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Printed 2014/10/01 02:50AM

Business of Software 2008 - Dharmesh - On Startups

By Steve Jones, 2008/09/11

Business of SoftwareI'm starting a series of blog posts from the Business of Software conference that I attended last week in Boston. If you are part of a small technology business (software, hardware, etc.), especially if you are an owner, I'd highly recommend that you attend this conference next year. It's small, 250 or so people, and everyone is interested in business. It's not a lot about technology, but it's inspiring and exciting to talk about business with lots of people looking to build their businesses.

One of the more intriguing talks was given by Dharmesh Shah, founder of Hubspot.com and OnStartups.com. He was also the most disorganized, but I think people really enjoyed it. At one point he stopped and admitted he'd had hardware problems and brought the wrong presentation on a USB stick, so he skipped ahead to an outline slide and asked us to tell us which items we wanted to hear about.

I raised my hand and asked about Liquidity events since I was interested in them. I'd had one, hope that another falls into my lap one day and so I decided to get his thoughts. He said that they were under-rated, in his opinion, and then got distracted. However I cornered him later on at the reception and he spent a little time talking about how he thinks most entrepenuers wait too long to have them, trying to grow and grow the business. He admitted he's a startup guy, someone that wants to continually start companies and so it's a generic play from him. His thoughts are that he would have taken less money and gotten out sooner if he could have in his first company.

We got a bit of history from Dharmesh on his experiences. He started a company in Alabama, proof in his view that you can start a technology company anywhere. Location doesn't matter for most technology companies. He spent 10 years building the company and selling out for a few million dollars. I think it was 5 or 6, but does it matter? In any case, he was tired of it, had wanted to get out, and had decided to go back to MIT. He went back there and got his CS and MBA together, proving that he's a smart guy, not just successful

At MIT, he didn't want to do a thesis, but had to, and started another company, OnStartups.com, a blogging site. He graduated, then moved on to form Hubspot.com.

He offered a bunch of advice for starting a company and they were interesting. I've got some basic notes that I made, somewhat disjointed because that's what the talk was, so I didn't get as well organized. And I didn't write this stuff up that first night. :(

b: Get started, just get moving and start working on your idea. The best idea usually comes along later.

Products 

Every startup should be embaressed by their first attempt at a product. They are usually really bad. If you aren't embaressed, you probably waited too long to release it. Not sure I agree with that, but Dharmesh thinks speed matters.

Pricing

Soem talk about pricing models, and that you have to look at the cost of customer acquisition (CCA), the Lifetime value of a Customer (LTV) and if the former is less than the latter, you're OK.

You can focus on increasing LTV in two ways: raising prices and reducing attrition. He feels that reducing attrition is where you should focus your efforts. Dharmesh is in a monthly subscription model, so that makes sense, but he feels you really need to get the data so you are aware of the CCA and LTV numbers. Even if you're not sure what they should be or what to do with then, collect the data.

CHI - Customer Happiness Index, be sure that you calculate the probability that a customer will remain with you for the next day/week/month, etc. 

Venture Capital

VC money is relatively expensive, and often not worth it. It's hard to raise, it often causes you to lose some control, and Dharmesh doens't necessarily like it. Do your best to avoid it.

That being said, Hubspot has VC money (along with $500,000 of Dharmesh's money) and he admitted it was a swing-for-the-fences startup. He's hoping to really cash in with this one. 

Overall 

Overall this was an interesting talk from someone that has had success in starting a business. I'd recommend his blog if you are a startup-type guy. 


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