The world isn’t run on ideas alone. Having a world-changing idea is great, but many big ideas are essentially worthless without proper execution. During one evening of the hackNY summer series, the 2012 Fellows got down to business with Chris Dixon. Chris is the co-founder of Siteadvisor (acquired by McAfee) and Hunch (acquired by eBay), as well as an angel investor. In this candid discussion about the business side of tech startups, Chris talked about the successes and failures he’s seen in the startup scene and gave us many tips for turning our dream business ideas into a reality.
Having a good co-founder is integral to the success of many startups, and co-founder issues are what Chris sees as one of the most common reasons for failure. If there’s a business co-founder and a technical co-founder, one thing that’s critical to realize is that the work will not always divide evenly between the two. When the product is being built, the work might break down as much as 80/20 between the technical and the business co-founder. Later, when the product is usable and partnerships need to be formed, the ball rolls into the business co-founder’s court. This uneven divide of work is part of the natural cycle in startups, and co-founders who don’t understand this often experience disagreements when it seems like only one of them is doing most of the work at a given time.
When you’re just getting started, some people will tell you to keep your idea a secret to minimize the chances of someone stealing it. Chris takes the complete opposite approach. He believes that the best thing you can do is tell everyone you know about your idea. Not only does it spread awareness for your business, but it also allows others to pick apart your idea and find holes before you invest years of your life into it. Very few people are going to drop everything to compete with you, so someone stealing your entire business isn’t nearly as likely as some sources may lead you to believe.
As an entrepreneur, angel investor and former venture capitalist, Chris has unique insight into the process of raising money for a startup. He warns us that VCs use a lot of tricks against entrepreneurs. While they may always seem to be helping you, their end goal is to make as much money for their firm as possible. It’s important to always be aware of this financial motivation when looking out for the best interest of your startup. VCs talk to each other, so you want them to feel like they’re all competing to give you money. It’s social engineering, and there’s an art to it. Unfortunately, 90% of the lingo isn’t written down and there very few great books and blogs about the process. Nothing beats talking face-to-face with entrepreneurs who have done it before.
It’s very easy to get screwed by any number of people along the way, so it’s important to have a good lawyer right from the get-go. Some law firms that specialize in startups will defer their fees until you raise money. If they see that you’re serious about what you’re doing, they’ll invest their time to help you start your business properly. Chris says that Mark Zuckerberg could have saved himself a ton of trouble if he had gotten a good lawyer from the very beginning and deferred the fees.
Starting a company is exhausting, but if you’re passionate about your idea it can be one of the most rewarding experiences of your life. Chris Dixon has been through the entire process twice, and he regrets nothing. For those of us hackers who are more technically oriented, this discussion with Chris was a welcome insight into the business side of tech startups.