Tag: Entrepreneurship

The Investment and Startup Community in Peru

Many travelers visit Peru to experience Machu Picchu, and though incredible, there is much more to this country than its wonder of the world. Known for its gastronomic sector, Peru has some of the most diverse (and delicious) food in the world. Through its long history of eating seafood, mixed with Spanish, Japanese and Chinese immigration, it’s always a pleasure to go to Peru, even if it’s only to eat, and entrepreneurial Peruvians have taken advantage.

Peru has diverse terrain, from the steeply sloping Andes and dense jungles to the cerulean coastline. About one-third of Peruvian residents live near or close to the ocean. The population is just shy of 32 million, surpassing Chile but falling below Colombia. Monthly wages are on the upswing at 1680.67 Peruvian Sol (roughly US$519), with a minimum wage of 850 Peruvian Sol.

The capital city, Lima, is experiencing rapid growth and the government is allocating investment towards more infrastructure and improving public transportation. Foreign investors are paying close attention to the new Cuzco airport which offers easier access to Machu Picchu, though has caught some local scrutiny. Peru offers multiple visas for foreigners interested in the business sector, but these visas can come with an unwanted amount of red tape. (more…)

What Entrepreneurship Is Really Like

I’m sick and tired of many people’s mistaken impression of what entrepreneurship actually is. It all started a few years ago with the Facebook movie and now we have a big problem. Too many people have the wrong idea. The douchebaggery quotient in the “entrepreneurial ecosystem” is so high a few non entrepreneur friends have told me that they think there’s something innate about startups that attracts massive douchebaggery. That used to be the domain of bankers. Now its startups. So I’m here to set the record straight.

Entrepreneurship is not dressing in whatever clothes you want, coming in to work at whatever hour you’d like to work on your social app that’s going to be the new Twitter for Facebook for Instagram and if you could only get 5% of the market, you’ll be able to sell for $1.1b too! It’s not working on an idea in hopes that you can sell it one year later. It’s not easy.

It’s not getting out of bed at 12pm, going to networking events and drinking as much free crappy beer and eating lukewarm mediocre pizza and telling people you’re the CEO of the company when you’re the only one “working” on your “idea.” It’s not applying to countless incubators, contests and pitch competitions. It’s not talking about your idea that’s been in stealth mode for six months and won’t leave for another year. If ever. It’s not working on a problem that nobody has.

Real entrepreneurship solves a problem someone has…and they’ll pay you to solve it for them. Real entrepreneurship is hard. It’s a struggle. It’s like getting up each morning and walking into the kitchen and putting your hand on the hot burner. Ten minutes later, someone walks in an starts smashing your hand with a frying pan. All the while, they’re laughing at you. “You think you’re going to succeed with that product? You think you can execute that? You think you can beat the incumbent company with 1000x more employees than you?” And you just have to take it with a smile and go about your day proving the critics wrong.

But at least you get to wear the clothes you want.

Obviously there’s some days where you get to take your hand off the burner and the laughing and the smashing stop. But then you’re going to an office, convincing people to pay you for your product and shipping product. Iterating. Solving a real problem. And then you have to deal with a whole new set of laughing, smashing hurdles.

So if you’re getting into entrepreneurship to wear comfy clothes, drink free beer and eat crappy pizza at meetups and pretend you’re the founder of a $1b company when you just have an idea and think it’s worth more than a ham sandwich, you’re probably in the wrong business. And you just might be a #starthole.

Your Internet Business Probably Isn’t A Startup

We have a big problem: people think that just because their company uses technology or makes sales online that it makes their business a startup. They couldn’t be more wrong. 95% of online or technology business are small businesses. They’re lifestyle business. And there’s nothing wrong with that.

Unfortunately a cadre of investors, successful (and wannabe) tech startup entrepreneurs, Hollywood and the media have bastardized the words entrepreneur and lifestyle business. Entrepreneur now only refers to people working to become the next Facebook and lifestyle business is used as a pejorative by investors who know they can’t get their desired 10-50x returns. People dismissively say, “ Why bother with that, it’s just a lifestyle business?” And entrepreneurs start to think that if they want to start a business, they need to find a way to stretch their small business idea into the box of tech startups.

I see entrepreneurs make this mistake every week. They religiously believe that their small business that happens to use the Internet needs to raise $1m, grow rapidly and get acquired by a tech giant. In reality, they have a small business that could generate a decent profit each year. They could support themselves nicely, but they cling to the idea that they’re a startup. No! They’re a traditional small business that happens to use the Internet.

An entrepreneur is not synonymous with Internet tech startup entrepreneur. Entrepreneurs come in all shapes and sizes: everyone from Mark Zuckerburg to the guy selling tshirts on his college campus. It doesn’t mean taking big investments from well know VCs. It’s not rapid growth to try to take over the world. Being an entrepreneur is creating value and being responsible for the gains and losses.

We got into this mess for two reasons. First, entrepreneurs have been beatified by the press, Hollywood (The Social Network, Shark Tank) and politicians who have fostered a “job creating culture” around entrepreneurs who are now these superhuman people who do incredible things. Now when people think of entrepreneurs, they think of tech startups like Facebook, Twitter and Instagram: companies that took massive investment, grew rapidly and changed the world.

Second, VCs, angels and tech entrepreneurs have pejoratively demonized small business as a “lifestyle business” which makes these potential entrepreneurs feel unworthy unless they’re starting startups. Successful tech entrepreneurs and investors say things like “its hard enough to start a small business, why not aim big?” At best, it’s a confirmation bias because those are the companies that VCs, angles and serial tech entrepreneurs have seen succeed. At worst, it’s because VCs and angels have no interest in small businesses and lifestyle businesses because they’ll never generate the 10-50x returns that these investors need to make money on their funds.

The confluence of these trends means that entrepreneurs who have great small business ideas think that they need to fit into the tech startup box. Instead of growing like a small business, they try to raise money, get rapid growth and delude themselves that someone like Facebook will buy them for millions of dollars. They end up beating their heads against the wall and failing because they’re wasting their time on things a small business has no business doing and wasting their precious money on things a small business shouldn’t ever focus on.

I’ve been advising a small business that thinks it’s a startup over the past two years. They have a great idea, passion and over six figures in revenue each year. But among many other problems, they’ve always thought of themselves as a startup that should have massive growth. They’ve dreamed of an acquisition by a tech giant, raising money and taking out loans trying to achieve this massive growth. It’s been obvious since day one to everyone outside of the founding team that they’re in fact a small business, not a startup. A potentially very profitable small business, but a small business nonetheless.

But the founders won’t give up the startup dream. And they will fail and go bankrupt despite having a small business that should be generating a profit of $250,000 this year because of their inability to admit reality.

This is an extreme, but not isolated incident. I see it every week. As entrepreneurs, we need to stop perpetuating the myth that every business is a startup. We should be encouraging small business creation that happens to use the Internet. We should create more resources for these entrepreneurs to learn about how to grow. And these entrepreneurs should be accepted as the real entrepreneurs that they are. They need to know that they’re not the same as Facebook. They’re closer to a corner store. And that’s just fine.

The US needs small business. They create the vast majority of new jobs each year. And sustain millions of families each year. Internet small businesses are one of the most promising paths to success in our economy. But we need to get this problem under control.

To reiterate: just because your company uses technology or makes sales over the Internet does not make it a startup. There’s nothing wrong with that. Rock it. Embrace it. Earn your money. Live a great life. And stop trying to be something you’re not.

My Entrepreneurial Journey

Note: I wrote this post back in May 2010 for a guest post on a large tech blog, but it never got used.  I found it today while going through my inbox and decided it was too good to not post.  This is my entrepreneurial journey from 2004 until May 2010.

As I made my way from Milwaukee, WI to Madison, WI for my freshman year of college in fall 2004, I had no idea what I wanted to do with my life.  I’d know for awhile that I liked working for myself: I’d been a soccer referee since I was 12, which allowed me to make my own hours and make more money than any 12 year old should be able to earn.  I’d been fairly bored with high school because we learned boring theories instead of practical ideas that would help me later in life.  My biggest take away from high school was “more practice, less theory.”

All of these thoughts took a backseat in my 18 year old mind when I received a letter from the University of Wisconsin notifying me that I’d lost the student football ticket lottery.  I was devastated.

After moving in, I’d been thinking about how to find tickets, but I didn’t have to look very far.  One of my friends invited me to a party my first night at college.  I was about ready to call it a night and walk home when I heard a guy screaming into his cell phone.  He hung up and was so mad that he slammed his phone on the ground, breaking it.  He got even angrier because he said he didn’t have the money to get a new cell phone.

Something in my brain just clicked and I said, “hey, do you have football tickets?”  He looked at me really strangely, but said he did.  I responded, “well I don’t have them, but I’d buy you a new phone for your tickets.”  I wasn’t really expecting anything, other than maybe some choice words, but to my surprise, he got excited.   The next day, I tracked the broken cell phone guy down via a friend in the frat, bought him the money for the phone and made the exchange.

I was pretty excited.  It only took me one night to get my football tickets.  All was right in the world.  I told my story to some of my new friends and quickly realized that there were a ton of kids who were in my same predicament.  I agreed to help them find tickets.  It pays to be in the right place at the right time.

Enter Exchangehut.  I first remember seeing flyers and spray paint stencils for the site a week into my freshman year.  I checked it out, signed up and was user number 1117.  Exchangehut was a ticket exchange that worked like the stock market.  Buyers could input a bid price and sellers could put in an ask price, creating the market.  When the prices matched up, a sale happened and both parties were contacted.  I used the site to help 4-5 friends buy tickets and quickly saw how useful the site was.

As the year went on, I became one of the more active users, I realized that the site had limitations and thought about creating a competitor.  I wrote up a simple business plan, but got discouraged because I was having trouble finding a programmer to write the new site.  I put the project on the back burner and went on with my summer.

I was in the right place at the right time again a month later.  The owner of Exchangehut was selling the site via an auction because he was graduating.  I quickly shot an email back, did my research and put in a bid.  I excitedly talked with my friends about how I was buying a business and to my surprise, one of my best friends from high school said he was too.  I said “what business” and we both said “exchangehut” at the same time.  He was a computer engineering major and we decided to merge our bids.  A month later, we were the proud owners of a 2000 person tickets and textbooks website at age 19.

We ran the site until 2008, growing the site to 150k users across 8 college campuses.  We learned a ton and needless to say, I was hooked.  I loved coming up with ideas for the site, promoting the brand and working my own hours.  I was making more money each week working on average 8 hours per week than my roommates were making bartending and waiting tables full time.  I loved the freedom that came with being able to work from anywhere.  I got to travel places and meet interesting, creative people.  I enjoyed meeting people who though “how can we fix a problem” not “why can’t we.” We sold the business to our ad network in summer 2008, but I knew I was going to start a new business.  This isn’t to say it was easy.  We put in long hours, answered angry customer emails and calls and continued to go to class.

Like many entrepreneurs I know, I keep a business idea list.  I had over 200 ideas on my list and after selling, worked on cutting them down to 10 that I thought were promising and would be fun to work on.  All that stopped when three professors I had gotten to know independently told me that I had to meet a student named Jesse Davis.  At the same time, two of my friends said that Jesse was working on something cool and needed a partner.

I met Jesse in one of the libraries on campus and he pitched me his idea.  Jesse’s pitch went something like this:

“I just read Thomas Friedman’s The World is Flat and couldn’t get through it when I got to US Marine Justin Ellsworth’s story.  He was killed in action in Iraq and his family wanted access to his Yahoo! email account.  Yahoo said no.

After a long court battle, a judge ordered Yahoo! to turn over the contents of his email accounts to his parents.   It shouldn’t take months to gain access to a deceased person’s email account.  Also, what if I don’t want my parents looking into my Facebook account or other sites I might have? Friedman ends the passage by saying “someone sort this out.”  Let’s create a system for people to store their last wishes for their digital assets, which are any online account or file on their computer, and let’s allow them to input their passwords so that their survivors have access.

I immediately thought back to ExchangeHut.  In 2005, we hired a programmer to help us make improvements with the site and at one point, I realized that our programmer has all of the usernames and passwords to the server, database, credit card processing, affiliate programs and everything else that was necessary to run the site.   Like programmers like to do, he used a random password generator, so there would be no way we’d be able to guess his passwords if he were to get hit by the proverbial bus.  We ended up having our programmer write down every password on a piece of paper and I stored it in our safe deposit box, just in case.  Jesse’s idea would have solved this problem.

I was looking for a project, Jesse was looking for a cofounder with some experience and we hit it off.  Two months later, we founded Entrustet.

I was sold on Entrustet because we had a chance to create a solution a real life problem.  The death of a loved one is an incredibly stressful time and we thought we could help give people peace of mind that their digital assets would be dealt with according to their wishes, and that survivors wouldn’t have the burden of having to guess what the deceased person wanted done with their online accounts.

We’ve been working on Entrustet since November of 2008 and launched in March 2010.  In our first year, we spent under $20k starting the business.  We were able to spend so little because we hustled and were located in Madison.  We’ve stayed in Madison, even though we’ve had opportunities to move to Silicon Valley, New York, Boston or Austin.  Being located in the Midwest has given us some advantages that are often overlooked by people on the coasts.

It’s incredibly cheap to live and work in Madison.  Our office is located across the street from the state capital and we pay $200 per month.  I pay $400 per month to live in a nice apartment four blocks from the office.  On the coasts, we’d have had to pay 5-10x more.  While the talent pool is not as deep, we’ve found talented employees who cost a fraction of what they would on the coasts.

Madison is small enough that we’re able to get in contact with anyone we want to relatively easily and Madison has groups like MERLIN Mentors that help new startups by pairing founders with successful entrepreneurs who server as in informal board of advisers. Everyone in our company walks to work and we’ve become active in the startup community by starting Capital Entrepreneurs, a founders group with over 60 tech companies in the Madison area.

I’m a huge believer is pursing your passion and starting starups has allowed me to pursue mine.