Next month:
November 2006

Google Stinkum

OK, this blog will be about more than just the core topic (inspiration for entrepreneurs going it alone) and Google video and Mark Cuban's commentary, but this is just too fetid not to comment about. There's also a large and somewhat sad point to all of this, but you'll have to read to the end to get that.
Take a look at Mark's inside look at the GooTube deal. I'm not saying it's accurate... who knows... but it sure would explain a lot of things:


  • The crazy high valuation. The YouTube guys can tell their grandmothers that they sold for $1.65 billion but the reality is they sold for about two-thirds of that with one-third set apart for paying off big media. And of the money they got, most of that is in stock that -- my view -- will be worth a lot less because of this deal.



  • The suits against the smaller video hosting companies.

  • The big media companies silence about this deal. (They can't talk if they were part of the deal and the contract says they can't talk.)

  • The weird (for Google) announcement that it is doing a video hosting project that is pretty actively anti-long tail. I think the techcrunch guys got it right that Google has been the model of how to make money with the long tail, and this deal is the exact opposite of it. But if they have some deal in place with all the big media producers, then this makes a lot more sense.


I wrote a book review about The Long Tail, and my day job is running a site that brings the long tail to legislation. I think the long tail concept is brilliant. I also used to be a reporter, so I know that if that post about the junk that went on behind the scenes is true, that will be the big story as no reporter can resist a scoop that will eventually become lawsuits, etc. We'll be watching this unfold for a long time.

But to me the biggest story is Google turning it's back on the Long Tail. They aren't "dancing with the one's that brung 'em." Luckily the thing that Google has started is now in motion, so if -- IF -- Google really does turn it's back on the Long Tail there will be myriad others who will pick up the notion and move forward with it.

OK, back to work for me. You, too!


Drugs!

The more I think about this drug analogy for credit cards, the more apt it seems.

Sure, credit cards are legal, and the credit card companies -- just like drug dealers -- do whatever they can to get you what you want, but they never really come out and say it.

Think of the typical credit card ads on TV: They seem to promote mostly the idea that they are not as bad as all the other credit cards. The new Discover ads show scissors everywhere cutting up cards. The Capitol One spots display the terror of using cards, cards other than Capitol One anyway.

So, why is it OK for me to parade around here saying that using credit cards is a good idea? Well, because it is. To paraphrase Winston Churchill, it's the worst way to start up a new company, except for all of the others.


  • VCs want your first born.

  • Angels are typically people who had one good idea, and now have enough cash on hand to help you out, except that they're going to be hanging around all the time telling you about how their one good idea was really good, and you should be more like that.

  • Banks: puh-lease.

  • SBA: Banks with even more paperwork, that sounds like a good idea.

  • Family: Personally, I like Thanksgiving dinner, and want to keep it that way.


So, if you have followed my rules, then go out and get some credit cards and live the American Dream.


Catholic Guilt

Look, I'm a Catholic, and so I tend to feel guilty about a lot of stuff. I'm starting to feel a bit guilty about being the only one on the public square in favor of credit card debt. Every expert is against it, you can see columns like this one nearly every day somewhere.

Of course, the credit card companies also want you to use credit cards, which makes me the equivalent of Milton Friedman,  the economist who favors drug legalization. Credit cards are legal, but they are addictive and it can be difficult to break free of them.

That's why I really only advocate using them if you have a specific plan for using them, and then getting out.


Sunday Nights

The job of an entrepreneur is not clear, there are no defined job descriptions, or whatever.

But boiled down, your job is to worry about everything, and then act on the things that are the most worrying.

So, when do you do that worrying. For me, it bunches up on Sunday nights. I've spend a blissful day or two with my family, and then all the worries come creeping up, making it impossible to get to sleep.

Turns out, I'm not alone.

"I think what most people experience are thoughts of dread," said psychotherapist Dr. David Wright. "Before going back to work they experience withdrawal behaviors, they don't enjoy their Sundays."

OK, it's a bunch of psycho-babble, but I find it to be true.

What's interesting to me is that a TV station did this story, and yet TV stations have their worst programming on Sunday nights late. I can't tell you the number of times I've been unable to fall asleep Sunday night and then was stuck watching some bad sports interview show, infomercial or other crap. I suppose it's good, because it reminds me that TV doesn't help anyway, and I should really go dig up an old WSJ and read that instead.


Don’t get the wrong idea

I realized I should be clear about one thing before someone takes this the wrong way: Do NOT get in over your head with unsubstantiated hopes.

If you have a solid business plan, really solid, and you have some certainty that you will be out of credit card debt in six months or less, then it does make sense for you to use the cards, the no-interest balance transfers, etc.

If however you are just holding onto a dream that even though you have no revenue and no customers in the pipeline but somehow Google is going to find out about how cool you are and call you up and offer a gazillion dollars, well, look, I think you should get a job delivering pizza to make sure you can pay off your cards soon.

Do not take up drumming! You know the difference between a large pizza and a drummer? The pizza can feed a family of four.

I digress.

Look, here's a good rule of thumb: If your current revenue is enough to cover the credit card minimums and your other fixed monthly expenses, and you have customers in the pipeline that will mean you can pay off the cards before the special rate expires, then you should be OK. If you are taking out new cards to pay the minimum payment on other cards, you need to stop right now, go get a job, and keep your dream going on nights and weekends.


YouTube and You

OK, this is a blog for bootstrappers, for people who like being in business for themselves, and really there's no reason for us to be thinking about YouTube, etc.

But it is fun.

For me, the one guy who's been spot-on through all of this is Marc Cuban, who's been hammering away at this deal since it was just in the rumor stage. He's the one who really brought up the comparison between YouTube now and Napster from back in it's fun days.

And then on October 11th, he predicted that the suits would begin not against GooTube, but against some smaller outfit so that the big boys could establish some precedent without having to go up against all the lawyers Google can buy in the first trip to the courthouse.

I read Cuban's prediction, and actually thought to myself: "Boy, I hope my memory serves me well enough to remember this when and if it actually comes true."

Even my memory was able to hold up because it's only been a week, and now Universal is suing a couple of smaller sites.

So, what's the lesson for us? What are we, the small guys just trying to pay the bills, supposed to learn from this? Nothing really. The multiples of the YouTube sale, the whole Google zeitgeist, are classic Fantasy Business League stuff.

OK. Back to sales for me!


Manifesto

Welcome to Credit Card VC, I'm Scott Yates.

This place, I hope, will be a home for people like me: entrepreneurs starting their own high-tech company. Maybe -- like me -- you aren't doing this for the first time.

And while it may be a big idea, you are financing it yourself... maybe with some retirement money, maybe with the proceeds from your last sale, maybe and probably most commonly from that Uniquely American method of the Credit Cards.

I went looking for a place for people like me, and couldn't find one. There are zillions of sites out there for startups looking for VC or Angel investors. If that's what you want, you won't find that here.

There are also lots of small business sites, helping people decide, for instance, if they should use a broker to help them purchase a dry cleaner; if they should open their own concept sandwich shop or buy into a franchise. This is not that site, either.

No, this is for the entrepreneur who sees clearly "the business." You know the product inside out, you know what the marketing plan is, you have a good idea of the cash flow. You may not have written out a whole business plan, but if you had a spare 20 hours you could. It's probably web-based, and certainly high-tech.

Even 5 years ago there's no way you could have done this business on your credit cards.
* Coders wanted too much money and moved too slowly.
* The problem you are solving didn't really exist, or if it did the tools to solve it weren't around.
* You didn't have the confidence that comes from surviving the dot-bomb era more or less in tact.

So, now you have a vision of a product that really will revolutionize your niche; that's awesome!

What else do you have?
* An executive office (that accepts the cards, sweet!) or a basement office.
* Some coders working, billing you on paypal (pay them with the card, too... sweet!) and some other workers typing or transcribing or something from Madras or whatever. (You tried the Indian coder thing until you realized they all suck.)
* Some marketing stuff you made digitally; read: cheap.

Maybe you have to go to a trade show, but the show, the hotel, even the cabbies these days take the plastic.

The customers are in the pipeline, but not here in force just yet. A couple months more, maybe six, they'll be beating down the door, and you won't have time for any of this crud.

But right now it's all you. It's your job to keep all those minimums paid, keep the coders on track, keep the marketing up. And there comes a moment when you feel so all alone, so completely isolated with customers not calling you back so there's plenty of space on your voip to have vendors calling you for payment. It's right at that moment that you want to throw out your plan, write up a quick couple of pages and send it off to Guy Kawasaki or maybe Union Square Ventures and have them take care of all your needs, and be your friend to boot. You just want someone to share your burden.

I'm there for you, man. I've been right there. I've been so tempted to submit that plan, go start hanging out with all those smart guys. But I'm telling you, don't do it. You and me, we'll stick together, and get this thing done.

Why? I'll tell you why. It is your dream. Selling your dream is like selling a child.

I've been through the whole cycle now. When it's time to sell, you'll know it. It's like sending a kid to college, it's time for the kid, and it's time for the parent. But not now, when the kid is needing a fresh diaper and a walk or 30 around the living room to be put back to sleep.

Right now you have nothing but bills and a dream. Go to a VC or Angel now and it's like sending your kid to college when he's 3 years old.

Look, VCs will talk a good game about how they just want to help you realize your dream, but if that's so then why do they get half of your dream? What is half a dream, anyway?

I'm clearly over-generalizing here. There are lots of ideas that really do need lots of cash and lots of good advice, and for that, there's VC and all the rest. But remember, for every youtube, there are hundreds of others that get funded and then die in a pile of resentment, legal documents and animus. A few of them move forward a round or two, changing along the way until nobody knows what the heck the dream was in the first place, and everyone walks away feeling... well not really anything. Kind of like the feeling after your sophomore year viewed a few years later. "Was that the year we made that great trip to the lake? No? Well, crap, I know I did something cool that year."

So, that leaves you all alone with your credit cards and nobody else.

Until now. Now you've got me, and I have you, too. Thanks for stopping by. Leave me a note, I'd love to hear about what you are doing.