Socrata

Last night I went to a sneak preview of ClayValet.com, hosted by founder and all around wonderful guy Mikhail Seregine. If you haven’t checked it out yet, I encourage you to do so.

Before the event got into full swing I was chatting with a couple of other entrepreneurs. Two different entrepreneurs – in totally separate conversations – each shared with me something that just seems totally inconceivable from a doing-business-smartly perspective.

Both have startups that weren’t able to secure the .com domain to match their company name. Let’s call them Trovel and Sniffl. Both names are fictitious. Sorry if that’s really your company name. Trovel was able to get trovel.net but not the .com domain. Trovel hasn’t launched. Nobody knows them from a hole in the wall yet. Sniffl was able to secure sniffl.us but not the .com domain. They’ve been in the market for a couple of years and have a huge brand asset in the Sniffl name.

The current owners of the respective .com domains have offered to lease the domains to the respective startups. For Trovel, the offer is $10,000 for a 1-year lease and then the right to buy the trovel.com domain later, but price will be negotiated at that time. Sniffl’s offer was even worse. The current owner offered to lease the domain for 3 years at $17,000 per year. The offer includes a right-to-buy but the current owner won’t negotiate the price until the end of the lease.

I have two pieces of advice:

1) Don’t name your company anything, unless you can get the .com domain that you actually want. Think of your .com search just like your trademark search. You wouldn’t name your company anything without ensuring you could get a trademark for it. Make sure you can get the .com domain too.

2) Don’t lease the .com domain if you don’t know how much it will ultimately cost you to buy it outright. Your .com domain isn’t like an office lease where you can just pack up and move at the end of the lease. The more successful you are and the more time goes by, the more that domain is going to cost you.

A right to buy without establishing today the price it will be at time of sale is a right to nothing. What a horrendous mistake it is to do this deal. If you have a blowout year, the current owner of the domain has you by the cajones and is really going to make you pay.

So you might be wondering what these two entrepreneurs are going to do. Trovel is going to go ahead and lease the .com domain for $10,000 for 1 year. Sniffl has hired a marketing consultant and has decided to change the name of their company soon, so they can finally get the .com they want.

All companies, but especially startups, operate within the constraints of finite resources. Usually the two most precious resources are time and money. Web 2.0 has, in part, encouraged startups to bootstrap and has inspired them to revel in their thriftiness. The 90′s mantra to “get big fast” has been replaced by the more pragmatic exhortation to “get real.” Develop the core feature set and iterate quickly post launch. Sublease office space downtown and commute via public transportation. Buy used Aeron chairs on Craigslist. Use Skype for phone service. The list goes on.

Todays entrepreneurs have gotten real and are doing a great job of managing real cash – the green kind. What I’m not seeing though is strategic opportunity cost management and I’d argue that the success of a startup hinges as much on good opportunity cost management as it does on good physical cash management.

Let’s say you and your co-founder have pulled together $200,000 in startup capital. You each can afford to go without salary for 12 months, after that each of you need $5,000/month to survive. You are a pretty good coder. The other co-founder is an online marketing wiz and product visionary. It feels like you need two really strong software engineers to complete the team in order to launch your service six months from now and catapult your company to success. If you meet that goal, you think you can get revenues up to $25,000/month within 12 months after launching the service. What’s the real constraint in this scenario? What’s the magic number?

Most of you are probably looking for a piece of scratch paper or you’re opening up EditGrid to forecast cash flow out for 18 or 24 months. You’re looking at the wrong variable.

The magic number is 2. That’s how many really good software engineers you need to succeed. That’s the more critical constraint. Hire one mediocre engineer, and you’ve got only one bullet left in the chamber. Shoot that at another so-so programmer and you’ve just ensured failure for your startup. When you’re interviewing candidates, you should not only be asking yourself “is this programmer worth $90,000/year?” but as importantly you should be asking yourself “is this one of the two extraordinary programmers we need to succeed?”

At blist, we’ve been saving our last two bullets for a while. Are you one of those exceptional software engineers who is the difference between success and failure? If so, we’re hiring.

Some startups agonize over finding good software engineering talent. Here’s an idea that worked well for us at blist and it might work well for your startup too.

In February we started drawing up sketches and narratives of what blist is and what it would become. To turn these diagrams into a working service, we needed a few really good software engineers. By now hopefully you know one thing that all programmers love is free food! We scheduled what we called an “Inception Mixer” for the early evening of Friday, March 2. Then for the rest of February I networked, recruited and met with as many qualified candidates as I could. I conducted an informal, introductory meeting with each one. In that meeting I painted a little of the vision for blist and told them we’d be hosting an inception party to share more details. It was by invitation only. Good engineers only. We arbitrarily set the limit at 20 guests.

Leading up to the event on March 2, a real frenzy started happening. Software engineers heard through the grapevine that we were a “startup to watch” and they wanted to come, too. I told them the event was by invitation and for qualified engineers only and asked if they could meet me for an informational discussion. That last week leading up to the event I met with another 12 or 14 engineers. One local reporter, two VC’s and one distinguished local entrepreneur all got wind of the event and asked for an invite. Nope. It’s by invitation and only top notch engineers are invited.

We rented out the back room of a pizza restaurant. I told the restaurant folks to keep the pizza and salad coming and the beer flowing. I brought a half dozen bottles of wine from home.

The event was a huge success. We had about 30 engineers show up. Believe it or not I ran through a 179-slide presentation in less than 15 minutes in a style that would make Dick Hardt of Sxip proud. We unveiled our logo, about the only thing we had to show that we existed.

The event worked great in a few ways:

1) An artificial deadline forced those we’d already interviewed to act. We actually hired two engineers before the event, including one at 4:00 p.m. the day of. The enticement was “c’mon, you know there’s going to be some really strong engineers there who are going to get really excited. Don’t you want to be employee #1? Wouldn’t it be great to introduce you to the crowd as the guy with the courage to jump in?”

2) The event fueled the fires of the others to make a declaration. The event ended around 10:00 p.m. and between 10 and 4:00 a.m. I received 6 emails saying “I’m interested. How do I go to the next step?” 30 engineers are smart enough to recognize that a startup can maybe swing hiring a few of them. It created a reverse auction for the few slots.

3) It filled our long term recruiting pipeline. A good 1/2 of the engineers left there excited by our vision, but didn’t have the stomach lining to have an employee # less than 10. A growing company needs good engineers at different stages and it requires very little effort to ping these folks every 6 weeks or so to check in.

The entire night cost us about $300 – way cheaper, way more effective and way more fun than hiring a headhunter. If you’re starting a company and need good software engineers, think about hosting an inception mixer.