Once in a while, I will go to a conference and meet someone who won’t tell me what their startup does because they’re afraid I’ll steal their idea.

This is the wrong attitude when starting a company. Having someone copy your idea is the least of your worries. Instead, you should engage as many people as possible to get feedback on your idea.

At Startup 2006, Reid Hoffman recommended entrepreneurs ‘value speed and intelligent feedback over secrecy‘. Here are four reasons why idea secrecy hurts startups more than it helps:

1. Someone else has probably already thought of your idea.

We would all love to think that our ideas are truly unique. But in reality very few ideas are one of a kind.

If you don’t share your idea, you won’t have a chance to find out if anyone is thinking alone the same lines (i.e. competitors or potential partners).

It’s too easy for programmers to put their head phones on, disappear into the tree house, and emerge 2 years later with the end all be all product. That’s why the first release of your product should be embarrassing.

Get it out there. Promote your idea like hell. And see if ANYONE is interested.

2. You lose a golden opportunity for feedback.

Overly optimistic entrepreneurs tend to shun critical feedback on their ideas. This is dangerous because one of the best things an entrepreneur can do with a new idea is share it with as many people as possible. Think of it as a free market test and invite harsh feedback on why it couldn’t possibly work.

This isn’t intended as an exercise in discouragement. Rather, it is a form of critical thinking that many starry eyed entrepreneurs pass on because they are so convinced their idea is the next YouTube. By being overly secret with your idea, you pass on opportunities to engage smart people in meaningful discussion around it.

Besides the lost critical thinking, you also lose out on karma. By sharing your idea with as many people as possible, you don’t give the universe an opportunity to conspire for you and drop you hints on how to get what you want. Who knows, that guy eating lunch by himself might be your next tech lead or investor.

Share your idea - the universe wants to conspire for you.

3. Your idea isn’t what you think it is.

While you certainly need an idea to kick things off, most startups end up looking vastly different then when they started. Your job is to figure out as quickly as possible where the real opportunity lies.

The more people you talk to about your idea and the sooner your release your product, the faster you can zero in on the true value it holds. As quickly as possible, you need to find that tipping point or break through that turns your idea from a vitamin into a pain killer.

4. Ideas are cheap. Execution is everything.

There’s a reason why VC’s look so hard at who they are funding as much as what they are funding. They know it’s the founder and team that are going to make or break the venture.

An idea without a strong executing team is like a rocket without jet fuel. It may look nice on the launch pad, but chances are it’s not going very far. The world is full of great ideas. What the world lacks people who can execute them.

Secrecy in today’s flat world is largely dead. Openness and transparency is where it’s at. You’re much better off getting feedback from as many people as possible and pushing your product out the door quickly.

Reid Hoffman (founder of LinkedIn) was speaking at a Churchill event and said something that really resonated with me:

‘If you are not embarrassed by the first version of your product, you’ve launched too late.’

Every entrepreneur and startup faces this question when launching a new product or service - when do we go live. And it’s not always an easy answer when one balances:

• time to market
• quality
• first impressions
• member experience
• status anxiety
• and a host of other factors.

Being embarrassed is good for a startup however, because in the beginning you don’t even know if you have anything worth starting.

Fire … then aim, aim, aim

When you release the first version of your product, you are really shooting in the dark. Often you can’t even see that target, much less know where it is. All you’ve got is a hunch. And until you pull that trigger, and light up the room with that muzzle flash, you don’t know where to adjust your aim.

Don’t view this as a bad thing. It just is.

• Flickr started off as a massive multiplayer online game (Game Never Ending) before realizing people really just wanted to share and tag their photos.
• Head started off building tennis racquets before realizing they could really dominate skis.
• Viagra was originally made to help people with hypertension - not erectile dysfunction.

Rest assured, your idea is going to morph and change which is why being embarrassed about your first release isn’t a bad thing.

Be embarrassed

So does being embarrassed give us an excuse to write buggy software, skip testing, and release shoddy work? No.

But being embarrassed is a good litmus test when you have a set of features you think could be valuable, and you’re tempted to add one more feature, fix one more bug, and delay the release one more week.

Be embarrassed, and get your product out there in the market place. Time is everything.

What do you think?

The Start Up Success 2006 video with Reid’s quote at 35:55.

* The whole video is worth watching if you are into entrepreneurship and startups.

GigaOM notes that the current CEOs are stepping down at two booming Internet startups. Both Reid Hoffman of LinkedIn, the business networking phenomenon, and Arik Czerniak of Metacafe, an online video sharing site, recently announced that they had chosen replacement CEOs. Both of these companies have been successful in raising financing, and both are valued at over $200 million dollars were an acquisition to take place.

It takes a special sort of person to pull a startup through the difficult initial phases of growth: a blend of creative vision, adaptability, and strategic flair. But once the vision is established and the startup has legs, it becomes important to have somebody at the helm who can execute that vision. Sometimes this is the same person, but often the visionary doesn’t fare well when required to focus on operations rather than tackling abstract, big picture issues.

If that’s the case, it’s best for the company (and for the CEO) if the CEO can see and admit they are no longer the man (or woman) for the job. That seems to be what’s happened with both LinkedIn and Metacafe, in both cases the exiting CEOs are remaining with the company, in roles that allow them to focus on products and strategy. It’s a win-win situation, the outbound CEOs get to do what they have demonstrated they are good at, and the companies get a CEO who can execute the vision.

There is a lot of prestige attached to the title of CEO, and in the case of an executive who has steered a startup through the difficult first years there is often a sense of ownership. It isn’t easy to recognize or admit that you are no longer right for the task, and it must have been a difficult decision for both Hoffman and Czerniak. But it was the right decision, and they are to be commended.

How can you tell that it may be time to take a new role within your startup? Here’s Cambrian House’s handy list of 5 signs it may be time to step aside as CEO of a startup:

1. The company is struggling or unable to maintain the level of success initially achieved on launch, and you feel that it has nothing to do with you
2. You identify possessively with the business, and refuse to consider acquisition offers (no matter how generous the terms)
3. Despite a solid vision and financing, you find yourself focusing more on re-thinking the vision than how to realize it
4. The competitive landscape has changed dramatically since you launched
5. The business relationships that you have to manage are no longer just investors and partners - the CEO’s role is no longer as much about growing the business as it is about maintaining position among your industry

According to some clichés these things tend to happen in threes. So, which startup CEO do you think needs to see this list and realize the time has come? Let us know in the comments, and be sure to give us your reasons.

Or, if you want to try being the CEO of your own startup, you can join the Cambrian House crowdsourcing community and start harnessing the wisdom of the crowd to launch your own idea.

Why web devs should be using IE, and not just because it has 85% market share.

Are you a web dev who has migrated to Firefox? Most of Cambrian House’s devs use Firefox for their day-to-day browsing. It’s simply a better product. Pages look nicer, sites render better and the program crashes less.

And therein lies the problem.

We get spoiled with better technology. Early adopters of better technologies reap the benefits of not having to deal with the issues of the inferior product. It’s a new adage, but will ring true in the ears of ever web dev: Build in IE, test in Firefox, get three errors. Build in Firefox, test in IE, get three hundred errors.

We recently had to re-learn this hard lesson with the release of IdeaWarz 3.0.

In building the new version, we tested the site in Firefox - it looked great, worked great and everything was just right.

As an oversight, we didn’t fully test in IE during development, so when we did final testing in IE, there was an overwhelming number of errors, the site looked terrible and was just plain broken.

Many of the team were burning the midnight oil to IW 3.0 off the ground because of that one oversight.

Let’s hear it one more time for posterity’s sake: Build in IE, test in Firefox, get three errors. Build in Firefox, test in IE, get three hundred errors.

Props to Marissa Mayer, Google Customer Products Director, for inspiring us to spread the word on creativity loving constraints. Check out this video of Marissa Mayer talking about creativity loving constraints as well as and other great innovation points.

Entrepreneurs are an endowed bunch. No really - let’s be honest. They’re ambitious, visionary, risk-taking, detail-oriented, driven, motivated and creative. They’re also highly constrained.

Similarly, working at a startup, there are constraints everywhere. We face tight deadlines, are often under-staffed and given limited resources. And our creativity thrives as a result.

At first this may seem contradictory. The assumption is that creativity is fostered when it is boundless. But that’s not it at all.

It is the ambition and the vision of the entrepreneur that forms the dream, it is constraints and limitations that force us to be creative in order to realize our dreams.

When starting small, executing our dreams, constraints are the things that force us to be even more creative.

Still don’t believe? Here’s an example: where established and large corporations would scale back projects, small startups push harder, add more and even expand projects because of the ambition and vision (and well, being able to scale back projects is quite a luxury, truth be told).

In our experience, when faced with the constraints of tight deadlines and tighter resources, we were not only creative about the things we were trying to accomplish, but also the way we accomplished those things.

The point? The creativity of our vision isn’t the only creativity that matters - the creativity of our design and execution also matters. Moreover, by being constrained, the latter type of creativity becomes more and more important.

A true story: Return of the King

The making of the final chapter in the Lord of the Rings movies - the Return of the King - is a fine example of creativity loving constraints.

Movie making has very real constraints. During the production of The Return of the King, it became apparent that time was running out. Movie posters had been printed. Press releases released. The world was waiting on baited breath for exciting conclusion to the Lord of the Rings saga.

Instead of responding to the pressure by reducing scope, Peter added more. Right up till the very end new music was being added, new special effects were being shot, more CGI development occurred, everything was increasing in scope.

They pushed so hard those final days that when Peter went to see the grand opening of the movie in Wellington, he had yet to see the movie in its entirety from beginning to end in one sitting.

Return of the King went on to win 11 Academy awards that year and was hailed by critics and fans around the world as one of the greatest movies ever made. They not executed a very creative vision, but they were all the more creative in the execution in order to realize an otherwise unfilmable movie.

Give your self a constraint

So if you are spinning your wheels, and not making any progress on the creativity side, have someone impose a real constraint on you. You may find your creativity flourishes!

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Agree? Disagree? Share your opinions, advice and stories.

Congrats Ms. Founder, you’re ready to rock-and-roll and there’s nothing stopping you from building that universe denting application you’ve been dreaming about for the last year and a half. We wish you good luck, and offer you a simple lesson from our past - don’t be building no tree houses. No customers allowed Remember being a kid, building a secret fort with your mates and hanging a sign on the door ‘No girls allowed’? Startups sometimes do the same thing only the sign says ‘No customers allowed’. This is what we did with our first company Servidium.

We bunkered ourselves in and built the best web development framework in the world (this was way before Struts, Spring, and all that other fancy stuff kids have today). It had database abstractions, security and templating mechanisms for separating presentation and business logic. It made tea and buttered your toast and even gave us a patent. It did everything - except sell.

You see, in the early days of Servidium we weren’t exactly customer focused. We got so caught up in the genius of our very own framework that we forgot to include the customer as part of the process.

The price we paid for this was the creation of a product no one wanted. By the time we realized the error of our ways, it was too late. The product never sold and we were never more than a wannabe product company kept afloat by professional services.

Customers = good

While we were too thick to get it at the time, engaging customers early in your startup is a very good thing. Look at all the good stuff customers do for us:

• Customers validate whether you have something of value. The only time you know if you have anything worth selling is when people are willing to pay for it.
• Customers force us to release software. When you’re working on something that isn’t released, problems are intriguing. When it’s out there they become alarming. [Paul Graham - The Hardest Lessons for Startups to Learn]. If you want customers to buy your product, you must release software. This is a good thing even if your software is incomplete or imperfect.
• Customers give invaluable feedback. Here are the features customers liked. Here is what they didn’t like. Here is what you nailed. Few products end up looking like their initial concept. Early customer feedback gives you time to adjust.

Mind the Gap

So how do you stay out of the tree house and get customers engaged early?

You force it.

You sell them something - anything.

Build the most compelling feature of your product and get it out there. Just build it and see if you’re meeting an unmet demand. If no one is willing to spend any credits on your product or service, you’ve got your answer.

Make the gap between product development and revenue as small as possible.

At Cambrian House we figure the only way to know if a product has legs is to get it out there and see who’s willing to pay for it. This is what we did with Prezzle. Prezzle started off as an all encompassing gift giving service. It had heaps of functionality and would have taken months to build.

Instead, we ignored all the grandiose scope and delivered a few compelling features. Three weeks later we released the first version followed by revenue just days later. Even better, customers started to articulate the demand we were meeting and not meeting.

Bake customers into your DNA

Customers are demanding son-of-a-guns. They want software that works, bug free, yesterday.

But customers (the good ones) can also be extremely helpful. Some will help you debug your application. The best will even send you code.

Baking customers in early is also going to affect how you operate. You are going to answer phones, return calls, respond to e-mails, and do things you wouldn’t normally do if you didn’t have customers.

Most importantly, baking customers in early helps highlight unmet customer demand and new opportunities, things you were unaware of when you started the company.

Most startups don’t end up doing what they first envisioned. Apple stumbled into desktop publishing. Thomas J. Watson (founder of IBM) thought there was maybe a world market for five computers. The same will happen to you and your idea.

You don’t need the treehouse - burn it

We understand the allure of wanting to squirrel away into a treehouse and work on the software. Just remember, by engaging customers early you will:

• know whether you are building a product anyone wants
• validate that your product has worth
• improve the customer experience incrementally

This is so much less risky than:

• guessing what the customer needs
• hoping that your product has worth
• releasing everything all at once

As counter intuitive as this may seem, taking the effort to include your customer at the beginning will give you a serious leg-up on the competition, while ensuring you build something of value.

When you join a startup, family and friends don’t understand why you work harder than anyone they’ve ever met. They don’t understand why you are tired at your kid’s birthday, or why you suddenly started falling asleep at the movies. They don’t understand how you can operate on such little sleep, or why you push yourself as hard as you do.

This can lead to tension because your friends view everything you do as work, while you view it as a calling. You simply feel compelled.

This calling is similar to the calling an athlete feels when they train for the Olympics.

It’s funny, because as soon as you tell someone you are training for the Olympics (and not working for a startup) a certain magical, mystical aura seems to fill the air. Images of the Olympic rings and gold, silver, and bronze medals come to mind. Happiness, joy, pain, determination, and a host of other powerful emotions flood to the surface. People look at you admiringly – wow, an Olympic athlete. They admire your determination, and encourage you on your journey. They understand why you push yourself so hard, and sacrifice so much. You are going for gold.

But joining a startup is a lot like training for the Olympics.

1. Both are all consuming.
2. Both span similar periods of time (4 years).
3. Both demand a lot of hard work, time, dedication, and pain.
4. Both force you to make sacrifices.
5. Both are extremely addictive in their own unique way.
6. Chances of failure in both are high.

People joining startups share a lot with Olympians. Both pursue goals and glory for which they are willing to work extremely hard, and dedicate a good portion of their lives. They realize the risks, and accept the consequences of failure. They also love the journey, and look back on their pursuits as some of the best years of their lives.

So the next time you are taking heat from a friend or loved one about how they never get to see you anymore, try explaining in terms of athletes training for the Olympics. You both make great sacrifices, and you are both going for gold.

Hat tip to Sarah.

Last November Michael Sikorsky (MJ) estimated that he would require around $1.5 Million dollars to fund our new company - Cambrian House. Not only did he raise the money on his own, he did it in less than two months. (Note: the final raise was $2.5M)

When I asked MJ for his secret to raising capital he responded “Basically, you have to eat a lot of fear”.

Thinking that was an interesting topic, I sat down and asked MJ if he could explain what eating fear meant, and offer any tips for those with generous portions of fear on their plate.

He immediately offered the following six tips, without any explanation:

Tip 1: Sincerely believe.
Tip 2: Screw the business plan. Tell them your story.
Tip 3: Emit confidence.
Tip 4: Pretend you already have the money.
Tip 5: Don’t marry every woman you date.
Tip 6: Prime the pump.

But before we delve into the six tips, we need to understand a couple things about fear.

Eat this: rational and emotional fear

There are two types of fear entrepreneurs need to eat when raising capital – one seemingly based on ‘reason’ (let’s call this rational fear), and another deeply rooted in emotion.

You need to be prepared to eat rational fear, but all the good hard digestive work is in consuming emotional fear.

This, is the key point: Most investors invest emotionally and then justify their decisions rationally. Rational fear is a servant to emotional fear. It is a complex and intelligent servant, but a servant nonetheless. Emotional fear calls the shots and it doesn’t read business plans.

Emotional fear is a much more primal fear. It is what sustained us before we had big brains (think: fight, flight, and feeding). It comes from the prior 499 million years of evolution – the Old Brain. It’s the instinctive, gut wrenching fear that enabled us to make split second decisions and stay out of the jaws of saber tooth tigers. Emotional fear is felt in the gut.

You can’t reason with emotional fear.

Rational fear – logic and reason

Entrepreneurs usually do alright when it comes to eating rational fear. That’s because this type of fear is rooted in logic and reason. It’s the type of fear people have whenever they face something new or risky to which they want to believe thinking and reasoning apply (like investing in a startup). They need a model to evaluate logically whether this is right for them.

Rational fear needs to be justified. When the investor goes to a cocktail party, she needs to be able to explain why she invested in your startup. She just can’t say because ‘it felt right’. She needs to be able to justify, to herself and her friends why it was such a great move. This is how she placates the rational fear and justifies her cocktail party sound bites.

When eating rational fear you will be fielding logical questions like:

• Who are your competitors?
• What’s the size of your market?
• What’s your sales strategy?
• How does the technology work?
• When do I get my money back?

Traditionally most of this would be communicated through your business plan, although, we don’t recommend writing one.

An aside: For a good book on how to answer questions like these, and why you should never say your exit plan is acquisition or to go public, read Guy Kawasaki’s Art of the Start. Also read: http://www.paulgraham.com/startupfunding.html.

Now as important as eating rational fear is, it’s barely even an appetizer. Before investors write that cheque you still need to face their darkest, most primal fears – those based on emotion.

Emotional fear – instinct, gut, and intuition in the Old Brain

Emotional fear is where we make all of our decisions from - especially when it comes to investing in startups.

In his book, How the Brain Works, author Leslie Hart observes, “Much evidence now indicates that the ‘Old Brain’ is the main switch in determining what sensory inputs will go to the new brain, and what decisions will be accepted.”

Emotional fear is primal and instinctive. It is based on gut and intuition. Emotional fear would never form a committee. Reason and deliberation have no place here.

Where rational fear questions focused on reason, emotional fear questions come from the gut:

• Can I trust this person?
• Do I like them?
• Do I believe that they can actually pull this off?

This emotional ‘instinctive’ fear is the harder of the two fears to eat because it can’t be easily fooled by well reasoned logical arguments. It relies and more on emotion, feeling, and how the individual feels about you personally. That’s right – it’s actually all how they feel about you.

Initially this can be confusing to entrepreneurs who are struggling to close financing. They begin to doubt their numbers, their business plan, and their power points when it’s actually none of those things.

The reason most people don’t invest in your startup is because their spidey sense is giving them warning signs. They haven’t bought into you yet.

You haven’t sold them on you.

You could have the most amateur answers in the world for how your business is going to operate and people will still invest in you if they believe in you. It’s just true.

Addressing the emotional fear – back to the 6 tips

Now that we have covered the basics on fear, we are ready to cover the six tips on how to effectively eat it.

Tip 1: Sincerely believe

You gotta believe! If your actions, language, and tone don’t communicate that you completely believe in what you are doing, you are not going to be eating much fear – you are going to be feeding it.

You have to show them your intent.

By showing your intent people usually think you have to show them you have some ‘skin in the game’. Money is certainly one way to show your intent but money alone isn’t enough. You have to show them it is your mission in life to make your venture a success. You were literally put on this planet for this purpose. This is your destiny. It’s what you’ve been training for all your life.

Showing how much you believe doesn’t mean getting cocky and naively thinking there are never going to be set backs, failures, and crises along the way (trust me, there will be). It means showing investors that you have your head, heart, and soul into your business.

If you don’t believe, no one else will.

Tip 2: Screw the business plan. Tell them your story.

Investors don’t invest in business plans – they invest in people.

Going over the business plan is all well and good but what really makes people perk up and pay attention is when you tell them your story and why you believe you can make them a lot of money.

Give the investors a glimpse inside of you - not the business. Investors want to understand you and where you’re coming from.

What makes you think you can pull this off?
What makes you an expert on x, y, and z?
How did you come up with this idea?

Toot your horn and talk about you. If they can’t map and understand you, they’re not going to invest.

Tip 3: Emit confidence

No matter how scared or nervous you may be asking people for their money, you need to emit an aura of confidence. You need to look every fear, concern, and challenge in the eye and explain how you intend to deal with it.

This doesn’t mean unbridled arrogance. It means listening quietly to people’s concerns, and showing them a light at the end of the tunnel.

Yes there will be setbacks.
Yes other companies may hold a key patent.
Yes there will definitely be competition.
Yes Google might enter that space.

Admit there will be challenges. Then address each one confidently as best you can.

The company holding that key patent may partner with us.

It would be a great validation of our business if others started copying us.

Yahoo can’t move as fast as we can – in fact we would make a great acquisition for them.

Sincerely listen to people. Accept feedback and address their concerns one at a time. Thank people for their comments and criticisms. But at the end of the day confidently explain that despite the challenges ahead, there is nothing stopping you from being successful.

Be confident.

Tip 4: Pretend you already have the money

This tip was accidentally discovered by MJ when he realized that the longer he took to get back to people, the more interested they became in his investment.

When MJ listened to phone message of investors whom he hadn’t followed up with for some time, he often heard a sense of urgency in their voices. It seems that MJ’s natural tendency to procrastinate worked to his advantage. By not returning people’s phone calls, they began to imagine the worst - MJ didn’t really need their money or the opportunity to invest was slipping away.

When investors feel a sense of loss on an investment, imaginary or real, one of two things is going to happen:

a) They are going to let the opportunity pass if they are truly not interested, or

b) They are going to become anxious because they don’t want to miss out on the action.

Scenario b) happens way more often then you might think.

That feeling of scarcity is hitting one of the oldest innate feelings in man – our fear or sense of loss. We just can’t resist something that is made scarce to us.

We are not advocating being dishonest with investors. Just don’t return everyone’s phone call right way

Tip 5: Don’t marry every woman you date

Don’t waste time on leads that have no chance of investing. Prune dead leads fast, and move on.

The universe is abundant and there is more money out there then you could possibly spend in a lifetime. Don’t sink time into a marriage that just isn’t going to work out. Find another date and move on fast. Your time is too valuable to be chasing money that is not there.

Pruning leads can be counter intuitive for those who are used to chasing things they have little chance of acquiring. In high school they chased the boys and girls that would never date them. Everyone has stayed in dead end relationships longer then they should.

Don’t chase money that isn’t there. Prune dead leads fast.

Tip 6: Prime the pump

Priming the pump means starting to talk to investors before you need the money.

It’s much harder to raise money cold calling investors you have no relationship with at the 11th. They barely know you and don’t have much to go on.

When you prime the pump early you get the opportunity to partner with investors instead of pitching them.

If you think you need VC money, start partnering with KPCB on Sand Hill Road sooner rather than later. Try something like this:

“I don’t have a pitch for you, but I think we should be working together.
Can I share with you an opportunity we are looking at?
If you were to participate, what would the deal look like?
Would you ever want to be part of a Series A round of financing?
Help me understand what kind of ideas and deal you would be interested in.”

This is much less direct then coming in and pitching your whole story in 20 minutes and crossing your fingers hoping for a ‘yes’. By partnering, you have a chance to setup things right so it’s easier for them to say ‘yes’ when the time comes.

By letting the relationship blossom over time you can invoke commitment and consistency. Because they have been working with you, and because you have been communicating with them continuously, you are more known to them and easier to invest in.

Bonus material : MJ’s First law of startups

1. The more sophisticated the investor, the less worried they are about the business plan.

Something MJ noticed with pitching investors, is that the sophisticated ones (those who have made lots of money funding other startups) needed less hand holding on the business plan, and were more into who he was.

Sophisticated investors look more at the person, and less at the plan. They know that good ideas are a dime a dozen (they probably have a few of their own). They also know that to take an idea and turn it into a profitable business involves a lot of work, determination, and persistence. A good idea by itself is worth little without someone determined to see it through and execute.

That’s why, when sizing up an investment, they are focusing more on the person, and less on the PowerPoint.

Eating fear is an art

MJ is the first to admit that raising capital is an art unto itself. Eating fear nears the top of his list of skills entrepreneurs need if they are going to successfully raise money themselves.

While would be entrepreneurs are pretty good at digesting investors rational fears, the emotional fears gives many indigestion. The key point to remember is that investors invest emotionally and then justify their decisions rationally. That means that they may tell their peers they believe in your business plan, but what they really believe in is you.

When entrepreneurs sincerely believe, project a genuine aura of confidence, and act as if they are destined to raise the money, they often do.