A really smart 28-year old I know asked me a very specific question. “When is the right age to start a company?”

My answer was that the answer is less about a specific chronological age and more about your personal circumstances, your current risk profile, your preparedness and your idea relative to external conditions. All four of these characteristics are at least intertwined and sometimes in opposition with each other. Let’s look at each of those four characteristics in order.

Personal Circumstances. Are you married or single? Do you have a significant other? Do you have a mortgage? Are you the primary provider for your family? Can you dramatically reduce your standard of living for an extended period? If you aren’t married and are wired the way most entrepreneurs are wired – not requiring external validation of your self-worth, I think that’s a plus. So if you think you might get married within a few years, I’d lean towards starting a company now.  If, on the other hand, you feel that a having a supportive spouse/significant other would help you endure through some of the dark times, then think about waiting. Financially I think it’s easier to degrade your standard of living by bunking with a bunch of roommates and eating Mac ‘n Cheese for a couple of years when you’re single. On the other hand, if you’re married and your spouse has strong earnings, this kind of partnership can be exactly the ticket needed to allow you start your company and go without pay for a while. I’ve started two companies and known hundreds of entrepreneurs and no matter how much you plan to have revenue and start paying yourself “very soon” it always takes longer than you think. I’d plan for 12 to 18 months without a salary. How much money do you have saved both for your own personal cash flow but also to invest in the company? Generally, you earn and therefore can save more as you get older, but you can reduce your personal cash flow more if you’re younger.  Edge: younger (25 to 30)

Risk Profile. The probability that your company will fail is high. I’m not making a subjective opinion of your startup specifically. I’m just saying that statistically, failure is the probable outcome. Failing early is better in my opinion. You’re going to spend some of your savings to start the company and for personal expenses. The earlier you start and fail, the longer you have to recoup those losses. Edge: younger (22 to 26)

Preparedness. This is the characteristic that wreaks havic in figuring out the optimal time to start a company. The more you learn at someone else’s expense, the better, right? The more experience you get, the better you’ll be prepared. If you wait until you’re 35, you’ll be so much smarter and better prepared, right? I think it depends. You learn a lot starting your own company. Someone once told me that he equated it roughly comparable in cost, time and learning to earning an MBA – $100,000, 2 years and lots to learn. While I do think that you’d be better prepared at 30 than 20, how much more prepared you’d be at 35 than 25 depends a lot on what else you might be doing during that period. Let’s say “Jared” is 27 and thinks he’d like to start a company some day. Jared was hired right out of college by a very large company and has excelled ever since. I’d encourage Jared to consider a transitional role at a startup for 2 years before starting a company. Now let’s say “Janet” is 27 and thinks she’d like to start a company. She spent 3 years fresh out of college at a large company then 2 years at a startup. Jane’s is probably a little better prepared than Jared. Now let’s look forward. Is there another role, at a startup in the case of Jared, and either at her existing startup or another one in the case of Janet, that would really allow either to grow professionally and thereby prepare them a little more? Consider delaying starting a company, but keep in mind personal circumstances and risk profile. Also don’t forget that it’s always a hard decision to pull the trigger and start a company. Lots of people start at 26 dreaming of starting a company and all of sudden realize they are 46 and never did it. Edge: a little older (27 to 32)

Your Idea Relative to External Conditions.   Our current economic climate is certainly bad, but by external conditions I actually mean something entirely different. Startup success hinges far more on timing than the people give it credit. If you’re too early, there’s no market yet. If you’re too late, the market will already have dominant companies with strong motivations for protecting what they’ve built. Time it well, however, and there’s lots of demand and not a lot of competition, which allows you to survive and grow in a compressed timeline. Start your company when the ideal timing for your product or service to hit the market is 12 to 24 months out.  If you are lukewarm about your idea and/or have no problems coming up with what seem like viable ideas for new businesses, consider delaying your plan.

So the answer to the oft-asked question of when you should start your company is “it depends” – on your personal circumstances, your risk profile, your preparedness and your idea relative to external conditions. All in all though, I’d err on the side of pulling the trigger earlier than later. After all, the likelihood is that your business is going to end up looking nothing like what you thought it would be, but you’ll learn a lot along the way. Successful entrepreneurs aren’t usually the ones with good ideas. They are the ones who started with a good idea and adapted it to what the market and their customers showed to be an even better idea.

photo credit: Facebook, Inc. For the record, Mark Zuckerberg was 19 when he started Facebook. I was 35 when I started my first company.

In 2002 I wrote a detailed business plan and created the investor presentation deck for MessageRite, my first startup. One of the key slides, or so I thought, was the gratuitous “Exit Strategy” slide. In my slide I described how MessageRite would one day be acquired by one of precisely four companies I cited by name. Investors would enjoy a handsome return at such time as we were snatched up by one of these four companies. While I was incredibly luckly to have accurately named the ultimate acquirer, I now realize how wrong was the advice I heeded to include that slide in the first place.

This time around with blist, I had no such exit strategy slide in the investor presentation deck I created to help tell potential investors learn about our business.

Certainly it can’t be solely attributed to the presence or absence of that exit strategy slide, but the fundraising outcomes were vastly different for my two companies. At MessageRite we effectively struck out raising venture capital. At blist, we were fortunate to have piqued the interest of a handful of quality firms and are now backed by two of the best in Frazier Technology Ventures and Morgenthaler Ventures.

But raising capital in and of itself wasn’t a milestone and it’s dangerous for entrepreneurs to think of it that way. Raising venture capital was a step we elected to take in our plans to grow a viable, enduring company with a great product and happy customers.

And that’s the point of this post and my advice to fellow entrepreneurs. Forget the exit strategy. A great exit will solve itself by building a viable, enduring business with great products and happy customers. Have the courage to omit the slide and also the courage to tell VCs just that. You are building a strong, enduring business which is the best way to ensure that the investors see a healthy return on their investment.

Are you building an enduring company? I’d love to hear about it.

photo credit A-Wix

Early in my career as a manager, if a key employee came in to my office to tender a resignation, I would try to talk her out of it. I would try to understand the motivations behind her decision, and combat each point with a counterpoint for staying. Sometimes I was successful, but only in the short run.

Over time I’ve learned two things. First, when an employee resigns I’m at least six months too late in starting to create an environment where the employee can succeed and wants to stay and contribute. Second, talking someone into staying never works in the long run. You’re better off dealing with the pain as quickly as possible.

In the last few years I’ve seldom been surprised by a resignation. I’ve seen it coming early enough to either change the environment or the individual’s workload in ways to stimulate and reinvigorate the employee, or to recognize that the person (and maybe our company) would be better served to move along.

Talking someone out of quitting is a bad idea. By the time they walk into your office and hand you their resignation letter, they’ve already processed the idea thousands of times. They were emotionally checked out long ago. I’m sure some of you will ask “but what about the person who quits or takes another job offer as a means to force a discussion about a raise?” I’ve only seen that tactic used a couple of times in my career and in 100% of those cases , I was better off without those individuals. The outstanding employees I wanted to keep never needed a resignation or a better offer as fuel for such a conversation. I guess what I’m saying is that top employees usually have the full package, including knowing how to manage their own careers without having to resign in order to demonstrate their value.

Finally, as a good manager we need to plan for the occasion when a top employee will move on. Succession planning – ensuring that business continues as usual after someone departs – is part of what defines a manager as a leader.

Before I tell you what Bill said, I need to provide some context. From late 2003 through mid 2004 my primary focus was on raising capital. In MessageRite I picked a capital hungry company to found – email archiving as a service. I started the company when my own personal net worth was insufficient to carry the company to profitability. During that 6-month capital raising period I received term sheets from two VC firms you wouldn’t recognize. They were bottom tier firms who offered incredibly unfair terms. I turned them down.

Back to the offer to be acquired.

Bill’s advice was as follows “Kevin, you are one of the most objective people I’ve ever known and you would be the first to admit that you’ve struggled to raise capital. If FrontBridge’s offer exceeds what you think the company is worth then you should consider doing the deal. There are two reasons for my recommendation. First, it will be perceived as a successful exit, making you all the easier to back next time you start a company. Second, it will provide the capital to personally fund the next company if you decide you don’t want to work with VCs. If MessageRite were your second company I’d have different advice, but in that it’s your first I think you should accept the offer.”

I did the deal and Bill was right. Find wise advisors and learn to heed their advice.

Please forgive this slightly more personal post; it’s Saturday. It highlights an important issue for startups – having good life balance and weighing opportunity costs.

blist is my second startup, so my family has lived through the long hours and dedication it takes to get a successful company off the ground. My wife, Karen, is phenomenally supportive and manages our busy household with 4 kids between 3 and 16. Three of our kids are starting at new schools this year. Karen asked me on Thursday morning if I would be able to go in the evening to the fall harvest party with Bryce, my kindergartner. I asked her for the details. “It’s from 6:30 to 7:30 p.m. The kids are going are going to carve pumpkins. It’s designed to integrate dad’s more into school, as mom’s are there all the time. It’s optional. Not all the kids are going. Bryce hasn’t asked if you are going to go. So think about it and let me know.”

I was out of the office all day Thursday with important back-to-back meetings. My last meeting was in Seattle and was to end around 5:30. I’d been skipping the Seattle Tech Startups meetings on the 3rd Thursday of the month, but wanted to go this time because the topic – scalability – is one I’m deeply interested in. Not to mention, I thought this talk might attract other folks who are interested in this topic and I could do some casual network-based recruiting.

As much as I wanted to go to the scalability talk, I knew it would mean more to Bryce for me to go to the fall social. I called home in between meetings and talked to Bryce. I asked him if he wanted to go. Of course he did. He was bursting with excitement. I chatted briefly with my wife and told her my schedule was tight and that I’d pick him just before the social and asked if she could have him ready when I arrived. Of course she could.

When I pulled into our driveway, I could see Bryce standing on the sill of my office window, in full Halloween costume, eagerly waiting for me to arrive. I wouldn’t have known it was him except for his unmistakable ear-to-ear smile and his always-happy-to-see-you wave. It was instantly clear I made the right choice.

Karen had Bryce ready to go and had pre-packed a big grocery bag with a pumpkin, carving tools, paper towels, snacks to share, etc. These are the kinds of small, devotional acts she does every day for all 6 of us.

The fall social was a blast. The kids were up on stage and sang 5 or 6 Christmas songs, but with the lyrics rewritten with fall themes “5 Little Pumpkins Sitting on Gate…”

I was wrong about one thing though. Initially I thought it would mean more to Bryce if I went to the fall social. Actually it meant more to me.

Once you cross the line and become an entrepreneur, there is no more dualism separating a work sphere from a personal sphere. You get 168 hours a week and they all come from the same pot. Driving a startup to success requires long hours and a lot of sacrifice. But it also depends on a healthy, happy loving and supportive family. Manage your time and priorities wisely.

The short answer is threefold:

1) They can code
2) They can contribute meaningfully
3) Hiring them as interns may be our best shot to attract them when they graduate

Some of you may have an impression that a 20-year young adult isn’t good for much more than making photocopies, filing, picking up lunch for the team and perhaps click-the-mouse circa 1992 testing. You’re so wrong if that’s your impression. The reality is, a 20-year old computer science student likely has 5 to 7 years of programming experience and at least two years of formal education to reinforce (or relearn) core constructs. Actually, they can probably out-code a lot of professionals in terms of pure coding speed.

But you only get them for four months, right? Four months is a long time in software engineering. At blist, we run 2-week sprints. Typically we work on 50 to 60 projects in two weeks. A summer is plenty of time for an intern to make really meaningful contributions.

Aside from the meaningful contributions and the great energy and enthusiasm interns bring, it’s important to recognize that top students are going to be heavily recruited in their senior year. By engaging them with meaningful work earlier in their academic careers, we’re hopeful these interns will consider blist after they graduate.

If you’re a computer science major at UW or perhaps another school but you plan to spend the summer in Seattle, blist is talking to interns now for next May. Our internships are paid, of course. Drop me a note at kevin.merritt _at_ blist.com if you’re interested.

Sooner or later reporters will want to interview you in order to learn more about your startup and share their insight with their readers. I thought it might be helpful to share some tips for conducting yourself when being interviewed by reporters:

1) Be honest. I wish it didn’t need to be said.

2) Recognize that the reporter is a professional interviewer and you are an amateur interviewee. His job is to get you to answer questions he thinks his readers will want to know.

3) Prepare for an interview like you would for any other important meeting in which you are representing your startup. We’re not yet represented by an outside PR firm, but if you are, by all means rely on them to help prepare you. Think about the 2 or 3 key points you want to convey. Prepare to answer the 2 or 3 hard questions you think he’s going to ask.

4) Realize that anything you tell the reporter is fair game to be printed or posted. You might sometimes be granted an exception, in advance, by asking to answer a question off the record. If you think that’s what you want to do, just answer the question with “We aren’t ready to divulge that yet.” My point is that answering off the record doesn’t give the reporter anything, so you might as well not answer.

5) Don’t immediately answer any question. We’re programmed to believe that answering questions faster makes us look smarter. Have you ever seen an article in which the reporter disclosed how long it took someone to answer a question? Me neither. Being fast just means you might not answer as thoughtfully as you’d like.

You’re also competing against a lot of background noise to have your message heard. Work with the media – old and new – to help get the word out.

I spent 6 years as CIO of an investment bank, followed by 3 years as CEO of a company selling software-as-a-service to hedge funds, investment banks and brokerage houses. Two terms you hear often in the world of high finance are buy-side and sell-side. Buy-side analysts usually work for mutual fund companies and help decide what stocks to buy for their fund’s portfolios. Sell-side analysts usually work for brokerage houses and make recommendations on what stocks individuals should buy, hold or sell. Sell-side analysts are peddling stocks. Buy-side analysts are accumulating stocks.

Many of us are trying to assemble great teams. We fill our teams via recruiting, which has many steps:

* Candidate sourcing
* Preliminary candidate screening
* Interviews
* Hire/no-hire decisions
* Offers
* Negotiations
* Start of employment

In my opinion, the reason good companies are good at recruiting is because they treat the process as a sell-side transaction. Companies filled with mediocre talent treat the recruiting process as a buy-side transaction. The basis for my opinion is that really talented individuals have their choice of opportunities. They pick where they want to work. Who among us wouldn’t jump at the opportunity if an awesome engineer called and said “I’m thinking of changing companies and love what you’re doing. Can I come in to see if there’s a potential fit?”

Crappy companies look at recruiting like buying produce at the grocery store. Thump, squeeze and sniff to find the best canteloupe or avocado. Throw it in a plastic sack, set it in the cart and off you go. Good companies look at recruiting like finding a soul mate. Court, woo, wine & dine to find the best mate. Now let’s assume you’re a great employee. Would you rather be hastily thumped, squeezed, sniffed and sacked or patiently courted, wooed, wined & dined? Would you rather be thought of as perishable produce or a soul mate?

There you have it. The first step in recruiting a great team is to change your orientation from buying to selling.

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.

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.