Hope is Not a Strategy, One is Not a Team, Ideas are Cheap

I've been meeting with lots of people lately -- prospective partners, investors, advisors and customers (in a way, they are all prospective customers) -- exploring different avenues for how best to move the Interrelativity venture forward. In the process, I'm gaining lots of valuable feedback on a variety of dimensions of this endeavor. Three recent meetings, in particular, stand out: Kimberley suggested that I would gain a great deal of insight by reading the book "Hope Is Not a Strategy"; Mike pointed out that even if I did have a crisp, clear and compelling business plan, no angel would invest money in a venture with a team of one; Dan observed that ideas are cheap, what really matters is execution.

At first, I thought Kimberley's book recommendation represented a gentle encouragement to help ground me in reality (a task that often falls to my wife), in response to my unbridled optimism and idealism about Interrelativity.  This may well be the case, but I also see that "Hope is Not a Strategy" has the subtitle "The 6 Keys to Winning the Complex Sale". Interrelativity faces a sales situation that seems complicated to me, given that the primary intended beneficiaries of our proactive display applications are not likely to be the people who directly pay for our services (just as in the days before cable and satellite television, viewers did not pay directly to view programs on TV).

Mike's observation about a team of one is also well taken. I increasingly recognize that one person cannot do it all (or, at least, not this person). [The Grammy award-winning U2 song, "Sometimes You Can't Make It On Your Own" has been resonating ever more deeply with me lately.]  I have been blessed by many wonderful advisors who have provided lots of valuable advice, and a few who have taken a more active role, and I would like to have more people more engaged in helping this venture succeed. I'm reminded of Glenn Kelman's talk at Entrepreneur University 2005 in which he had a slide on assembling in team that included "Find the maniacs and give 'em a reason to believe". I definitely want to find more maniacs ... and I want to give more people more of a reason to believe.

Dan provided some of the most sobering feedback about the viability of Interrelativity, with respect to how much customers would have to pay for our technology to enable this venture to sustain itself ... and grow. He sketched out some numbers and made some concrete suggestions for how to collect more evidence about whether they would really add up to a profitable investment -- for me, or anyone else who might be interested in this venture.

Dan's emphasis on the importance of execution over ideas brought to mind the focus on execution intelligence in "A Good Hard Kick in the Ass: Basic Training for Entrepreneurs", a book by Rob Adams that was recommended a while back by Doug (who has also provided valuable and often sobering advice, on numerous occasions), but that I only just started reading recently.  When the advisee is ready, the advisor / advice [re]appears ... I just hope it's not too late to execute.

Bridging the Gap between Game Worlds and a Games Conference

Interrelativity had the good fortune to work with Evergreen Events to facilitate interactions at the recent Seattle Games Conference.  We deployed a proactive display at the one-day event, where it showed content from profiles created primarily by speakers and sponsors on a plasma display near the registration table in the lobby of the Highline Performing Arts Center.

The display attracted a fair amount of attention, sparked some conversations based on content that was being shown, and led to subsequent interactions in different times and places throughout the conference.  We plan to conduct a survey to better assess the impact of the display and determine how to continue to improve its effectiveness at future events.

One of the benefits we derived from the experience was a heightened awareness of the games industry as an ideal market segment for our technology.  [Briefly, a proactive display is a large computer display that shows content from people's online profiles when they are detected nearby, creating new opportunities for conversations and other interactions.]  Gamers, particularly those in massively multiplayer online role playing games (MMORPGs), have some of the richest online profiles of any group of people I've encountered.  The games they play, the avatars they use to represent themselves, the levels they've achieved, and their teammates or guild members, are some of the many aspects of their digital lives that they may be very willing to share in a physical space shared with other gamers ... such as at a games conference.  Add to that the highly visual nature of much of these digital dimensions, and it seems like a rich source of profile content for a proactive display.

The Seattle Games Conference was intended for students and professionals who were looking for jobs in the games industry. As such, it seemed that attendees were more focused on interacting with the speakers and sponsors than with each other. Since many of the speakers and sponsors had profiles that were shown on our proactive display, we believe our technology helped facilitate some of those interactions.  However, very few of the attendees (other than speakers or sponsors) created Interrelativity profiles, which may have something to do with the intentions and goals of the attendees, but no doubt also due to our ongoing challenges to craft a crisp, clear and compelling marketing message for this technology, and to simplify and the user profile registration interface (we were able to personalize our invitations and assistance to speakers and sponsors before the event, but not with attendees).  Even if we would have had more attendee profiles, I suspect that this kind of technology is likely to have greater impact at an event where there is not such a power imbalance, and the attendees are peers.

Another big benefit of Interrelativity's involvement in this event was the opportunity to work with Cynthia Freese, CEO of Evergreen Events, and an incredibly generous mensch.  The biography on her web page highlights this attitude toward life and work:

Evergreen Events is a conference company dedicated to the enrichment of the games industry through innovative, high-quality conferences that are both informative as well as connective. A dynamic networker who loves meeting people and helping others, Cynthia exemplifies the mission of making connections happen. A mother of three, she is an entrepreneur, volunteer, artist, and a writer who believes in sharing and giving back to her community.

In addition to all the efforts she and her business partner, Suzanne Freyjadis-Chuberka, expended in organizing a successful event, Cynthia still found time to help me better understand how a proactive display might enhance this and other games industry events, and to actively promote Interrelativity among her extensive network of business associates and friends, perfectly illustrating the concept of BizLove (= knowledge + network + compassion) that I blogged about a while back. 

Interrelativity was also fortunate to have the assistance of Scott Axworthy, who founded Immersion Arts with the ambitious goal of creating a year-round Halloween theme park that will provide a personalized and immersive social and entertainment experience for families, friends, tourists, and corporate groups ... possibly involving proactive displays.  Scott helped with a broad range of technical, user interface and [other] design issues for Interrelativity, including debugging a networking "issue" that arose during our setup at the event, helping me observe (vs. facilitate) an on-site user registration process, and suggesting a number of improvements for future versions of the applications.

Entrepreneurship can be a lonely road at times, so partnering with Scott and Cynthia (and members of Cynthia's extensive network) was a welcome boost, and I look forward to further exploring how we might effectively and beneficially bridge the gaps between virtual worlds and shared physical spaces at future events!

Establishing a Fair Equity Allocation within a Startup Venture

A while back, when I was offered an exciting consulting engagement, I had to determine how to establish a fair consulting rate. I did a lot of research, found some excellent resources on the web, and posted some notes on an approach that I adapted to compute a rate that I considered to be fair to everyone.

Recently, I became excited about the prospect of someone who wanted to join the company I founded, Interrelativity, Inc. Aside from the aforementioned consulting engagement, Interrelativity has not generated revenue, so I'm not in a position to offer anything beyond a share of the equity and/or a share of future revenues, and I want to do so in a way that is as generous as possible but also fair to all past, current and future associates of the company. Unfortunately, unlike my last search, I wasn't able to find much useful information on the web; fortunately, I have some friends in the Northwest Entrepreneur Network who provided tremendously valuable help in this quest for a fair way to allocate equity in the company.

Doug Miller, who has founded several startups and now offers his insights and experiences to other startups as a business and strategy consultant, shared some of the data he had collected about equity allocation and other compensation factors in technology startup companies. Although the data varied by different years, industries, company sizes, funding stages, etc., they were fairly consistent with respect to the relative proportions of equity based on title or role in the organization (e.g., the ratio of shares allocated to CEOs vs. VPs of Business Development ranged between 7:1 and 10:1). This provided a good start, but applying this to a company of one was somewhat problematic, since [in this case] the roles are not clearly delineated.

Mike O'Donnell, another serial entrepreneur, and current Chairman of the Board of NWEN, presented another way of approaching the allocation of equity in a startup during his Entrepeneur University 2005 presentation. Mike argued that entrepreneurs should use contractors rather than W2 employees, and offer 3-month contracts that clearly specify deliverables for each contractor. He also offered his approach to determining an amount of shares to offer for each contract: determine the valuation of the company and the number of outstanding shares, use that to calculate the share price, and then for the three month contract, offer an amount of shares whose value equals the hourly rate that the contractor would normally charge for his or her services.

This sounds like a very reaonable approach ... assuming one can determine a valuation of the company. Unfortunately I didn't have a good sense for how to do this. Instead, I decided to use what I did know: I knew how many shares I had allocated myself, and I knew my own consulting rate (from the previous exercise). So I determined how my shares would vest in quarterly installments over four years (the vesting schedule I've been using for all my calculations, based in part on my experience at former employers, but also on recommendations in "The Entrepreneur's Guide to Business Law", a fabulous resource for this, and other, legal issues for startups). I estimate that I'm working somewhere between 60-80 hours per week on this venture, so I divided the number of shares that would vest in one quarter by 720 (60 hours / week * 12 weeks / quarter), and used this as the valuation basis. Actually, I've invested a fair amount of money, as well as sweat, into this venture, and so I used this valuation to go back and subtract out the number of shares that would equal the financial investment, and then used the difference as the basis for the division by 720 (well, actually 11,520, since I was using 16 quarters).

In my discussions with the candidate who wanted to join Interrelativity to help with business planning, development and sales (areas in which I have no experience), we determined that his current salary was pretty close to my own when I left my last job, and so, assuming we would be adding relatively equal value to the success of the venture per hour worked, his hourly rate would be the same as mine. Since he intended to continue on in his full-time [day] job, he proposed to work 20 hours per week on Interrelativity business, and so I offered him a 3-month contract that included an allocation of stock equivalent to one-third of what I would be earning in a 3-month period.

Unfortunately, this offer fell considerably short of the candidate's expectations, and so our discussions concluded amicably, but without an agreement. On the plus side, I was given a powerful opportunity to practice Don Miguel Ruiz' second agreement (don't take anything personally) -- since, according to my reasoning, my assumption about "equal value per hour worked" must not have been shared (although, as I write this, I recognize that this may have been a missed opportunity to practice the third agreement, don't make assumptions) -- and I now feel much better prepared for any future discussions with other candidates who may be interested in joining Interrelativity. And, as always (or, at least, as is increasingly often the case), I trust that this will all work out for everyone's greatest good.

Another Interrelativity Milestone: Helping People Relate at a Holiday Party

Washburn Communication invited Interrelativity to deploy a proactive display at their holiday party at the Civica Office Commons in Bellevue yesterday.  I live (and work) for these deployments -- it was great to have an opportunity to insert this social technology into a fabulous place like Civica and among so many interesting people!  About 25 of the 40 or so guests created a profile before the party, another 5 created profiles at the party, and from what I could see and from what I heard (and acknowledging my biased perspective), the technology helped facilitate a number of social interactions throughout the evening.

I heard [of] conversations about minks vs. weasels, salmon and scuba diving, all triggered by images appearing on the proactive display.  Two people, who had known each other for 30 years, had independently (i.e., unbeknownst to each other) uploaded photos to their respective profiles that showed each of them dressed up as Albert Einstein at different costume parties [update: I just found out that one of them had spied the other's profile image before creating his own profile].  Several people expressed positive impressions about the technology and its impact, and a few had interesting and helpful suggestions for how to improve it, and/or extend it into new types of contexts.

The main application ran without any problems all night.  Due to some local networking challenges, there was a problem in uploading images into profiles directly from the web, but we could save them locally to the laptop I was using as a profile registration kiosk and then upload them into profiles on the server from there.  There were also some issues that arose due to the fact that the kinds of plastic name badge sleeves into which we typically insert the RFID tags aren't a typical feature of a casual holiday party.  Fortunately, people were willing to stick the tags into their pockets, and women with no pockets were willing to insert the tags into their handbags (or simply carry then for a bit until the RFID reader first saw their tags).

It was pretty challenging to independently handle most of the logistics (pack up, transport, set up, assist with profile modifications during the event, tear down, pack up, transport ... sleep).  I was fortunate to have the assistance of a neighbor for loading and unloading here at the house, and of Mark Manca and his extremely helpful catering staff at Seastar Restaurant (who also provided excellent food, drink and service throughout the event) for moving equipment into and out of Civica.  I have an even greater appreciation for all the hard work that others who have worked with me at earlier events have contributed ... and it's time to start thinking about -- and doing something about -- involving others [again] (I met someone at the party who may be able to help).

Now that the technology is fairly stable, and I have enjoyed a successful deployment, I intend to turn my attention to business planning again (particularly with respect to the financial aspects -- the holiday party was a promotional opportunity, for which I am very grateful, but I want to get much clearer about the costs and pricing that will support the growth of Interrelativity).  I attended two very helpful -- and mutually reinforcing -- presentations on this topic (an NWEN Business Plan Writing workshop and an MIT Enterprise Forum seminar on An Entrepreneur's Perspective on Angel Investing) last Thursday, and am finally ready to break through my resistance to engage in this increasingly important aspect of the business.

The Re-emergence of Interrelativity

After months of seclusion, Interrelativity, Inc., is finally ready to re-emerge and open up to new business opportunities.  By way of brief background: Interrelativity designs, develops and deploys proactive display applications, software that runs on computers connected to large displays and sensors (e.g., RFID readers) that detect people nearby and show visual content that is related to those people (e.g., from their online profiles).  Our goal is to bring the benefits of social networking in virtual communities into physical communities, enhancing face-to-face networking opportunities at places and times -- such as conferences, meetings and other events -- where people gather to connect with one another.  I'll share a brief history of Interrelativity below, but first I want to be explicit about our current status: if anyone is organizing, hosting or sponsoring any events that could be enhanced by our proactive display applications, please contact me -- we're ready to roll!

I founded Interrelativity, Inc., in February as a business venture to support the mission of using technology to help people relate to one another.  As I noted in an earlier blog post in the midst of my most recent career transition, I have pursued this mission through various paths over the past 9 years (and in less direct ways before that).  I didn't know much about entrepreneuria at that time, but I decided to exercise some gumption and follow the path with heart.  I am still on the steep end of the entrepreneurial learning curve, but I have been fortunate to connect with some fabulous organizations (e.g., the Northwest Entrepreneur Network) and people (most notably, Doug Miller and Melissa DeLong) who have been helping me in a variety of ways since I took this leap of faith.

As I started developing the business, my friend and erstwhile intern, David Nguyen, started developing the technology.  At the time, David was traveling the country, visiting friends and family, applying to graduate schools, and working on the technical design and development of software for Interrelativity as time permitted.  In May, he was accepted into the graduate program at UC Irvine, where they recently initiated a focus area on ubiquitous computing and applications.  Shortly thereafter, he made the sound career decision to accept an offer for another summer internship at Intel Research to work with another friend, Trevor Pering, where he could focus more on research  ... and actually earn a salary.

Fortuitously, another [mutual] friend, Khai Truong, was finishing his Ph.D. at Georgia Tech, and he agreed to join Interrelativity to take over the technical development on the same day that David started his internship.  Around that same time, I was contacted by Darryl Drayer of the Advanced Concepts Group at Sandia National Labs, who is part of a team exploring the idea of using technology to build community to help secure "soft targets" -- public and semi-public places (such as malls and transportation centers) where it is impractical to deploy guns, gates and guards for protection.  I was honored and excited to have an opportunity to work with Darryl and his fellow team members Curtis Johnson, Judy Moore and John Cummings, to help organize an event, Foil Fest, that brought together a host of brilliant people inside and outside the Sandia community to brainstorm about the topic.

The Foil Fest, held in Albuquerque in July, also represented the first opportunity for Interrelativity to deploy proactive displays, as well as incorporate some innovative new features -- such as a group weblog and a mechanism for posting and viewing biographical sketches of the participants -- into our solution.  While the event itself was very successful, the deployment was a mitigated success.  A new application that Khai developed, which generates semi-random collages of profile photos, ran flawlessly, but we had some problems with the RFID reader interface for the Ticket2Talk application (so it, too, ran in semi-random mode).  There was some confusion among the participants about the different profiles, usernames and passwords required for the Interrelativity web site and the group weblog, hosted by TypePad (and for which we configured password-controlled access ... so I'm not [yet] at liberty to reference it in this blog).  In a post-event survey, the vast majority of respondents reported that the applications added "moderate" or "significant" value to their experience at the event, and the identification of areas for improvement provided invaluable feedback, and overall, I was very grateful for the experience.

However, shortly after the Sandia deployment, family health issues lead to my refocusing priorities from business matters to family matters.  Khai, who had already accepted a faculty position at University of Toronto that starts in January 2006 before joining Interrelativity (and so, even in the best case, I knew he was only intending to be actively engaged in Interrelativity for a limited period of time), decided that the intensity of effort required for ongoing technical development of Interrelativity software was taking away too much time from his research ... in fact, it was taking all of his time.  So, after walking me through the code -- which I tried to understand as best I could, having never programmed in Java, PHP or MySQL before -- he turned his attention to research, and preparing for his new job and upcoming move from Atlanta to Toronto.  I was (and remain) grateful for all his help in getting us to a stage where we could do a deployment, and understand why this was the right decision for him to make. 

Given that I still had/have no financial means to offer a respectable salary (although I was, and am, willing to offer respectable equity), and was running out of friends who were both technically proficient and available for unpaid work, I decided I had to either seek financial investment -- which [I believe] would require learning a lot more about business planning, finances, marketing and sales, in order to develop a comprehensive and compelling business plan -- or assume the technical development responsibilities myself -- which would require learning a lot more about Java, PHP and MySQL.  To be honest, the challenges of the former path scared me more than the latter path, as the fomer path deviated more significantly from my past experience, whereas I did have strong technical skills at a earlier stage in my career.  Under other circumstances, I might have been more inclined to feel the fear and do it anyway, but I was already near the edge of my stress threshold in dealing with Amy's cancer and its treatment, so I selected the latter path (first).

In the long run, I decided it would be better to redesign and redevelop the proactive display code from scratch (informed and influenced by the code that Khai had developed), so that I would truly understand how everything worked, and be in a better position to make subsequent modifications to accommodate future deployments ... and/or future alliances or partnerships.  I had forgotten how much joy -- and accompanying occasional frustrations -- I used to experience in programming.  I was delighted to discover a suite of valuable resources to assist me in this path, including my new favorite technical book, Head First Java, the incredibly helpful JavaRanch forums that were initially created to augment that book, and my new favorite blog, Creating Passionate Users, written by Kathy Sierra, one of the book's co-authors (and which, er,  recently recommended that bloggers reduce talking about themselves by 80% ... oh well).  When I put all the software components together this weekend, and saw a complete working system, I felt a wave of joy -- and empowerment -- that I haven't felt in a long time.

So, now that the technology is in a stable state -- and, just as importantly (if not moreso), Amy's health is in a more stable state -- it's time to turn my attention to the development of the business of Interrelativity ... and I hope I will experience a similar measure of joy and empowerment as I stretch to meet the challenges that lay before me down this path.