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Wanna Be a Tech Star?

Do you need to learn to program? Or just partner with those who do? At The Angel Fund’s Tech Stars Live event, held at The Newman Library at Baruch College, five community internet stars debated on building skills, execution, networking, and venture capitalists. Professor Edward Rogoff, Chairman of Baruch College’s Business Management Division, posed the questions.

 

Edward Rogoff: What did you do prior to starting a business to help you prepare? What should young people be doing if their ambition is to start a business, particularly something that is tech-based?

Jojo: Learn how to program.

Charlie: I agree, learn how to program. There are so many free ways to learn how to do program, like Codecademy.com, and other free ways to learn Python, or even basic HTML and CSS. If you know how to program, even basically, you will have a leg up on the job.

Al:  I think internships and networking is a good way to prepare. I think converse to what Jojo and Charlie said—if you have a good product and something that people want, then you shouldn’t have to do the coding, but you should find the investors who will propel you on so you can focus on building your business. In my business, if I had spent my time sitting by a computer coding and programming, I wouldn’t have made any real money. Take yourself out of the picture and ask,  ‘How do I bring this to fruition?’ But—to answer the question—I believe in internships. We try to structure our internship program so our interns learn what they need to start a business, from the bottom up.  You should be looking for that. Ask, “How can I enter a situation where, in a year or two, I can learn how to do this by myself?”

Jojo: I have to disagree with my awesome neighbor Al. I think that e-commerce is different than the tech world in general, but the one thing I’ve learned, and I’m actually spending a ton of money to take a programming class right now 2 days a week, 3 hours a day, is that even if you’re on the business end of things, you need to know everything that’s going on. At the same time, you don’t want to always have to rely on other people. If you want something built, you go and you built it, you get that MVP (minimum viable product) up so you can go and show it to anybody.

One month ago we had an event at the Amory; there were 3,000 people there and 175 startups. You can to go any startup and every single one is hiring an engineer. If you know how to program, you can get any internship, you can earn a good salary, learn from the top, and end up building things on your own. Most CEO’s of startups either know how or have a good understanding of how to program. Everyone has ideas. It’s who executes it the right way.

The Winklevosses had an idea, but Zuckerberg was the one who was able to execute it. And execution in the tech world is really what’s valuable.

Charlie: And even if you learn code, it doesn’t mean you will end up in a code-based position. Right now, I am hiring a marketing communications person, but one of the requirements is that they be proficient in Python. Not because they’ll be programming, but because they need to talk to developers and understand what they’re talking about.

Ari:I think the moral of the story is: if you have nothing that you are doing now, it’s a good idea to learn how to code. But if you do have an idea, don’t wait and take a year to learn how to program.  We definitely would have made less mistakes if we understood programming ourselves, but now I still don’t know how to program. We found someone who could build what we wanted. Surround yourself with experts and it’s almost as good.

Rogoff: Did any of you start your businesses with a clear idea of what your business was and what your financial results would be? Or are all these experimentations?

Al: When I started in 2006, I looked at different projections and business plans of people who had tried to start this business in the late 1990s. I laughed because their first projections were about $10 million of revenue in the first year. I learned they failed because they set extremely unrealistic expectations. I knew what my expenses were, and in the first year, I tried to cover half of them, with a 3-year projection where I broke even in the 3rd year. I had gone to business panels and heard people in the same industry speak, and they had said that it had taken them 2 to 5 years to break even, so I knew what to expect and used that trajectory for myself.

Ari: Most people who launch a startup don’t call them financial projections. We call it financial guessing. Most startups start off by bootstrapping, and then once you have it together, you approach venture capitalists. You’re not going to them with financials. Most importantly, you are pitching an idea and a team—whether it’s yourself or one or two more core people. The Instagram team didn’t make any money for years—it wasn’t about making money right away—and now they made it.

Jojo: It depends on what your business does. For e-commerce, measuring financial projections really does matter. For a site like ours, we just have to get users. We don’t think, “We have to make 3 million dollars this year.” We think, “We have to acquire 20 million users this year,” then we’re worth “X” amount of money. Right now, we’re not making any money, we’re just spending money. Once we acquire 20 million users, then we’re worth something. Once you have the users, you figure out how to make money.

Jon: Don’t speculate how you’re going to make money. Just keep trying different business models and see what hits. On our job site, once we had the users, we then started trying to figure out how the money was going to come. First, we tried charging 2% of someone’s salary the first year if they got a job through out site. When that didn’t work, we charged them a flat fee if they got an interview, or if an employer read their resume. We tried 10 things until we found something that made much more money than the rest.

Charlie: Agree. How to make money from this shouldn’t be the priority in the beginning. When you have a startup, especially in the first 12 months, you have no idea what it’s going to grow into. Most companies that you see today, like Twitter and many others, don’t do what they set out to do. But, investors and VCs do like to see revenue and growth models. If you can show an investor, “This is what we’re making right now; this is our growth potential.” That’s also worth a lot of value. Venture capitalists don’t want people coming to them, “I have an idea. I need you to make money.” They want you to tell them, “I’m already making money. I need you to  make more money.”

Rogoff: How many of you have raised money from professional capital sources, such as banks, venture capitalists, and private equity, or sources other than friends and family who will invest in your business because they love you.

Charlie: To start the company, I had put my life savings in at the the time, which was $10,000. Bootstrapping is difficult; you literally have your house on the line. My business is capital intensive; we need to have money to make money. Whatever our daily revenue is, we have to have double that available in banks all over the world. At the point where we were doing a couple thousand dollars a day, and then we grew to a point where we had to stop processing orders because we didn’t have enough money. I told everyone I knew, “I need money, I need money.” I didn’t know anything about seed-funding and the VC world. That night, Wikipedia was my best friend. I learned what round A and round B was and series C and series D.

I had gone on an Internet TV shows, explaining my business. I literally raised up my hand and put my number and said, “I need money, please call me.” The next day, I had an investor from Japan call me, and he led our seed round. We raised a little more than $100,000 during that first round. Now we’re closing our second round and we’re going to raise a lot more.

Al: For CookiesKids.com, we have never raised from outside sources. However, now, for the first time, I’ve been focusing on strategic partnerships with different kinds of companies, sometimes as a broker or partner. Something that resonates as one of the most important lessons I learned in college is: you have to make a real effort to meet the right people.

I had one girl working for me who decided to move to Europe—so I had an opening for a social media manager. I reached out to a contact and said I’m looking to hire this position. They recommended I speak to Ted Rubin, the most influential CMO on Twitter (see Ted’s social media marketing tips on page  12). I connected to Ted and we had coffee. He later joined Collective Bias, which you guys should look into, then soon I received a phone call that they want to meet me. From those new connections, I raised capital for the first time in my life. All this happened and I formed two new partnerships just from networking.

Jojo: When outside investors come in, they bring a group of 50 other contacts with them that help you get to the level you want. But most of this comes from networking; the VCs I’ve met came from speaking at business panels and having VCs in the crowd. I get lots of emails about all kinds of tech events which are taking place in New York. There are VCs and angels at all these events.

But—if you don’t have any family money to start with—if you go to a VC with just an idea, he’s taking most of your company. That’s why I stress programming. If you can get that started on your own—then you can go out there and network—and with the VC money you can hire a good programmer. A good programmer can cost $120,000. These days, it is easy to get money in the tech world if you can get the initial concept up.

Charlie: But be careful, you don’t want to take the wrong deal. You don’t want to give away too much equity, board seats, or voting rights. The money may look good on paper, but you can always get a better deal. You think you need them, but they want you.

Ari: And it’s not like you meet a VC and the next day you have money. Often, a VC will meet you, and meet your team. They say, “You have an interesting idea, we’re going to watch you guys. Call us in four months.” Don’t wait until you need the money. Even if can show some prototype, try to get in touch and start networking now and get back to them 3, 4, or 6 months from now.

Charlie: Go to meetup.com and type in your zip code. There’s a NJ Tech meetup, a NY tech meetup. Jojo and I attended an event at NY Tech day. For $300, everyone received a 8-x10-foot booth just to show off product or website. There were 300 companies there. There was a 2 hour investor hour, and so so many VC’s walk up and you’re repeating yourself over and over and over again. All day, networking, meeting tons of people—for $300 and that’s it. All these events are really worth it. Talk talk, talk, tweet, there’s no end. You never know where you’ll get those connections from. 

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