To kick things off here on Startupping, I asked many successful Internet entrepreneurs about lessons they learned starting and running Internet companies. I asked for their best decision and their worst mistake, and I received many insightful replies. Here is the first set of responses.

John Battelle

John Battelle is an entrepreneur, journalist, professor, and author who has founded or co-founded businesses, magazines and websites. Formerly at the Graduate School of Journalism at the University of California, Berkeley, Battelle, is also a founder and Executive Producer of the Web 2.0 conference and “band manager” with BoingBoing.net. Previously, Battelle was founder, Chairman, and CEO of Standard Media International (SMI), publisher of The Industry Standard and TheStandard.com. Prior to founding The Standard, Battelle was a co-founding editor of Wired magazine and Wired Ventures. John is currently the founder and Chairman of Federated Media and blogs at John Battelle’s Searchblog.

1. Either keep control, or don’t act like you have it. This was the primary lesson of The Industry Standard. I felt like this was the first large scale business I built on my own, and I acted like it. But majority control was always squarely in the hands of the company who funded it. We fought, and I lost.

2. Don’t skimp on hiring. Ever. I’ve hired folks who had the right resume, but I knew in my gut were not right for the culture of the business. I thought the skills/resume overshadowed the ability to work together as a team. They never do.

3. Do it for love, not money. This is pretty careworn, but it’s very very true. I’ve never ever started anything for money. Some folks are really good at starting companies to make money, but I’m terrible at it. I suspect most entrepreneurs are like me.

3a. But make sure what you are doing makes sense to others. Everything I’ve started or been part of starting, I’ve talked to key folks who would make or break the idea, and gotten their buy in and encouragement/help first. If folks who are critical to the idea are not interested, well….that’s a pretty good sign it isn’t going to fly. Doesn’t mean it’s not a good idea, but it probably means you’re not the person to do it.

4. Pick one constituency and stick to it. Very early on, we decided that FM would be “author driven”. We could have made the company “advertiser driven” but it struck me the core business had to do with the folks who produce the sites we work with. At Wired, it was all about the ideas. At the Standard, it was all about the journalism. One clear core driving force helps clarify decisions during the tough early years.

5. Don’t do something because you can. Do it because it’s good for the folks in #4.

Dick Costolo

Dick Costolo is CEO and cofounder of Feedburner, the leading provider of media distribution and audience engagement services for blogs and RSS feeds. Previously, he cofounded and was CEO of Spyonit.com. Spyonit was sold to 724 Solutions in September 2000. Prior to Spyonit, Dick cofounded Burning Door Networked Media, a web design and development consulting company. Burning Door was acquired by Digital Knowledge Assets in October 1996. Dick blogs at Ask The Wizard.

The best decisions I’ve made have all been hiring decisions. When you really are feeling the pain of not having a certain kind of person in the company, it’s easy to hire the first interviewee that walks through the door, but it’s critically important when a company is getting started to make sure you’ve found somebody that everyone on the team thinks is the right person for the role. People always tell you to hire A players, but the person also has to be a great cultural fit with the team you’re assembling and with the kind of company you want to be.

I’ve made loads of mistakes so I’ll try to think of one with a good lesson for startups - one of the biggest mistakes I made in a previous company was accepting a high dollar contract once for something that wasn’t core to the vision of the business we were running at the time. While the revenue initially feels great, there’s nothing worse than pursuing a piece of business that isn’t core to the startup’s vision. Lesson learned - once you decide what it is you are going to do, don’t pursue efforts that distract from the vision. One of the hardest lessons an entrepreneur has to learn is what revenue to turn down. You can certainly decide to change the vision and zig when the market zags, but in a startup, everybody has to be working toward a very focused vision, and chasing down side projects can be a real distraction (and probably ends up costing a lot more in terms of long-term resources than you’d expect).

Paul Graham

Paul Graham is an essayist, programmer, and programming language designer. He is currently a partner in Y Combinator, an innovative venture firm specializing in funding early stage startups. He is also a cofounder of Startup School, which this year is on March 24, 2007 at Stanford. Previously, he co-developed Viaweb, the first web-based application, which was later acquired by Yahoo, and more recently he pioneered the Bayesian spam filter, which inspired most current spam filters.

The best decision I made was to make Viaweb web-based. There were no web-based applications then, so we weren’t sure such a thing would even be possible. Initially what drove us was our dislike of Windows. Writing a desktop application would have meant learning Windows, which we really didn’t want to do. Whereas servers were the same Unix machines we used every day. To make a web-based application, all we had to do was figure out how to let users drive our software by clicking on links on web pages. That was a lot less work than learning Windows.
Hmm, no, actually the best decision I made was to get two fabulously good programmers, Robert Morris and Trevor Blackwell, to start the company with me.

The worst mistake I made, probably, was not being strong enough with investors. I now realize that investors like you to be assertive. It reassures them when founders take charge. But because our investors were so much older than us and had given us what seemed then unimaginably large sums of money, I felt I ought to defer to them. And yet I wasn’t prepared to do things their way in anything really important, like what the software should do or what our strategy should be. This inconsistency led to disputes that sucked up a lot of time and energy.
I realize that’s not really a decision. It was more something I didn’t do than something I did. But I think the worst mistakes startups make are mostly of that kind. Another big mistake I made was not to investigate IP agreements signed by people we hired. That nearly sank us later. But I didn’t decide not to; I just didn’t pay enough attention to it.

Ross Mayfield

Ross Mayfield is the CEO and co-founder of Socialtext, the first wiki company and leading provider of Enterprise 2.0 solutions. A noted blogger and industry expert, he is a serial and social entrepreneur. Mayfield has grown Socialtext to over 2,000 customers with Software-as-a-Service, Appliance and Open Source solutions.

Best Decision — To become an entrepreneur in the first place.
I started my career in the non-profit sector, and then in the public sector, all in hopes of changing the world. I quickly realized that I could both have an impact and make a living in the private sector. And am lucky to now work on a company that produces social goods. Further, as a startup founder I believe you can quickly have a significant impact, possibly more than any other job. It is a roller coaster of risk. One day you can be beaming with pride to have created jobs and a fun place to work, and another you stress about meeting payroll and having folks be overtly human with one another.

Answer #2, to more specifically tie this to a decision…
Best Decision — Picking co-founders you trust.
It is not an exaggerated saying, that you marry your business partners, especially co-founders in a startup. Some look to partner with the Geek Girl for her technical whizbangery or Phone Guy for the sweet talk and access to capital. While you want to work with people that are skilled, I’d say the primary qualifier is if you can trust your co-founder. If you have any hesitation, either work it out or walk away, quickly. I’m luck to work with great co-founders I can trust with my life. Beyond trust, I would also put startup experience beyond specific skills. Someone that has rode the roller coaster before is less likely to barf in your lap.

Biggest Mistake — Not taking bigger risks earlier.
Maybe because in hindsight all risks are clear, but I always find myself regretting not taking bigger risks earlier. For example, open sourcing the Socialtext code was something we waited on until the company had strong footing. Partially because we thought there would be cannibalization, partially because we were understaffed to really engage with the community. But I believe if we bought this bullet earlier in the history of the company we would be reaping better rewards. As a planning exercise, now I always try to ask two questions: “How could we take more risk?” and “What risk can we take that creates the greatest amount of options?” I find there is always a way to do a little more, in particular by getting past instinct to control prevalent in so many entrepreneurs.

Chris Pirillo

Geek, Internet Entrepreneur, Hardware Addict, Software Junkie, Book Author, Once TV Show Host, Technology Enthusiast, Shameless Self-Promoter, Tech Conference Coordinator, Early Adopter, Idea Evangelist, Tech Support Blogger, Bootstrapper, Media Personality, Technology Consultant, Thicker Quicker Picker Upper. You can call Chris at 1.888.PIRILLO to leave questions for him to answer on his podcast. Chris blogs at Chris.Pirillo.Com

Bad Decision: Dealing with salespeople who didn’t have a clue what they were selling. A good salesperson (and there are apparently only two on the planet) will cost you a lot, but a bad salesperson will cost you even more. I loved them dearly, but love doesn’t pay the bills. Moral of the story: be cautious when it comes to yielding control of your business model.

Good Decision: Finding someone to help me facilitate various functions (keeping us on a publishing schedule, wrangling our content creators, etc.). Robert Glen Fogarty has been a godsend, and I wish I had found him years earlier. He’s talented beyond words, and has successfully alleviated my daily stress. Moral of the story: don’t be afraid to yield control to the right people.

Thanks again to all the entrepreneurs who responded, and look for the next set of entrepreneurs soon.

32 Responses to “Best and Worst Decisions (Part 1)”

1. George Lee's blog Says:
   February 21st, 2007 at 2:12 am e
   
   創業者最棒和最爛的決策
   # Passion. It’s all that matters.
   # Partners, the one who you stand with.
   # Hiring decisions.
   # Investor relationships.
2. iface thoughts » Blog Archive » Mark Fletcher Startupping Says:
   February 21st, 2007 at 3:12 am e
   
   […] with blogs - so it is going to offer a complete bouquet. The blog already has an excellent post on lessons learned from the the best and worst decisions contributed by stalwarts like John Battelle, Dick Costolo, Paul Graham, Ross Mayfield and Chris […]
3. Search Engines WEB Says:
   February 21st, 2007 at 3:33 am e
   
   None of those Entrepreneurs addressed the two really important issues that appear to have been the downfall of most business - internet or brick and mortar:
   –> How to change and adapt to the changing times (society once need your service - but do they still need it as much as they used to in its present form)
   –> Egos and Politics (what’s in it for me?) that may curtail many good ideas with good potential from being explored
4. Search Engines WEB Says:
   February 21st, 2007 at 3:33 am e
   
   _______________________________________
   None of those Entrepreneurs addressed the two really important issues that appear to have been the downfall of most business - internet or brick and mortar:
   –> How to change and adapt to the changing times (society once need your service - but do they still need it as much as they used to in its present form)
   –> Egos and Politics (what’s in it for me?) that may curtail many good ideas with good potential from being explored
5. Tiggr’s blog » Blog Archive » The Entrepeneur Says:
   February 21st, 2007 at 3:33 am e
   
   […] A beautiful question by Ross Mayfield: “How could we take more risk?â€� […]
6. Suso Says:
   February 21st, 2007 at 4:06 am e
   
   Ross Battelle: Some folks are really good at starting companies to make money, but I’m terrible at it. I suspect most entrepreneurs are like me.
   Don’t assume that other people are like you. Very few actually are. I’ve made the mistake several times in the past of thinking that other people where like me, know what I know and are interested in what I am interested in. That is just not the case and will lead to misguided business decisions.
7. john Says:
   February 21st, 2007 at 5:12 am e
   
   Great post to start off with Mark, I’m looking forward to reading more like this in the months ahead!
8. David Cornelson Says:
   February 21st, 2007 at 7:24 am e
   
   I’m embarking on this trip for the first time although I have had a small business before. The things I think are critical are the boring things like having a very good attorney with an intellectual property background, having an accounting firm that understands your business and adds value, and then passion. I’ve had hundreds of ideas for companies and have done research on many of them, but 99% of them all died at the idea stage. I would write up the idea, share it with a few people, get excited, and then it would collect dust. If you’re going to start a business, you have to be persistent and passionate about making it happen. If that passion subsides, that means you don’t believe in the idea (or yourself). Eiter one will kill the business before it starts.
   I now have a business plan that I believe in. I’ve done things very methodically.
   So in no particular order…
   1. Legal - to protect your investment
   2. Accounting - to make sure everyone gets paid
   3. Advisors - to keep your plan on track
   4. Plan - to clarify the vision
   5. People - to execute the vision
   6. Passion - to lead
9. I, Pandora » For All You Entrepreneurs Says:
   February 21st, 2007 at 7:45 am e
   
   […] on the best and worst things you can do when starting up your own company. From those who’ve already made the mistakes and had the lucky breaks. The ideas which stuck […]
10. Gerald Buckley Says:
    February 21st, 2007 at 8:10 am e
    
    First, Mr. Battelle - thanks for being so accessible. Keeps me engaged.
    Second, Mr. Mayfield - thanks for the not-for-profit pricing. Despite the fact our association leadership/membership doesn’t quite “get it” yet… I appreciate the nod to the NFPs. Keep it up. We’ll break through.
    Third, Mr. Pirillo - entrepreneur in the making here. I’ll come out of the woodwork once the prototype is fully cooked. False starts and intellectual property are potential deal killers.
    So, to that I’d ask the panel… to what degree did/do you folks find you pay attention to competitors I.P. and navigating around potential legal action? How important are lawyers in the “Startupping” phase (specifically the I.P variety).
11. Startupping: Lessons Learned « 21st Century Digital Boy Says:
    February 21st, 2007 at 8:18 am e
    
    […] Lessons Learned From http://www.startupping.com/2007/02/20/best-and-worst-decisions-part-1/ I’ve made loads of mistakes so I’ll try to think of one with a good lesson for startups - one […]
12. arghyle » Blog Archive » Worth Reading Says:
    February 21st, 2007 at 9:46 am e
    
    […] Best and Worst Startup Decisions feature John Battelle, Paul Graham, and […]
13. local shopper gorodn Says:
    February 21st, 2007 at 10:28 am e
    
    it is about passion and i think that is very important. the minute you start thinking about dollar signs then your clients just become objects and you don’t provide them the experience that they deserve.
14. Doug Camplejohn Says:
    February 21st, 2007 at 10:59 am e
    
    David,
    Passion, persistence and people are what’s important to get an idea off the ground - legal and accounting are of minor importance in the beginning. Just incorporate online, set up a bank account, and file a few provisional patents at $100/pop to reserve your invention date and your off. You can get templates of NDAs, contractor agreements, etc. here, so you only need really to retain counsel once you’re starting to talk about financing or partnerships (Gunderson Dettmer is my favorite firm), and only need to implement real accounting systems once you’ve got enough accounts payable or receivable to matter (QuickBooks online works great).
    Doug
15. nmw Says:
    February 21st, 2007 at 4:54 pm e
    
    What is a Internet entrepreneur? Is it more than a “user” (i.e., a “profitable user”)? If so, how much more? Or how so?
    Great Q&A — seems very un-nonsensical. (does firefox need a better spell-checker?)
    nmw
16. Umer Mansoor Says:
    February 21st, 2007 at 6:17 pm e
    
    LOL
    never mind
17. monks Says:
    February 21st, 2007 at 6:52 pm e
    
    I love the first line I read:
    Either keep control, or don’t act like you have it.
18. Bob Ellsworth Says:
    February 21st, 2007 at 8:09 pm e
    
    While all of these points are great once you are up and running, have some level of funding, etc., they don’t really help you with the hardest part - making the leap before anyone will give you money - or bootstrapping.
    I have found two really important truisms for successful bootstrapping:
    1. Live frugally. Your personal cash flow has a better chance of sinking your new company than anything else. Every large mortgage, every car payment, every binge at Nordstroms means you need more money just to pay the bills every month. If you know you want to make the jump, set yourself up by keeping a check on your expenses. Do you really need the newest IPOD or a new car? Can you get a smaller, cheaper house?
    2. Get as much done while you work for someone else. If you are good at what you do, you know how to take short cuts and can get more done while others are goofing off. In my last job, I could get everything I needed done for the day in 3-4 hours. That gave me 4 hours of work time, plus another 4 hours after or before work to get the real work done. You won’t advance in the company since you are getting by (like everyone else), but your hope is to get out eventually anyway. Never underestimate the value of paid insurance, vacation, infrastructure on the boss’ dime. Big caveat - cover your tracks, if you make it big and the company can prove you were doing it on their time - big trouble. I was working out of my house and my boss was on the other side of the country and I used my own equipment for everything I did on my venture.
    Sales people have the best situation, especially if they can set up meetings with clients for their day job and other meetings for their night job on the company’s travel expense.
19. Dai Ichi Says:
    February 21st, 2007 at 8:46 pm e
    
    During my life, I’ve started three companies of varying successes. In doing so, I formed my Laws of Business (in the spirit of Asimov’s Laws of Robotics). They work for me.
    (1) The business’s purpose is to make a profit
    (2) The customers/investors must be kept happy unless it conflicts with the first law
    (3) The employees must be kept happy unless it conflicts with the first two laws
    Don’t read too much into it. For example, “making a profit” is different than “making the most profit” and certainly is not the same as “making a profit NOW.” But an entrepreneur, I think, can’t go wrong if he prioritizes his business by these “Laws.”
20. IDG Blog » Blog Archive » Leestip: internet entrepeneurs Says:
    February 22nd, 2007 at 2:22 am e
    
    […] mij niet alleen betrekking hebben op het opstarten van internetbedrijven. Zeker een aanrader om te lezen en ik kan niet wachten tot hij meer antwoorden post. Pick one constituency and stick to it. Very […]
21. China Law Blog Says:
    February 22nd, 2007 at 6:23 am e
    
    Great idea for a blog!
22. Startupping - A Community for Entrepreneurs Says:
    February 22nd, 2007 at 9:03 am e
    
    […] Best and Worst Decisions (Part 1) […]
23. Matt Hardin Says:
    February 22nd, 2007 at 12:17 pm e
    
    Interesting reading, and an excellent subject for a blog. My own experience echoes some of the comments from others:
    In co-founding Symas, the best decision I made was to stick with it. That might sound simple, but persistence seems to be a key differentiator for anyone wanting to be a successful entrepreneur. It’s easy to start a company. It’s very, very difficult to keep at it through hard times, particularly when you’re self-funded. The one thing that kept me going was a determination to own a successful technology business. Some of our co-founders fell by the wayside, but those of us with the determination to stick it out are beginning to enjoy the fruits of our hard work.
    The other good decision I made was to listen carefully to our prospective customers. We started in 1999 with a grand vision- what is now called Provisioning and Identity Management- and realized that the folks to whom we were speaking were nowhere near ready for it. Their feedback did frame a common need, though, and Symas is meeting that need.
24. Luca Mondini » Blog Archive » Links 22.02.2007 Says:
    February 22nd, 2007 at 12:25 pm e
    
    […] blog, wiki e forum su tutti gli aspetti legati a questa forma di business. Da leggere i primi due post sulle migliori e peggiori intenzioni prese da persone del calibro di John Battelle, Paul […]
25. Business for enjoyment's sake Says:
    February 23rd, 2007 at 5:11 am e
    
    Best and worst decisions when starting a company
    Some entrepreneurs share the best and worst decisions they made when they started theis businesses. No surprise that just about everyone talks about getting good people on board and the right sort of people for your culture. But of course
26. Startupping - A Community for Entrepreneurs Says:
    February 23rd, 2007 at 10:56 am e
    
    […] there are some great comments to the Best And Worst Decisions (Part 1) blog post, including posts from several […]
27. Jon Atkinson Dot Org » Links for 23/02 Says:
    February 23rd, 2007 at 12:15 pm e
    
    […] Startupping - A Community for Entrepreneurs […]
28. Taking more Risk? Says:
    February 25th, 2007 at 2:43 pm e
    
    […] inspiration to for your own startup check out Startupping. They have an interesting post on the best and worst decisions. There are a lot of great stories and information for people who want to make money online. There […]
29. Rue Plumet » Interesting Sites For This Week Says:
    February 25th, 2007 at 6:08 pm e
    
    […] Best decisions and worst mistakes at Startupping Tagged as: business interesting […]
30. Meriblog: Meri Williams’ Weblog » links for 2007-02-26 Says:
    February 26th, 2007 at 1:23 pm e
    
    […] Startupping - A Community for Entrepreneurs Really interesting interview, asking start-up founders what their best and worst decisions were. (tags: interesting startups entrepeneurship business work industry leadership) […]
31. Best and Worst Decisions (via Startupping) at Starting Up by Rahul Pathak Says:
    February 27th, 2007 at 12:43 am e
    
    […] Great post on Startupping in which entrepreneurs are asked about their best and worst decisions. Some that stayed with me: Ross Mayfield - Biggest Mistake — Not taking bigger risks earlier. Maybe because in hindsight all risks are clear, but I always find myself regretting not taking bigger risks earlier. For example, open sourcing the Socialtext code was something we waited on until the company had strong footing. Partially because we thought there would be cannibalization, partially because we were understaffed to really engage with the community. But I believe if we bought this bullet earlier in the history of the company we would be reaping better rewards. As a planning exercise, now I always try to ask two questions: “How could we take more risk?â€� and “What risk can we take that creates the greatest amount of options?â€� I find there is always a way to do a little more, in particular by getting past instinct to control prevalent in so many entrepreneurs. […]
32. Startupping - A Community for Entrepreneurs Says:
    February 28th, 2007 at 9:39 am e
    
    […] Here are responses from Doug Camplejohn, Mark Pincus and Boris Veldhuijzen van Zanten (also see Part 1, Part […]

__________________
Mark

No matter what is the size of your business, a pre employment background check is a necessary hiring procedure if you want to avoid costly hiring mistakes and lawsuits. Remember those days when a simple reference check and some phone calls were enough to screen new employees? Well, those days are over, and we are in the era of pre employment background check practices. Because of security concerns, workplace violence and corporate scandals, the pre employment background check is gaining more and more ground.

The American with Disabilities Act (ADA). Under ADA, employers are prohibited to use medical or disability data in their pre employment background check. Simply put, you cannot inquire during the interview, hiring or pre employment background check process about a person’s disabilities.

Other legal provisions. Different states have different legal frameworks, such as the Investigative Consumer Reporting Agencies Act which exists in California. Make sure you check any regulations which may apply to your pre employment background check in your state, before going a little too deep into the background of a new hire. Consult your legal counsel and your local regulators to avoid stepping on a potential legal landmine during the pre employment background search.