
Starting a Business in Silicon Valley - imartin2k
http://www.tlalexander.com/business/
======
i_am_nomad
These articles are always a guilty pleasure, because all of us reading them
can point out countless mistakes the author made that we, of course, would
never make. All the time failing to consider that we would simply make
_different_ mistakes.

~~~
nathan_f77
I like this tweet from Zach Holman [1]:

1\. Try something new

2\. Read all the advice from experts

3\. Nod and say “sure, no problem”

4\. Make all the mistakes anyway

5\. Finally understand for yourself what that advice really meant

6\. Advise beginners not to do that thing

7\. Repeat

\---

I've had that experience more than once.

* "Don't remove the credit card field from your sign up form."

* Hmm, but what if I remove the credit card field from my sign up form?

* Conversions went down

[1]
[https://twitter.com/holman/status/990311600451076096](https://twitter.com/holman/status/990311600451076096)

~~~
bpyne
LOL...Substitute "parents" for "experts" in 2 and your comment is an
observation of youth growing up. I think it's a human condition.

------
compumike
> I'd later learn from some hardware experts that you really want to price
> goods like mine around 5x the cost to manufacture.

This. If you're doing hardware, your price needs to be _minimum_ 3x-5x the
COGS.

If you think you're going to win some market by pricing with lower margins,
like 1.5x-2x, you're setting yourself up for failure.

Interestingly, the same rule holds for restaurants: food input costs should be
no more than 20-30% of the meal price.

~~~
nostrademons
I'm kinda curious where the rest all goes. Seems like there's a market
opportunity to streamline operations & improve efficiency if 80% of the
purchase price of a product goes into things that are not the product.

~~~
colechristensen
5x the cost to manufacture, which would not include product development, not
to mention sales, failed products, cost of returns or fixing defects, office
rent, testing, certification, support, and on and on and on.

There is a market opportunity and many people capitalize on it. Amazon is full
of things like this. Generic items or barely designed items with your brand
stuck on them, built by somebody found on Alibaba and shipped to the consumer.
They're fantastically cheap, the margins are much thinner, and the products
range from adequate to terrible.

It's terribly difficult to build a high quality product people will want for
many years (no new design costs) which you don't have to market or do anything
with and can just manufacture and sell for a tiny profit. When it is done
you'll usually find it as a small very specialized family type business which
hasn't sold out yet.

~~~
megaman8
But still, most of those things are one time costs: product development,
failed products, fixing defects, certification. once you have completed those
things, you can keep selling the successful product for decades right?
especially now that the pace of innovation is slowing down. I mean just look
at the clothing industry: a t-shirt today is the same as it was 10 or 50 years
ago, right?

I would imagine things are super high tech and new, would need some iteration
in their first 5 to 10 years, but after that, I don't know.

the costs that scale with each good sold is: Support, cost of returns, Sales,
marketing, etc.

~~~
colechristensen
Name something built by a hardware startup in the recent past or imaginable
future which would be designed once and built for 10 and 50 years exactly the
same.

~~~
Animats
Jenkins valves. Same cast iron gate valves for a century.

Ad from 1924.[1]

Current product brochure.[2]

Jenkins used to advertise that one from a 19th century water main had been
removed because the line was being re-routed by a water utility. The valve was
cleaned up and put on display, and after a while, when everybody was tired of
looking at it, it was put back into inventory and went back into the ground,
probably to serve another 100 years.

[1]
[https://s.ecrater.com/stores/260372/5725ed67b3cab_260372b.jp...](https://s.ecrater.com/stores/260372/5725ed67b3cab_260372b.jpg)

[2] [http://www.cranecpe.com/chem-energy/products/valves/gate-
val...](http://www.cranecpe.com/chem-energy/products/valves/gate-valves)

~~~
fastball

      recent past
    
      1924
    

I think you may've skipped a step.

~~~
jacoblambda
It also says that will be built almost the exact same for the next 10 to 50
years. In this case I would consider recent past everything going back to
around the start of the 20th century.

------
grellas
The difference between the ancient way of working a lifetime for a salary,
perks and a gold watch on retirement and the new one of building a breakout
company in tech lies in a wholly changed business environment by which super-
talented founders with a business sense can draw on a depth of
knowledge/expertise (typically gained from work experience in a demanding tech
environment) to conceive of a solid business model to profitably disrupt
existing enterprises and thereafter apply grit, good sense, unbelievable
perseverance, and basic street smarts to execute on that model via a startup
world that affords amazing access to capital, an ultra-connected network of
technically savvy persons with whom one can potentially ally, and a huge
reservoir of resources by which founders can educate themselves to learn,
grow, and develop.

One might sum this up by saying "Silicon Valley" but it really is most
anywhere in the modern world where any modicum of freedom prevails, though
Silicon Valley still offers unique advantages in my view.

The odds of failing are still stunningly high and those who make it to success
are often bloodied by the process but the door is open today in a way it never
has been before.

Another way of saying this is that, in the founder/investor partnering that is
typically necessary to succeed, no arrangement was even possible for all but a
rare few in mom/dad's ancient days, a reasonable arrangement that skewed
heavily toward investors was possible just 20 years ago, and an even more
reasonable one with founders and investors in near parity (when the founders
are strong) is readily achievable today.

I actually don't believe that the story told in this blog post conveys a
typical situation but what I have just said does so based on my having worked
in depth in this world since the mid-1980s.

~~~
abtinf
> The difference between the ancient way of working a lifetime for a salary,
> perks and a gold watch on retirement and the new one of building a breakout
> company in tech lies in a wholly changed business environment by which
> super-talented founders with a business sense can draw on a depth of
> knowledge/expertise (typically gained from work experience in a demanding
> tech environment) to conceive of a solid business model to profitably
> disrupt existing enterprises and thereafter apply grit, good sense,
> unbelievable perseverance, and basic street smarts to execute on that model
> via a startup world that affords amazing access to capital, an ultra-
> connected network of technically savvy persons with whom one can potentially
> ally, and a huge reservoir of resources by which founders can educate
> themselves to learn, grow, and develop.

The length and structure of this sentence obfuscates its meaning.

~~~
vonseel
After several minutes I was able to read it in full... and lots of reading and
back-tracing.

He says our business model is "wholly-changed" and now founders need to be
super-talented and a long list of other things in order to succeed in the
modern world.

I would argue that founders have always needed incredible smarts and a good
product/market fit to succeed. I don't think anyone would claim that the
"titans" of industry (think Rockefeller, John Jacob Astor) didn't have street
smarts, grit, and perseverance.

> _affords amazing access to capital, an ultra-connected network of
> technically savvy persons with whom one can potentially ally, and a huge
> reservoir of resources by which founders can educate themselves to learn,
> grow, and develop_

For sure, there's more resources (cheaply) available than ever before.

IMO, this should all add up to make it easier to start a business and succeed.
Maybe that's what he wanted to say.

------
TaylorAlexander
Oh wow I didn’t expect this to get posted yet! There is also a video of this
lecture, which I’ve now added a link to in the article.

[https://youtu.be/huOzokY_fME](https://youtu.be/huOzokY_fME)

It’s part of a series of lectures I delivered are African Leadership
University in March. Please check out the playlist here below. I just finished
editing these videos last night!
[https://www.youtube.com/playlist?list=PLP0dfLFk-
anezfZZMB4Dh...](https://www.youtube.com/playlist?list=PLP0dfLFk-
anezfZZMB4Dh-78x_6zVsxIm)

~~~
gurpreet-
Wow this is was truly an amazing piece to read. I have a few questions:

1) How did you manage to keep working even after you realised you were $85k in
debt after 2 years?

2) What drove you further into investing into the business after that point?
Sheer motivation?

3) How did you stay sane throughout all this?

------
maddening
I'd like to see a essay about starting a business outside the SV. Maybe even
outside a startup hippie communities in general.

* no investors interested in pre-seed phase - they all say that you should call them when you are already profitable

* nobody interested in being cofounder - cold cash only

* clients saying that they like your MVP - but you unknown, so they won't buy the product anyway

I don't mean that in SV things are magically happening on its own, but
sometimes I have an impression that anywhere else you have to be twice as bold
and twice as careful to get 1/10th of a result... Yet they are written in a
way that suggest that you can easily reproduce SV results everywhere.

~~~
mattferderer
Check out the MicroConf community -
[https://www.microconf.com/](https://www.microconf.com/)

Read the The E-Myth Revisited (80's classic)

Check out MIT's Bill Aulet's Disciplined Entrepreneurship: 24 Steps to a
Successful Startup & accompanying workbook.

------
Animats
_" I knew at that moment I wanted to run my own robotics company. I have been
hell bent on it ever since."_

Robotics is a tough business. The problems tend to be way underestimated. Even
by the big names, like John McCarthy and Vic Scheinman. There is progress, but
it's slow. I've done some stuff there myself, but never made money off it,
although I sold some technology off to the game industry.

Linear motors have never made it big. They exist, but they're a tiny niche and
cost too much. I once was very interested in Aura, which made the electrical
equivalent of a hydraulic cylinder, but they went off into strange directions,
first subwoofers for gamers (the Aura Interactor), then some financial mess.

If you're building RF stuff, as this guy was, the test gear you need is quite
expensive. More expensive than what you need to build the product. Big problem
for startups.

This guy seems to have failed to research the history of the fields he was in.
That's important in technically hard areas. Otherwise you repeat old mistakes.

~~~
TaylorAlexander
Well I did have the help of Silicon Valley’s most talented RF guy, who had met
me and agreed to lend me his time and lab to help test my product. I never
could have gotten this off the ground without him. Even if I got things
working with my first layout, I’d never have been able to solve the
manufacturing problem I had when the fab house swapped the RF crystal for 5
different clones.

I am forever indebted to Earl McCune for his help:
[http://wirelessandhighspeed.com/](http://wirelessandhighspeed.com/)

I did get a functional RF design that passed FCC testing, but the fear of
regulations around RF sunk me. I read the specifications for wireless in the
US, EU, Australia and New Zealand and designed a frequency hopping wireless
protocol that I believe satisfied all three regions rules. The protocol
supported operating in the 902-928 MHz band, 915-928 MHz band, and the 865-870
MHz band with pseudorandom channel schedules picked as a hash of the network
name.

But damn it was a lot of work. And then I found out about how the FCC also
issues directives that maybe count as law too, so it’s not just part 15 you
have to comply to...

I suppose that could be called a lack of research. I saw it as naïveté and
optimism, which might be the same thing. I learn everything else by doing so
that was my plan for learning to run a business. I can’t research everything
so I just dive in and see what happens. I was desperate to do something.

As far as the linear motors, they were specifically sex toys. The linear
motors worked, but only at the prototype stage and they needed better
electronics and software to work at the desired speed and smoothness the
application would require. Here’s some videos I have not posted publicly, but
have thought I should share (safe for work):

[https://youtu.be/Fm8lxtqEPk8](https://youtu.be/Fm8lxtqEPk8)
[https://youtu.be/H3qLlZ6cJho](https://youtu.be/H3qLlZ6cJho)

See the mildly NSFW web page:
[http://www.mobiusadult.com/investors.html](http://www.mobiusadult.com/investors.html)

And SFW images of the device hardware:
[http://www.tlalexander.com/content/images/2016/12/IMG_7219_p...](http://www.tlalexander.com/content/images/2016/12/IMG_7219_phixr_sm.jpg)
[http://www.tlalexander.com/content/images/2016/12/IMG_7185_s...](http://www.tlalexander.com/content/images/2016/12/IMG_7185_sm.JPG)
[http://www.tlalexander.com/content/images/2016/12/robots_sm....](http://www.tlalexander.com/content/images/2016/12/robots_sm.jpg)

~~~
jpm_sd
That is an incredibly large amount of engineering effort to compete with plain
old vibrators, and also appears to misunderstand the target market.

Was your BOM cost 100x higher than the competition, or only 10x higher?

~~~
TaylorAlexander
As a small business I was trying to compete with awkward or overly expensive
“sex machines” for the niche kink market. Our closest competitor sold for $2k,
and my bom cost was $200, so hopefully 2x-5x lower BOM cost than the
competitor.

~~~
jpm_sd
If you're trying to start a real business, your competitors are mass market
sex toys with a $2 BOM cost, not one-off dildo-sawzalls pieced together in
someone's garage.

~~~
TaylorAlexander
I strongly disagree. Thrusting sex machines are not competing with a $2
vibrator. The goal is not to orgasm but to have an experience worth having,
and thrusting sex machines provide a vastly different experience from a
vibrator. The competition I describe was a functioning small business and not
a sawzall. Honestly your comment seems super dismissive to me, and I don’t
really understand the vitriol after I’ve shared honestly my experience for all
to benefit from.

I wasn’t trying to start a billion dollar business. I was the only employee
and I wanted to make enough to support myself while making a fun product.
Unfortunately the product was too complex for me to do it myself, especially
at that skill level.

------
keeptrying
This is the kind of stories we need in the valley. This more than any other
story gives you a the sense of anxiety that goes with each phase of building,
marketing and launching a product.

Thank you for sharing!

~~~
TaylorAlexander
Thank you for the kind words! :)

------
matchagaucho
_" I lost $100,000 over five years on my first halfway successful venture."_

Real World MBA.

~~~
TaylorAlexander
That’s what I tell myself!

------
ajiang
Yeah, that's the experience of working on a hardware startup. The amount of
anxiety is unreal. Great writeup, with a rawness that most people don't get in
these retrospective pieces.

~~~
vonseel
Does shipping 20 packages a weekend sound kind of low for a pre-manufactured
product?

~~~
TaylorAlexander
It's low. Remember that at this point, I was well past burn-out. I'd burnt out
two years earlier and was still going. I worked a full time day job and had
been doing this all by myself for years. I was tired of working on it, and
sure as hell wasn't going to work 7 days a week for the Nth year. That meant I
spent part of the weekend trying to live my life. It was a miserable balance
and my productivity was super low. Nothing like what it would be if this was
my day job.

~~~
avinium
Great article and appreciate the transparency/honesty.

FYI the link in your profile (www.reboot.love) isn't working - outdated?

~~~
TaylorAlexander
Thank you for the kind words and for the tip! I forgot about that, but you
reminded me that my server is not configured properly and the links should say
[http://reboot.love](http://reboot.love)

I’ve updated my profile and I’ll have to fix my server!

------
dominicr
"I found that the manufacturer did not use the part I specified, but something
else." \- Everyone who works with manufacturers needs to watch out for this,
especially if they're in the East.

I knew a small scale bicycle manufacturer and he worked with a well known &
respected bicycle manufacturer in Taiwan. Even then he'd only get his bikes
produced while he or someone else was on site as otherwise they swapped parts,
or worse, change the alloy mix in the metals to something cheaper but a lot
weaker.

------
scarejunba
What a brutally raw narrative. Thank you for sharing! Things I never would
have thought about.

~~~
TaylorAlexander
:) Thank you! I’m glad my story is appreciated.

------
EGreg
This was frustrating to read. He describes the romanticized notions promoted
by silicon valley similarly to “making it” in Hollywood or as a singer. There,
people waited tables and were peniless but at least they didn’t borrow huge
sums from their parents who borrowed against their home, and then said it was
a huge success when they ended up in the red. Not to mention all the drinking
drugs and stress.

In the end, the guy got crowdfunded, and his girlfriend helped him a lot. They
could have done that from anyplace, living near his parents, and gotten
married.

------
j_shi
I'd like to see more content like this. Find it 100x more helpful than the
success stories. Karenina principle and whatnot. Would gladly subscribe and
pay buku bucks for a more rigorous startupgraveyard-esque page. And would
gladly contribute as well..

------
anon2775
Where to eat, University Ave PA:

\- Cafe 220 $

\- Oren's Hummus $$

\- Crepevine $$

\- Il Fornaio $$$

\- Coupa Cafe $$

\- Local 271 $$

\- Sprout $$

\- Madera $$$$ (Sand Hill Rd)

Man-bod approved.

