

The rest of the first month, you actually work on accomplishing whatever milestone you came up with.

At the end of the first month, you know if you have a co-founder or not. If you do, bring them on board with equity (don’t forget vesting).

Decision Point

Common mistakes I have seen too often: at the end of the first month, no work was done, but you heard plenty of very convincing excuses. It’s so tempting to be nice and give the other person the benefit of the doubt.

Don’t.

You’ll become more and more miserable over many months before you eventually pull the trigger, and it will be very painful for everyone. Just don’t.

Why? Because some people will pay to read your tweets before everyone else. Sixty seconds is not long, but it’s the difference between free and millions of dollars of revenue.

Here’s how it works.

Imagine a new premium Twitter client. It costs 99 cents on the App Store. Every time you tweet, it gets posted on the regular Twitter network with a small delay. Everyone who is on Twitter will see your tweet with that delay. But the trick is that those who have the same premium Twitter client will see it live, before everyone else. That’s step one.

Step two is revenue sharing. Now that endusers have an incentive to buy the premium client because they really care about the influential people they follow, we can use the revenue from selling the app and redistribute it to those influencers. The premium twitter client actually would have a money counter in the top right that displays how much money you are receiving because of people who follow you.

Who could pull that off best? It turns out that Loic Le Meur of Seesmic already owns a Twitter client. And he has more than 50,000 followers. He could easily convince two of his buddies (Robert Scoble with 140,000 followers and Dave McClure with 40,000 followers) to take their tweets premium. Why? Because they love to be at ground zero of new technology and business models.

Out of those 200,000 followers, you’d easily get 10,000 to pay $1 to get the premium app to stay “in the first circle of friends” of their idols. Take that $10,000 of revenue, and send it back to the people with the most followers. Instantly, about 2,000 people just made $5 by buying a $1 app.

That’s all it will take to set off a chain reaction.

Could Twitter itself do this? Probably not right away: the notion of a two-tiered service would be a tough sell to their existing users. However, if it is made popular by a third-party, they could eventually do it too.

What do you think?

The rules are simple: you give your best elevator pitch, in less than 1 minute, as if you were pitching an angel investor or a VC. You think you did a pretty good job. You are proud of yourself. And then Adeo tells you what an investor really hears, and how bad your pitch really is. It’s tough, but that’s the best way to learn.

Adeo’s strength is in being able to analyze and deconstruct a pitch instantaneously. Believe me, investors think the same way. The difference is that they don’t tell you what they think. Instead, consider yourself lucky if all you get is an “Hum, interesting…”.

But enough talking, judge for yourself and watch the video!

The twist is that all projects must build a hardware prototype (I guess because it’s linked to the Mechanical Engineering department). For me, it was a welcome change to hearing pitch after pitch of web and software startups. When you actually build hardware, your horizons expand.

There were good projects.

A dual-screen tablet to communicate with your grandma (there is a definite need here, I just think having two screens doubles the cost of the tablet beyond what people can afford, without adding enough value).

A very impressive demo of a telepresence table that goes beyond video to provide real document interactivity using gestures.

But my favorite one was TRUSTcard. It looks like a credit card (but a little bit thicker) with a tiny keyboard and LCD screen. It’s meant to make casual borrowing mainstream. Can I borrow your $100 textbook for the weekend? Although you don’t really know me, you hand me the textbook, because I hand you this card where I just punched the borrowing information. The card will serve as a reminder that the item is out there, and in the worst case, it can be used through insurance to get your money back.

Their vision is that will save the world because objects will now be reused much more, so we’ll have less junk being manufactured.

I like it.

Of course, it reminds me of crowdfunding and topics close to my startup (for instance, creating an instantaneous contract on the fly is quite similar to the vision behind FairSoftware, except one is for IP, the other for physical goods).

While there are iPhone apps that pretty much do the same thing today (minus the insurance bit, which I think is critical), the students were adamant that the physical trade, the fact of exchanging the card for the object, was hugely important.

How would I fund such a company? I would pitch it to an insurance company that wants to break into the student market. By selling those cards, they would instantly acquire a huge number of customers, that they could upsell eventually when they need car insurance of whatever else college students need nowdays. Kind of like freemium for insurance.

It’s a great idea. Unfortunately, it was designed by students for a class. So it remains to be seen whether someone will actually push this further.

UPDATED: I just had coffee with a member of the TRUSTcard team to discuss the concept further, and try to understand what features are core, and which ones are not necessary. By removing all the fluff, you can typically launch a product in weeks rather than in months, and find out quickly what works and what doesn’t. Stay tuned…

He finally asked: “why do you put so much emphasis on market size? The team, and surely other aspects must be equally important to a startup success.”

He was right: we are putting a lot of emphasis on the market size. It dawned on me that we hadn’t clearly explained why. Maybe because we took it for granted. So I said it: “VCs can fix your team by injecting more money, but they can’t fix your market”.

“Oh, of course!”. That was all the explanation he needed. When you are a bootstrapped entrepreneur, you think of money as something real hard to get, a very expensive commodity. And you lose sight of the fact that on the other side of the table, VCs see money as the cheap commodity, and good startups as the rare one.

If your technology is not quite as good as you thought, your VCs will put more money on the table and hire a bunch of Ph.Ds to make it work. But if your market turns out to be non-existent, there is nothing the VCs can do to fix it. That’s why despite all the claims about backing teams first, it’s so important to target a huge market.

Ideally, VCs want to back great teams targeting great markets. But given the choice, they’ll settle for a somewhat weaker team.

Not a smaller market.

Here’s how you do it in one tweet:

@joe I expect this co-founder position to be worth ~30% equity. My goal is to incorporate in about a month, let’s see how it goes by then.

Really, that’s all there is to it. Now if you are curious to know why this is the right way to do it, read on.

You must commit to a number upfront

You need to make the potential co-founder a promise. Something tangible that clearly spells out how much of the company they’ll be getting. You can’t avoid a discussion with a specific number. Am I getting 30% or 5%? That makes a huge difference. By putting it in “writing” (a tweet), you are giving enough rope for the co-founder to sue you if you completely abuse the situation.

You’d be amazed by how many startups I coach that tell me they haven’t discussed equity split yet, although they have been coding along for 6 months or more… The longer you wait to have that discussion, the worse it gets. Be upfront.

You need a way out

Frankly, you should not sign a definitive co-founder agreement with someone you haven’t work with yet. In my experience (confirmed by talking to many entrepreneurs facing the same situation), it takes about a month to know whether it’s going to work out or not. So work together informally for a month, and decide then. Follow your instincts. If after one month, the only contribution of the co-founder are excuses and delay, just stop, don’t try to save the situation and hope that it will get better. It doesn’t.

You need to be fair

While you committed in writing to an equity split, a tweet is clearly not as strong as a legal contract, so in case where the relationship doesn’t work out, there is no additional paperwork needed.

But if you ripped-off the co-founder, the tweet gives them a (small) basis for a lawsuit. So it forces you to do the right thing. It’s a good trade-off, fair for both sides, without getting all lawyerly.

After the one month, if everyone is happy and super-excited about the startup, incorporate. That will make the tweet official. That’s it!

PS: did I mention that if you construe this post as legal advice, you deserve the mess you’ll get into? Of course you should talk to a real lawyer. Just do your own research as well.

I’ll happily take comments from lawyers and others about whether this approach is sound or not.

As I remind all the presenters beforehand, your personality is just as important as your Powerpoint. Finding co-founders has been compared to dating or marriage many times, and it’s true. So you need to show a little bit of your personal side, to attract people who will enjoy working long hours with you and stick with you during the ups and downs of your startup adventure.

And the presenter who stole the show last night is Beto, with FiestasMariachi. I knew something was up when he checked in with a guitar in hand. And he didn’t disappoint the audience!

To get back to business, he probably has found a great niche and he is probably one of a handful of people who can pull it off. I followed up with him after the MeetUp with more questions.

1. Tell us about FiestasMariachi,where the idea came from, or why you think this is important.

Beto: Like a good amount of business idea anecdotes I’ve heard, mine came from the realization that there was a pain point in a certain market. My girlfriend was trying to spend $600 on a mariachi to come to an event in San Francisco – which has a significant Mexican American population – and could not find anything online. She ended up having to go through my old mariachi teacher, two groups removed, to find someone in SF. This is a clear market inefficiency that needs to be addressed. As my roommate @JoshConstine pointed out yesterday, if someone ever has to work to spend money, there’s an opportunity there.

2. What stage are you at (do you have code, specs, etc.)?

I have what most idea people have – a great business plan, executive summary, job description for a technical co-founder, and some basic mock-ups. I’ve tried the code. I’m so bad at it. I just feel like I go round in circles reading tutorials online instead of being productive. Few things bother me more than not feeling productive.

3. What help do you need now? Did you get interesting feedback from the MeetUp?

Now I need one of two things – a technical co-founder that can do a quick build on my idea (less than four weeks should do it) or partner with an existing technology that can be white-labeled and tweeked.

I did have a lot of great feedback at the MeetUp. It’s amazing how much people are willing to engage with your idea and provide feedback; I suppose that’s the lifeblood of entrepreneurs these days: constant feedback. I’m a little disappointed that I didn’t find my technical co-founder right then and there, but it was still a great launching pad for my search (i.e., the networking was excellent).

4. Tell us about yourself, your background

I’m a dreamer from San Antonio, TX. I got into the tech game a little late while doing my undergrad at Stanford. Before then, it was all International Relations and Mariachi. But once the Silicon Valley bug gets in you, it never leaves. Follow me @betoiii to get a little better idea of where my mind is:)

5. What else will you need to succeed, or is there anything else that would make a difference for you?

The name of the game right now is perseverance. I’m extremely boot-strapped, but still committed to a successful business. In the mariachi world, I’m confident I have exactly what I need to build a viable site and marketing campaign. All I need right now is someone who shares that passion to partner with me on the build. Victory is close!

Iterate Quickly

Also known as “kill ideas fast”, this advice is saying that your idea is probably not worth the pixels it’s displayed on. Ideas are a dime a dozen, execution matters. You’d be better off with a dumb idea in a large, expanding market!

The advice goes on to recommend that you submit your idea to friends, advisors (maybe VCs). Find people who you trust and are honest enough to tell you that your idea is dumb. Don’t fall in love with your idea, move on, try another one.

Trust Your Guts

Also known as resilience or tenacity: when everyone else tells you to give up, when there is no hope in sight, what separates the successsful entrepreneur from the wanna-be: perseverance. Don’t give up.

Or my favorite quote: Instant success takes years!

Making Sense Of It

The apparent contradiction was especially visible during the latest Founder Institute session in Silicon Valley, since several mentors gave both advice back to back. Some founders couldn’t help but notice.

Here’s my take on the contradiction: both your guts and everyone else are right — partially. It takes a very smart person (you) to figure out the gem that your guts detect and remove the junk that everyone else sees.

So it’s not a contradiction at all. We are just going back to the essence of intelligence: you need to keep thinking about every angle of your idea. If you really believe there is something to it, I’ll believe you. But also listen to feedback because while it may be missing your big picture, it is probably right at least on a tactical level. Your rough idea, as you pitch it, likely has shortcomings and limitations.

It’s your job to figure it out.