High Tech Start Up

You have a brilliant idea. But for a high tech company to make that idea real is an incredibly complex machine to launch. What you really want is someone who has done this before, someone who can tell you how the bankers really make their money, what dilution means, how to quit your current job ethically, and what you should expect at each stage of “capital development.” What you need is John Nesheim, the guru of high tech startups. He’s been involved with Silicon Valley entrepreneurs for decades and has seen everything. Despite being an engineer, he correctly places great emphasis on the emotional costs (to you) at every stage. This book is the best; it doesn’t hide the nasty side, and it is explicit in an engineer’s way about what you have to do. It’s worth its weight in stocks.

-- KK  

High Tech Start Up
The Complete Handbook for Creating Successful New High Tech Companies
John L. Nesheim
2000, 342 pages
$44

Available from Amazon

Sample Excerpts:

The entrepreneur must realize that the process of raising venture capital never ends. From the first to the last of the fourteen stages of the venture capital formation process.. the CEO is continuously occupied with problems of how to raise the needed capital. Experienced start-up staff members of both successful and unsuccessful companies said the same thing: “You never have enough money, things always take twice as long to do as you think, and there is never enough time to stop raising capital while you focus on running the company.”

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Founder CEOs seldom last as employees for more than three years. This is universally lamented by all parties, including the VCs. We will discuss the reasons and cures later in this book. Silicon Valley psychologists report that few founders make it to the IPO without personal emotional trauma.

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Get in touch with yourself. That was repeated by many of the people we spoke with. Decide what motivates you: joy of work, love of wealth, the satisfaction of getting further than anyone expected, and so on. And decide what failure means to you, as a person, as a company leader.




The Case Against Patents

I’m convinced by Don Lancaster’s (and others’) arguments that patents makes no sense for a small-time inventor or technical genius. Patents guarantee you nothing but the right to fight for your idea. Fighting takes a full apparatus, lots of time, negotiating assets, lawyer fees, and emotional surplus. The same results from fighting (ineffectually 99% of the time) can be had by moving fast and staying nimble. Patents are a corporate game and should be avoided by anyone trying to work outside of that framework. Here’s a lot of encouragement and support from a master non-patent inventor.

-- KK  

Case Against Patents (PDF)
via Don Lancaster



The Future of Ideas

This is the book most often recommended to me in the past year. It is very important because Lessig articulates the central reason the web has succeeded – its root as a commons – and proceeds to dissect the problems threatening this commons, and suggests remedies and laws that would protect and nourish it. It is brilliant work, long overdue.

-- KK  

The Future of Ideas: the Fate of the Commons in a Connected World
Lawrence Lessig
2001, 352 pages, Random House
$11

Available from Amazon

Sample Excerpts:

As I will argue, in the digital world, all the stuff protected by copyright law is in one sense the same: It all depends fundamentally upon a rich and diverse public domain. Free content, in other words, is crucial to building and supporting new content. The free content among the “wired” is just a particular example of a more general point.

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This is a hard fact for lawyers to understand (protected as they are by exclusionary rules such as the bar exam), but most of production in our society occurs without any guarantee of government protection. Starbucks didn’t get a government monopoly before it risked a great deal of capital to open coffee shops around the world. All it was assured was that people would have to pay for the coffee they sold; the idea of a high-quality coffee shop was free for others to take. Similarly, chip fabricators around the world invest billions in chip production plants, with no assurance from the government that another competitor won’t open a competing plant right next door.

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Commons may be rare. They may evoke tragedies. They may be hard to sustain. And at times, they certainly may interfere with the efficient use of important resources.

But commons also produce something of value. They are a resource for decentralized innovation. They create the opportunity for individuals to draw upon resources without connections, permission, or access granted by others. They are environments that commit themselves to being open. Individuals and corporations draw upon the value created by this openness. They transform that value into other value, which they then consume privately.

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Contrast this with computer networks. The most striking feature of the early history of the Internet is the repeated assertion by those at its founding that they simply didn’t know what the network would be used for. Here they were building this large-scale computer network, with a large number of resources devoted to it, but none of them had a clear idea of the uses to which this network would be put. Many in the 1980s believed the Internet would be a fair substitute for telephones (they of course were wrong); none had any idea of the potential for many-to-many publishing that the World Wide Web would produce.

Where we have little understanding about how a resource will be used, we have more reason to keep that resource in the commons.

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To the extent you view Napster as nothing more than a device for facilitating the theft of content, there is little usefulness in the new mode of distribution. But the extraordinary feature of Napster was not so much the ability to steal content as it is the range of content that Napster makes available. The important fact is not that a user can get Madonna’s latest songs for free; it is that one can find a recording of new Orleans jazz drummer Jason Marsalis’s band playing “There’s a Thing Called Rhythm.”

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But in light of the emerging technologies for sharing, even the spectrum sold as property would be subject to an important qualification: Other users would be free to “share” that spectrum if they followed a “listen first” protocol – the technology would listen to see whether a certain chunk of the spectrum were being used at a particular time, and if it weren’t, it would be free for the taking.

I recognize that idea is jarring – that “my property” would be free for the taking just because I was not using it. But do you recognize why the idea is jarring? The assumption that fuels the dissonance about property “free for the taking” is that the taken property is exhaustible. I may not be using my car at the moment, but that doesn’t mean you should have the right to take it since your use of my care will, to some degree, deplete the property I have. Cars are exhaustible resources. Spectrum is not. When I use a bit of spectrum at a particular moment in time, that spectrum is just as good after I’m finished as it was before. My use in no way exhausts the resource. And more important, when spectrum is not used, its value as a resource is not saved. Unused spectrum, like an empty seat on an airplane, is a resource that is lost forever.

And pollution is precisely the way we should think about old uses of spectrum: large and stupid towers billow overly powerful broadcasts into the ether, making it impossible for smaller, quieter, more efficient uses of spectrum to flourish. Why should these smokestack technologies get protection, when the steel mills did not? Why not force them to improve their technology – to reduce the pollution they spew forth into the ether – so that others could innovate in yet unimagined ways?




Powering Virtuous Circles

There’s no shortage of opportunities to support important causes. Lots of charities are local and community based. Some are more internationally and future-oriented such as Amnesty International, EFF, Long Now Foundation, World Vision, the ACLU, and Oxfam to name just a few. Everyone can add their favorite.

But let’s say you were interested in a “tool” to leverage the least amount of money into the largest measurable effect over time. For that I’d like to recommend a type of giving that multiplies itself. Over the years, these are the criteria I’ve adopted for this challenge:

1) The help is aimed at the lowest, those with the least, where small makes a huge difference.
2) The gift expands itself, gaining amplitude with each cycle.
3) The range is global.

Think of it as enabling philanthropy: take a minimum of money and aim it at the precise point where it can do the maximum good, multiplied by many generations. Maximum good is measured simply: when you enable someone to enable someone else. That is a virtuous circle.

I’ve found the following three do-good organizations to meet these criteria: Heifer International, Opportunity International, Trickle Up. They fund the neediest in the world. They are highly-evolved programs that produce amazing results. And one tangential result is that when we give to these three, we feel optimistic.

-- KK  



Heifer International

For fifty years the Heifer Project has been providing families in developing countries (and parts of the US) with breeding pairs of animals: cows, goats, pigs, rabbits, water buffalo, ducks, and so on. Even in the world’s poorest regions the cost of a cow or goat can exceed a year’s income, preventing many families from acquiring animals. When a family receives a breeding pair they get meat, milk or eggs, but more importantly, they now have a source of income as the offspring are sold.

The deal with Heifer Project is that the recipient must agree to give one breeding pair of offspring away to another family, thus paying the gift forward. Therefore a small amount of money contributed now will multiply manyfold as families gain food, pride, a source of income, and the means to help someone else. It’s hard to imagine a better gift, or a more practical, proven lever in making a difference in communities of need.

 



Opportunity International

Micro-financing is quite the rage in international circles for one very amazing fact. The payback rate on tiny loans to the workers in developing countries is greater than the payback rate for large loans to their home countries. In other words, from an outright profit perspective, you are better off loaning money to a Bolivian peasant than to the Bolivian government. Furthermore, there is now no doubt that Bolivia itself, and any other country, is much better off if investment goes directly to their poorest citizens than to the government. Several non-profits, starting with the Grameen Bank in Bangladesh, have pioneered micro-credit loans on a large scale and for large investors. I’ve found the easiest way for a helpful citizen to contribute funds to a wide variety of micro-loan programs in different parts of the world is through Opportunity International. Opportunity International has been providing micro loans for 30 years, even before the term microcredit was coined. They work through Trust Banks, groups of 20-30 (mostly women) borrowers who meet weekly for encouragement and to cross-guarantee the loans.

-- KK  



Trickle Up

Rather than dispense loans, Trickle Up issues outright grants, but with strings attached. They provide seed capital and training for micro-enterprise hopefuls. Maybe someone with ambitions for a food stall, or a repair shop. A typical deal is a $100 conditional grant. Unlike in a micro-loan program, grantees don’t have to pay the money back, but they do have to get trained. Grantees must commit a minimum of 250 hours in the first 3 months to their venture, reinvest at least 20% back into it, and keep an account ledger, among other conditions. Last year 10,000 business started via Trickle Up donations, and 30,000 budding entreprenuers benefited from this global program. There is huge emphasis on training for very basic business skills. And follow up expansion grants are offered, too. About 70% of grantees are women.

-- KK  

[Sampa rebuilt her life after rebel attacks by starting a restaurant ]



Die Broke

die_broke-sm2.jpg

God punishes one generation when it accepts the undiminished wealth of the previous generation. The way to escape perpetuating generational richity is to die broke. But what about college for my kids, or when I’m sick, old, or retired? This book has answers for you and very specific tactics for the liberation of all from the myth of inheritance.

-- KK  

Die Broke
A Radical Four-Part Financial Plan
Stephen M. Pollan and Mark Levine
1997, 305 pages
$13

Available from Amazon

Sample Excerpts:

You are not a corporation – you are a human being. Your money shouldn’t outlive you. You should exit life as you came into it: penniless. Your assets are resources to be used, for your own benefit and for the benefit of those you love. Every dollar that’s left in your bank account after you die is a dollar you wasted. Use your resources to help people now when you know they need it, when it will do the most good, rather than hoping they’ll be helped when you’re dead. The last check you write should be to your undertaker — and it should bounce.
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Inheritance is a terribly inefficient way to pass wealth to others.
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You need to shift to a more flexible view of work and career, one that abandons the ultimatum of retirement – a false choice between full-time and no time. Similarly you need to shift to a less rigid approach to earned income. No longer can you look at your earned income as continually increasing up until age sixty-five, at which pint it will stop entirely. From now on you need to approach earned income as you do unearned income. It may grow, it may be stagnant, or it may decrease, all depending on market conditions and your own choices.
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The best metaphor I can think of for today’s pursuit of retirement is of a mass of lemmings busily struggling up a steep cliff and then jumping off the cliff into the abyss.
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Dying broke means living well.




Fidelity Charitable Gift Fund

The only sane antidote to massive wealth is massive philanthropy. But giving is a habit that is best begun before you are loaded; the great philanthropist Carneige began when he was making a few dollars per week. Indeed, some of the most influential funding in history has been small, but creative, grants.

You can write a check any time the spirit moves you, but like all things in life, they are tools that can improve your aim. One tool of philanthropy is a personal foundation. A foundation gives you flexibility and can increase the amount you can give. However you can spend half your fortune — no matter its size — creating and maintaining a foundation, or you can do it the easy way, a way that is suitable to middle class assets.

The Fidelity Charitable Gift Fund provides most of the functions you, a non-tycoon, might want from a personal foundation. Best of all, it requires a minimum of “only” $5,000.

Here’s how it works:

You deposit your contribution in Fidelity Charitable Gift Fund which in turn invests the amount in one of their mutual fund pools. You get to choose the level of risk/payback you want for your money, but Fidelity chooses and runs the fund. Whenever you want to make a donation, you tell Fidelity, and as long as it is a tax-deductible outfit (it can’t be an individual), they send ‘em a check. You can do this online with a very graceful and easy interface; it even remembers all the details of your frequent grantees, so you just need to click.

The main advantages are four:

1) The money grows. Like a real foundation, your money is invested, and the returns on those investments are reinvested and further enlarge your fund for giving. Depending on what percentage you disperse each year, the total can accumulate significantly. (Fidelity suggests you give at least 5% of your fund each year.)

2) You can gift stock (or securities) directly to the fund. When highly appreciated stock (as in a boom), is cashed out it triggers huge capital gains tax for the owners. With a personal foundation you can donate the stock without cashing it. The Fidelity Gift Fund account is credited with the high value of the stock at market value, but the giver (you) doesn’t have to pay for the huge gains, because those gains are now the gains of a non-profit fund. You receive the normal charitable giving tax deduction for the market value of the stock. You can do the same with ordinary stock investments. Say you were lucky enough to buy 20 shares of Amazon when it was at $20 per share. Say when Amazon hit $200 per share, you decided you wanted to do something creative and meaningful with your small fortune of $4,000. You bestow the Gift Fund with the 20 shares of Amazon, which then credits your philanthropic account with $4,000. But instead of having to pay a capital gains tax on $3,600 ($4,000 minus $400, your cost), you get a tax deduction on $4,000. That $4,000 can then amplify further (see point 1). A common tactic for Gift Fund users is to donate their highest flying, most inflated stocks for maximum philanthropic joy and smallest capital gains pain.

3) It’s free. Well, almost free. Fidelity charges the usual industry standard of any mutual fund (less than 1%), but this is far less than hiring a personal fund manager, or even setting up a private foundation yourself.

4) You get to name your foundation anything you want. Having a foundation of your own focuses attention on keeping it full, and encourages discipline in giving it away.

Because accounts within the Gift Fund are so easy to set up they are often used for giving circles. A giving circle is a group of friends or advocates who decide to combine their resources to fund a cause. They create a virtual foundation without the usual expense and work of setting up a bona-fide non-profit (which is needed to receive funds, but not give them) and collectively research and debate who/where/how to fund their mission.

The Gift Fund is so useful for givers of more modest means that is has drawn in about $2.5 billion dollars, making the collective Fidelity Charitable Gift Fund the third largest public foundation in the US, and the number one foundation in total amount of money dispensed last year. Of course it is not really one foundation, but 27,000 small foundations, many of them pioneering creative philanthropy. You don’t have to fund the opera and hospitals. As an example, here are some donations clients of the Gift Fund recently made:

* Support for a historic preservation speaking tour
* Rebuilding a scout camp destroyed by fire
* Support for an archeological dig in a national park
* Support for Native American students majoring in science
* Supplying an animal shelter with an examination table and equipment
* Support for a summer theater

My experience with the Gift Fund has been great. It was simple to set up, with a minimum of paperwork, and when it comes time to make a donation, the effort is pretty painless. Having a convenient do-it-yourself vehicle, with tax breaks, and investment upside, has encouraged our giving.

-- KK  

Giving Account
Fidelity Investments