September 2009 Archives

yeh, don't bet on your own money. get funded. screw someone else #TEDxEdges #OutSystems

This twit appeared on the web as I was giving my closing remarks at TEDxEdges. I believe it got sparked by my fundamental rule of thumb that you always need something to fall back to if your startup fails. Startup bankruptcy is always a possibility and nothing to be a shame of. Folding in a company that is going nowhere is a sign of a truly senior entrepreneur.

Colorful language aside, the "screw someone else" deserves exploration from a content point of view because I think it reflects a misconception a lot of people have about venture funding.

An absolute rule for me is that you should not invest everything you have. You should never issue a second mortgage on your house, bet your kids' education money or your parents retirement savings. If your startup fails you might be left with nothing. You have no last safety net. You may fall so low that you never come back again. This is, of course, stupid.

This is why funding a risky startup with a bank loan is an absolute no. A bank will require some form of collateral from you, as a person. If you can't afford to loose that collateral than if the company fails the bank will collect and leave you with nothing.

So, what are the alternatives? Well your extra money is okay. I funded OutSystems initially with 50,000 euros from my own savings. But I planned always on loosing that money. I planned that if that happened my basic survival needs would not be affected.

The only feasible way of funding a company with real money, short of asking your very rich relatives for it, is venture capital. Venture capital is exactly that. Capital that is assumed to go on an adVenture. VCs have a structured way of working where they hedge their risk by spreading their investments among tens of companies assuming some will fold. They get hefty rewards from the ones that succeed which compensate for the others that fail. 

Now, why is this "screwing someone else?"

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One of the strengths of the US lies in the self organizing nature of its citizens. Football (soccer) clubs that host thousands of kids in suburban towns are run in a self organized hive of activity, where parents act as investors, managers, coaches and referees. Voluntary work is highly recognized by US employers who rightly believe that people that have run workshops, helped maintain a highway or run civic groups have accumulated useful skills and experience that make them better employees. 


Portuguese are not used to voluntary work but that is changing. A remarkable example of a great non-profit initiative is TEDxEdges the result of the extraordinary work of Rui Ribeiro, André Marquet and Artur Arsénio. The event on Friday 18 Sep 2009, had a fresh quality to it. Rui, André and Artur have assembled an impressive lineup of speakers. Speakers were very sensitive to the tight schedule, a novelty in a country that is still discovering a new respect for being on time. The presentations were interesting and lively and some folks actually took a vacation day off to be there. I came out of there truly impressed and more energized to help and contribute.

Rui, André, Artur: thank you.

A culture of inclusion

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I remember Cisco doing a pre-M&A due diligence on a former company I worked for. One of their must-have checklist items was the "size of the CEO office". They had validated over, I am sure, a lot of trial and error that there was a negative correlation between the size of the CEO office and the culture of the company. Our CEO at the time had a fairly large office so that might be the reason why the process did not move forward.

This checklist item makes way more sense than what you think. A big office shields you from the team and conveys the notion that you are very important without you having had to win that importance with actions and leadership. A big office removes you from where the action is in a fast moving, tech company and makes you a little bit less in control. It shields you from your customers, your R&D, your field teams. When you are managing knowledge workers, people that are full of innovative ideas and energy you want to be smack in the middle of them. You want them to be your collaborators, not your employees. You want to be privileged enough so that they include you in their impromptu brainstorms.

And I have taken this principle to the absolute extreme. I have no office. I have a desk in an open space like everyone else. There are no offices at OutSystems which sometimes is a major drag for people to concentrate working, but which does wonders in terms of team building. In team building events like the now traditional OutSystems Summer Event, I try to not be involved in the organization and act as any other collaborator. The inclusion of management within the rest of the collaborators breaks boundaries of communication and enables trusted networks to be built among the multiple country teams.

In the video below you can see a bunch of OutSystems executives and managers drinking Caipirinhas, singing, playing volleyball, and shaking their helmets to the well intentioned, sometimes slightly misguided, sound of the band. See if you can find them.


By Paulo Rosado

Besides my daily job as CEO of OutSystems , I occasionally help entrepreneurs grow their businesses and avoid obvious mistakes. I have also tricked some folks in listening to my opinions on Management, High Tech, IT and life in general.
twitter.com/paulorosado

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