Location: Mahalo HQ, Santa Monica
Date/Time: February 26th 2009 6:25pm
Subscribers: 12,483
Rock out To This While Reading: Don’t Stop Believing
http://www.youtube.com/watch?v=ip1zsUIosoA
Forward To: Startups that are hitting the wall

A lot of CEOs with less than 12 months of capital left have been
asking me for advice about what to do, given the massive economic
turmoil we’re facing. I thought I would take the time put these
various conversations into one email to help those who are “up against
it,” as we say in Brooklyn.

Now, sprinting to the startup precipice is one of the most horrible
and exhilarating experiences you can have as an entrepreneur.

The exhaustion sinks in as you slam on the brakes. You dig in your
heels and watch the dirt and pebbles fly off the cliff as your left
foot dangles down in the ravine, with your right foot desperately
trying to save you. Your momentum could–if the wind kicks in–send
you straight down to your death. Heck, even the two inches of earth
under your right foot could give way and send you to your death.  Or,
you could slip and fall on a magic carpet that will take you to the
Promised Land.

OK, that last part is made up. You’re probably screwed and you know it.

This email is intended for startup companies with less than 12 months
of cash in the bank, who know in their hearts that their VCs have lost
faith, and that Google, Yahoo or Microsoft aren’t going to pick them
up on a magic M&A carpet ride.

This is the email I’d like you to forward to your friends who are
running startups that could go under in 2009.

Some background
————————-
I’ve been to the precipice and faced the fall a couple of times. I’ve
learned a couple of things from the experience. I can tell you that
the first time it happens, you’re terrified, because everything you’ve
done–all the effort and dreams–will probably be lost (like tears in
the rain).

The second time it happens, you’re deeply concerned, but know it ain’t
over until you’re splattered on the boulders below.

The third time it happens, you smile and say “let’s get it on!”

You see, there are two types of entrepreneurs in this world: real ones
and the folks who play entrepreneurs for some portion of their lives.
From a distance, most folks can’t tell who’s who. In up times, when
the market is flush with cheap money and unexplained exits (Bebo,
anyone?), everyone looks brilliant.

It’s only when the tide goes out that you know who’s naked. (Who said
that? I hear it on CNBC every other week now).

The differences between the two types of entrepreneurs become clear
when the fan and the manure meet. The faux entrepreneurs run for cover
rather than dealing with the storm. They go back to their plush,
somewhat mindless jobs as VPs at mega-companies, while the real
entrepreneurs suit up and clean up the mess.

We’re going to find out who the real entrepreneurs are in 2009 because
they are going to spend another 12 months, on top of the last six,
cleaning up the mess. It will be two years of total pain, so before we
go any further you gotta make the decision if you’re in or you’re out.

In or out?
————————-
Here is a really easy way to figure out if you can deal with the mess
in front of you. How many of the following can you deal with:

1. Laying off half your staff.
2. Laying off half your staff again three months later.
3. Spending 20 hours a week on the phone being yelled at and
threatened while trying to renegotiate a dozen contracts–like your
T1, phone system, rent, equipment leases, etc.
4. Having an investor scream at you and tell you that they will ruin
you, your career and that “you’ll never raise money again, you mother
f-er.”
5. Laying off half your staff for a third time.
6. Getting served a half-dozen lawsuits, courtesy of the folks who you
tried to renegotiate with in point number three who wouldn’t deal.
7. Having one of the people you’re renegotiating with come to your
office every week and ask for their check in person.
8. Having the same media outlet that once claimed you were the next
Barry Diller write that you’re a fraud.
9. Not getting a good night’s sleep for six months.
10. Having dozens of paying clients default on their bills.
11. Having staffers who you really need to double down and focus walk
out the door after you helped make their careers.
12. Have the people who begged you for a meeting at the peak not even
return your emails or phone calls.

If you can’t deal with these 12 situations, then you’re out. It’s time
to refresh your resume, tell your board you resign, sublet your place
and go to Thailand. Go sit on the beach and lick your wounds for $40 a
day (all-in) like the fauxtrepreneur you are. You suck. I hate you.
You’re smart enough to cut your loses in a way I could never
understand.

If you think you can handle most of the horror above, well, then you’re in.

How do I know this?

Those 12 things–and more–happened to me for over a year when Silicon
Alley Reporter, my first business, got whipsawed by the dotcom bust.
We went from $11.6m in revenue one year to $600k the next. From 70
full-time people to 12. From a 20,000 square foot office to subletting
ten desks at a PR firm.

Personally, I went from being on top of the world, with appearances on
Charlie Rose, 60 Minutes, CNN, and Fox News, to being savaged in the
press as a fraud who got lucky and who no one would ever hear from
again.

My office used to get 100-200 phone calls a day and I had two
assistants.  Six months later, I answered my own phone–on the rare
occasions it would ring. When it did, it was either my mom calling to
check in on me or a vendor calling to yell at me.

It was the worst year of my life, but it made me who I am today. I’ve
never talked about the tailspin that my business went into, and how I
barely managed to land the plane, but I get the sense that there are a
lot of twenty-somethings about to experience the same thing, and
perhaps my lessons could help.

I’m not going to tell the story. (That would take 80,000 words, a hard
cover and the right publisher), but I’m gonna share some of the
lessons.

Let’s get to work.

The Good News
————————-
If you’re a real entrepreneur, you’re still reading. If you’re a faux
entrepreneur, you’re writing your resignation letter, considering
which beach to surf and how long to grow your beard. God bless you
fauxtrepreneurs, because you’re gonna have a much nicer 2009 than the
real entrepreneurs who are “up against it.”

Of course, a year from now, the real entrepreneurs will be
battle-scarred beasts who are capable of taking big bold risks, and
you’ll still be crying about what could have been with your last
business while attending back-to-back meetings about nothing at BigCo.
Not that I’m judgmental of fauxtrepreneurs who create noise, distract
investors from the real workhorses, suck at their jobs and take no
real risk in their lives.

No, on the contrary, I love you fauxtrepreneurs, because you create
the foundation upon which real entrepreneurs stand. At the start of my
career, it wasn’t east to stand out, but by the time I’d done two or
three businesses and become a fixture in the technology industry, I
had figured it out: Longevity is a big part of credibility. I met
Esther Dyson, Fred Wilson, John Brockman, Jerry Colonna, Mark Cuban,
Ted Leonsis, Seth Godin and countless other luminaries between 1994
and 1997.

Well, it’s a dozen years later and they still take my calls and
respond to my emails.

Longevity is credibility.

Oh yeah, I almost forgot the good news: People’s reputations are made
in the bad times more than the good times.

Even if you’re 100% sure your company is going to crash in the next
six months, you’ll learn more from staying on board than you will from
running. You’ll also earn the respect of your peers and you’ll learn
exactly how people break down and lose their cool. You’ll see how
certain VCs screw entrepreneurs, you’ll see entrepreneurs screw VCS
and you’ll watch the lawyers and landlords collect their vig the
entire time.

Most of all, you’ll realize who you are and who your real friends are.

So what’s the sitch?
————————-
You need to figure out your runway immediately. This is really easy to
calculate: you look at how much cash you burn every month and divide
that into how much cash you have in the bank. Your accountant can do
this for you or you can simply look at your P&L and bank statement.

Once you know how many months you’ve got left, you’ve got to do the
hard work of trying to extend it by at least 1/4. This means cutting
staff, negotiating with your landlord and cutting any and all
recurring bills. You then need to look at your revenue streams and
figure out if you can double them. In most cases, if you do these two
simple things, you will have increased your runway by 50-100%. If you
double your runway, your chances of figuring out what your business
actually is will go up exponentially.

You also need to do a monthly P&L review with your management team.
Look at every single recurring cost you have and figure out how to cut
it. In an up market, this level of obsessiveness is often wasteful,
because you’re in a race to take market-share. In the case of MySpace
vs. Friendster vs. Facebook all having unlimited funds for a period of
time, this makes total sense. Why worry about $100,000 in server costs
if you’re racing to see who gets bought for a billion dollars first?
However, this is not that time. You have to change your style. There
are times to hit the gas and there are times to conserve your gas.

Look at it this way: Getting the most market-share and running out of
cash is the equivalent of getting to the moon first without the
ability to get back to Earth. Congratulations, you won the race… and
now you’re dead!

My primary business right now, Mahalo.com, is lucky to have raise a
large amount of capital and is going to fairly easily make it to
profitability based on our growth curve, runway, modest spend and
significant traffic (we’re at 5.6m unique visitors over the last 30
days).

We couldn’t be in a stronger position.

However, even we recently did a deep review at Mahalo and were able to
cut 30% of our costs in under 60 days. The company is still growing
just as fast, and in fact we’re actually more efficient. There is
something strange about that: 25-person companies seem to get more
done than 40-person companies in my experience (other CEOs have told
me the same thing).

Perhaps it’s because after you trim down you have the most efficient
folks left, or maybe we’re all more focused because we don’t have to
communicate what’s going on to as many people? Does anyone know if
there is any research on optimal team size for startups? I’d be
interested to hear what the studies say. Anyway, we made the hard
decisions and that extended our runway by a year. That means Mahalo
will be here in 2013 if we make every single wrong decision and we’re
asleep at the wheel. Of course, we’re focused like lasers on getting
to profitability and developing a really helpful service. If we can’t
figure this business out by 2013 or 2014 then, well, either we really
suck or there is no solution to combining search and knowledge
exchange (of course we know search and knowledge exchanges can and
have worked–so we’re bullish).

Also, when your company goes through this kind of economic boot camp,
I think you get stronger. You understand which parts of your business
are working the best and which ones are, well, not working at all. We
had one area of our business that was two percent of our spending
making 30% of our revenue. You figure these things out when you start
cutting. It’s a sick and sad process to be sure, but Darwin is your
friend at a startup.

Put your VCs to the test
————————-
If you’re running out of money, you’ve got three choices: cut costs,
make money or raise capital. We’re going to get into cutting costs and
making money below in a minute, but I’m a big fan of testing your
investors. When the market is crushed, most VCs get realistic, greedy
or paralyzed. You’ve got to figure out where you stand with your
current investors as quickly as possible, and the quickest way to do
that is to ask them for more money.

Let’s say you’re burning $200k a month and you have a million dollars
in the bank. Go to your VCs and say something like the following:

“John, we’re going to run out of cash in five months. I’ve developed a
cost-cutting and revenue-generating plan that I believe will extend
our runway to 10 months. I’d like to present it to you and your
partners tomorrow for a half-hour with the goal of doing an ‘A+ round’
of one million dollars. I truly believe in this business and I’m
willing to do a flat-round, bust my ass for the next two years and
come out of this recession on top.”

Now your VC is probably going to start asking questions–as they
should. They may try and push off the discussion of the “A+ round.”
Your job is to stand firm and say something to the effect of:

“Well, we’re both vested in this business and I’d like to take the
time to present to you guys this week and get a response from you
either way within five days. I know it’s a compressed time frame, but
we’re living in extraordinary times, and if you guys don’t believe in
the business the way I do, I can accept that and make other
arrangements.”

At that point, you say nothing. Silence is the greatest negotiating
tactic ever created–use it. Your VC right now will be thinking the
following:

a) “This guy/gal’s a real killer and I wish all my CEOs were this
focused. At the very least, I should hear them out.”
b) “This guy/gal has another opportunity, so I’m gonna have to deal
with this train wreck myself–that will suck.”
c) “This business is a dog and I shouldn’t have invested in it. Since
they’re asking for the truth, I might as well give it to them.”
d) “I’m an idiot and I can’t make decisions. Let me push this out a
couple of weeks and make this person’s life hell while I
procrastinate.”

That last part is not what the person would actually say, but that’s
basically the translation of “let me think about it.”

Now, in cases a, b, and c you’re in good shape. You’re gonna either
get your meeting and money or you’re gonna get told you’re not getting
any more funding. Situation D is what you don’t want. If you’re
running out of provisions in the middle of the Atlantic, your best bet
is to go either East or West–not in a circle.

VCs and investors will sometimes send entrepreneurs in circles, either
inadvertently or as leverage. Sometimes VCs are juggling a lot of
balls and can’t focus. Sometimes they’re inexperienced and/or they
have issues that don’t concern your business, like their limited
partners, their partners or their divorce settlements. Sometimes
they’re cutthroat and know that, when you’re down to your last two or
three payrolls, they can extract a 2-3x liquidation preference out of
you.

It’s your job to force the issue now–don’t wait.

Heck, even if you have a year’s worth of runway, you should probably
do this kind of thing so your VCs know you’re the real deal and so you
know where you stand with them.

Put your staff to the test
————————-
If you’re down to six months of cash, you’re gonna have to cut the
bottom 1/3rd of your staff, if not half. This sucks, but there is no
choice. You’re gonna also have to cut salaries. So, here are some
suggestions on how to do this:

1. Get rid of the non-core staff. Look in places like PR, marketing,
and admin to cut. See if you can put some of these folks on part-time.

2. Look at the salaries of your current staff vs. market and look for
ways to cut the high-priced ones who you can get cheaper at the
current market. I know this sounds cutthroat, but remember, this is
advice for folks going out of business in six months. Another way to
run this test is to ask yourself “Would I hire this person for this
amount today?”

3. Go to each member of the team who is over-paid by today’s market
rate and tell them that you’re probably going to be cutting their
salary and that you’re increasing their options. Ask them how they
feel about it. Some people can take a pay cut, others can’t–you don’t
know until you ask.

I’m really against cutting people’s pay above cutting position because
you want the people remaining in your organization to be happy. Of
course, sometimes that’s just not realistic. Many CEOs overpay in a
hot market because they feel they have to, and those folks are the
ones who really need to take this hard action now.

Put your landlord to the test
————————-
Call your landlord and ask them to get a cup of coffee. Do this in
person. Let them know that it’s 50-50 you’re going out of business and
that you need their help in the form of four months free rent,
starting today, the ability to sublet some space (if you don’t have
that right already) and to keep the rent at the same rate you already
have. Tell them you feel horrible about this, and you wouldn’t ask
them to do this if it wasn’t urgent, but you didn’t want to drop the
bomb on them five months from now when there were no more options.

Remember, silence is your friend. Tell your story and see what they
say. I did this at one point and not only got free rent, I got 50% of
our letter of credit freed up. It was a win-win. Trust me, your
landlord is probably facing a LOT of fallout right now… better to
get half than nothing.

Put your vendors to the test
————————-
Since you’ve probably got webhosting, CDNs, equipment leases, and
other recurring charges on your credit cards, cancel those cards
immediately. Call up each vendor and tell them you need six months
free while you figure out your status, and if they can’t do it, ask
for suggestions. Then call each of their competitors and let them know
that you are willing to switch over for the first six months free.  If
you get one of four vendors to do this you just saved 25%–I bet you
can get two or three.

Vendors would rather eat some profits for six months than lose your
business. If they can’t support you in your time of need, then you
should find someone who will. There is a LOT of competition out there
and you can negotiate harder than you probably think you can. Tell
vendors you’re willing to switch if they give you six months free and
see what they say. We’ve had folks offer us a *year* of free service
to switch (of course, that’s an exception, not the rule).

Put yourself to the test
————————-
If you’re going to ask so much of your staff, investors and vendors,
you obviously have to take a hit yourself. Go to your VCs and ask them
to participate in the next round–the A+ round. Tell them you know
it’s not a lot but you want to put in $5 or $10k in the round as a
show of support. This will result in them saying it’s not necessary.
After that, tell them you’ll sell your car and take a bike to work and
put $20k into the business if you can get that for your car. Make sure
your staff doesn’t take a bigger cut than you do in salary if you’re
doing salary cuts.

Even if it’s just ceremonial, it means a lot to make cuts. I’ve
stopped traveling as much to conferences even though they cost me
little to nothing (normally people pay me to speak or at least pay for
my travel). Of course, don’t cut traveling if you’re going to
conferences where you might find clients or investors (which is why I
travel half the time!)

Put your product to the test
————————-
As Mark Cuban told me over and over again, “Sales solves everything.”
If you can’t sell your product, it’s not a product–it’s a hobby. Take
your consumer service and sell it as a software package to someone. Go
on the sales calls yourself. During the final year of Silicon Alley
Reporter I made cold calls and set up lunches to sell folks on our new
product, Venture Reporter (the rebranded Silicon Alley Reporter). It
works. When people see the CEO making sales calls, they respect the
company and take it seriously. When the VCs and staffers see you doing
this, they get inspired.

Put a whiteboard up and count any stat you can: sales calls made,
meetings scheduled, contracts sent and sales closed. Give your team
something to think about other than just the bottom line, because you
might have to celebrate the little victories before getting the check
in the door. Celebrate getting the meeting. Celebrate sending a pitch
out.

What to do if it’s over
————————-
If you’re going to hit the wall, you should do so with three or four
months of capital left in the bank. You should cut down to your core
staff and tell them “we have 120 days of cash left and we’re going to
try to land the plane safely. If you want to leave at any point during
the 120 days you’ll get the reference of a lifetime from me. If you
help us land the plane safely I think we’ll all be better off because
of it.”

Then make a plan to do one of the following:

a) sell the business
b) close the business
c) sell the assets of the business

There’s a little bit of overlap up there, since sometimes you close
the business and sell the assets, or you sell the assets and leave a
shell behind. The point is, don’t wait until you have a month left. Do
it when you have 120 days left. If you signal to everyone it’s over,
you’ll have done the honorable thing for your employees, by giving
them the maximum time to have a safe landing, and for your investors,
by allowing them to roll the business or its assets into another
company.

The worst thing to do is to delay this process. I’ve gotten down to
this point exactly, but when I was at break-even at my first business,
we looked for a buyer, because I didn’t think we had much chance of
making it on our own in the 2001-2002 market. I could have been wrong
about that in retrospect, but either way, I’m glad I got out because
it set me up for Weblogs, Inc.

And that is the final lesson: when one door closes, three more open
up. When you shut down your business properly, you will have a clean
slate and renewed energy to take on your next project. You might even
get the investors to give you the company with the 90 days worth of
capital left to start your next project with a recapitalized
structure.

Remember that there is no shame in failure but there are honorable and
dishonorable failures. If you’re going to lose the game, remember that
it’s just that: a game. There will be another and another and another
yet to play. Don’t lose your cool and don’t get depressed. Just get
yourself back up, dust yourself off and get back in the game. The
precursor to success is almost always failure.

[ To the 17 folks who made it to the bottom: If you're struggling with
failure right now, if your business is failing and you don't think you
can go on, remember that at the very least you've been lucky enough to
take your shot. That's more than most people get. You're going to be
much stronger for getting through the heartbreak of a failed business.
Also, you've always got me--your pal Jason--if you need a shoulder to
cry on. I'm only an email, tweet or IM away jason@calacanis or
jasoncalacanis on skype/twitter/AIM. ]

Wanted to do some shout outs to folks involved in discussions with me and Mahalo. This will probably wind up being a regular post as I’m really slow in responding to folks who are generously giving us attention and feedback. I really do appreciate it, and I try to respond here or on Twitter as much as possible.

If I missed anything important from the last month or so please let me know in the comments.

Upcoming conferences (I’ve cut back so I can focus on Mahalo and TechCrunch50):

1. Will be speaking on a panel (I try not to do panels, but a close friend asked) at the Personal Democracy Forum on June 24th. It’s a really great conference that anyone in tech and/or politics should attend.
2. TechCrunch50 is taking place on September 8-10th in San Francisco.

A bunch of folks mentioned Mahalo Daily’s Steve Jobs 107 minute keynote–in 60 seconds today including:

1. AppleGazette
2. Viddler’s blog
3. The most excellent TUAW.COM (I named it!)
4. touchPodium
5. This dude in Hong Kong with a very cute kid (i think Hong Kong!)
6. TheAppleofmyi.com
7. TheNextWeb (which I’m going to be speaking at I think)
8. Christian (with a very cute baby) featured it

A number of folks have “shown us their Mahalo!” including:

1. Russell Heimlich
2. A Mahalo hat was spotted at the Brandenburg Gate in Berlin.

Many folks checked in on Leah D’Emilio winning the hosting spot on Mahalo Daily:

1. Mahalo Superfan Larry: Did they make the right choice?
2. Andy DeSoto asks: Mahalo Vlog Idol: a success or failure?
3. Leah D’Emilio’s winning viral video: Touch my Body (aka Touch Lon’s body) now has over 150k views on YouTube alone.
4. AndreasKothe had something to say about it (translation?)

Podcasts and Videos:

1. We discussed the Steve Jobs keynote on the gillmor Gang on 6/9/2008
2. We talked with Google’s Mark Lucovsky on the gillmor Gang on 6/6/2008 my old pal Dan Farber wrote up the visit on CNET.
3. Shill Podcast refuses to play my submitted comment–you #$%#@$ bastards!!!

Other stuff:

1. Paul P. Brown mentioned my “How to save money at a startup” post in the The New York Times small business section today.
2. Jay Greene featured my purchasing experience at Blue Nile in a story in BusinessWeek. I love BlueNile.
3. My old pal Steve Hall at AdRants mentions ZobZee which will allow you to read my thoughts in the shower (no jokes in the comments please—ok, go ahead).
4. My other old pal–and sparing partner–Duncan “down under” Riley mentions my SEO philosophy while making some good points on syndicated content.
5. Tim Marman mentions marc Andresseen and myself on our positions that startups should raise capital when they can. Fairly obvious from my point of view: if you get good terms and you’re going big raise capital. If you’re going small–and that’s ok–run off revenues. I’ve done one or the other–I just won’t do both at the same time.
6. Someone made a page on Citizendium about FatBlogging.
7. 1938media says Calacanis Diversifies revenue steam. (photo)
8. DealHack mentions my love for the DASH GPS
9. Mahalo Superfan Larry covers my “Entrepreneurial Insanity” talk

Mahalo related:

1. Search Engine Roundtable mentions Mahalo in a conversation between Matt Cutts and Danny Sullivan.
2. e-consultancy talks about our video game traffic
3. The Next Web talks about us giving the audience “not so insane levels of control” after reading my Wikipedia 3.0 post.
4. Ryan Spoon checks in Mahalo opening up for more user participation.
5. Daniel Yomtobian says social search as failed, but then says it will work: I’m not going to fall for that link bait!!! Oh wait… I already did!
6. Shoemoney mentions my FeedFront cover.

[ Editor's Note: Part of me doesn't want to even write this story because it involves the death and health of friends. Part of me feels the need to discuss the topic in order to reach out to friends who pushing it too hard. I'm conflicted. I'd ask that folks who join this discussion about stress and work please do so with civility and good faith out of respect for folks who have passed. I know, Calacanis calling for civility sounds ironic, but this is a very sensitive topic for everyone involved. ]

The New York Times wrote a somewhat sensational story–ok, a very sensational story–about the death of two bloggers. Those two bloggers had both worked with us at Weblogs, Inc. at some point so I have some insight into the individuals and each case (note: they both worked with Weblogs, Inc. briefly and part time, and they weren’t working for us when they passed–so I don’t have total insight into their cases. I don’t want to overstate my knowledge of the situations that lead to their passing). The Times also mentions my friend Om Malik who recently recovered from a heart attack, and my friend and business partner (on the TechCrunch50 conference) Mike Arrington.

Essentially the story was about four of my friends: two have passed, one who almost died, and one who is living an admittedly unhealthy and unsustainable lifestyle. It hits home in other words.

The New York Times sees the common thread amongst these folks as blogging, but that’s a superficial assessment. The truth is the common thread amongst these four individuals–and it’s kind of shocking the New York Times missed this–is they were all entrepreneurs.

The Times would have been better off blaming entrepreneurship over blogging. Of course, there are tons of healthy entrepreneurs out there who are not dying, and a certain number of men between 35-60 die from stress on a regular basis, so the story’s premise is flawed from the start.

“Fake trend” stories like this one intended to get headlines. Building a story like this involves finding three of something. In this case they found three people involved with blogs who died/almost died, and put some causation there. It’s bad journalism at its finest in many intelligent people’s opinion. I can’t disagree with them, and I’m sure the author and the editor who green-lighted the story had the same debate were having: “should we run this? are we fabricating a trend when there isn’t one?” I’ve been involved in those stories as an editor.

Perhaps on the blogging front they are faking it, however there is one thing the New York Times did get right: the human species inability to deal with stress.

• In the case of my friend Marc Orchant, God rest his soul, he was under the stress of trying to build a blog network.
• In the case of Om Malik he was under the stress of trying to build a blog network.
• In the case of Michael Arrington he is under the stress of trying to build a blog network.
• In the case of Russell Shaw, God rest his soul, he was trying to build out a blog network (one he didn’t own, but worked for). He was also trying to hustle freelance writing gigs–which is an entrepreneurial effort in and of itself.

These are all examples of fairly new or first-time entrepreneurs running hard in a high-growth sector.

Nick Denton from Gawker and I both built blog networks and we both were not under this level of stress. Sure, we had some day-to-day stress, but not debilitating stress. What’s the difference? Why did Nick and I not have massive stress and these folks do? Experience, exercise, and perhaps a little perspective come to mind.

Nick and I both got our asses handed to us during the dotcom boom and bust cycle. Nick, who I am fond on and individual basis truth be known, and I spent many a lunch laughing and joking about the meaninglessness of it all. We both had massive perspective on the businesses we were building at Weblogs, Inc. and Gawker due to past failures. If the blog business took off great, if it crashed that’s life. Nick had the added security of being a millionaire.

Having lived through a crash and had to cut my staff from 70 to 12 people I understand the stress folks are feeling. That was the most stressful moment of my life. Lucky for me during that time I was also running marathons and teaching/practicing Tae Kwon do two or three times a week. I had balance in my life that let me get through the very rough downtimes.

Stress is actually helpful when running a business. Stress is the warning system that something is either going wrong or could go wrong. If you didn’t have stress you might not do what you need to do to survive as a business. A business without stress is probably not a business you want to own.

• YouTube had the stress of a huge copyright lawsuit
• MySpace had the stress of Facebook and the perception that the service was dangerous for kids
• Google has the stress of Microsoft
• Netscape had the stress of Microsoft (a justified stress)
• Yahoo has the double stress of Microsoft and Google
• Newspapers has the stress of Craigslist
• New York Times has the stress of bloggers, Criagslist, unhappy journalists, and pissed-off shareholders
• Craigslist has the stress of EBAY (of course, Craig is cool he doesn’t seem to stress but the business should stress EBAY in the market)

You get the idea. Great businesses will feel stress. Stress is like pain in your body: it’s lets you know where to focus your attention. You need pain and stress as a feedback loop.

Now, adding to the issue in the story is that many of the folks listed were leading unhealthy lifestyles that included bad diets, smoking, drinking, and not sleeping. That alone will kill you. If you add the stress of building a business and growing older you’re really pushing the envelope.

Mike Arrington has no balance in his life right now and I’ve been working with him on the issue. Having no line between your home and your office is just not acceptable: he has to kick people out now. (this coming from the guy who had 20 Mahalo folks at his house for four months last year). Om Malik didn’t have balance in his life from what he’s explained, and now he is explained over and over the balance he’s setup. I’m really happy for Om.

Now, the collapse of my first business was hard on me, but I knew in my heart of hearts I was a good person doing the best I could. I had family, friends, and other core activities that made me who I was and I was able to carry on. It wasn’t easy. I didn’t sleep many nights. Of course, I was also only 30 years old. If I was 30 pounds heavier (like I was when running Weblogs, Inc), wasn’t running marathons (which I stopped in 1999), and was 36 the Silicon Alley Reporter experience might have killed me, who knows. Scary thought for me, and part of the reason I’ve radically changed diet and exercise over the past couple of years.

Stress kills men. It’s a fact. An ugly but true fact.

Does this mean you have to become a hippie and leave work at 4pm to go rock climbing and not aggressively build your startup? Does this mean you can’t be a workaholic? Yes and no.

If you have tools for dealing with stress you can burn the midnight oil and never feel stress. I’ve always worked really hard but very rarely had stress. As time goes on I feel less and less stress. In some ways I think I’ve realized that life is just a big video game and if one game doesn’t work out you put another quarter in and try again. It’s no big deal. That’s the great part of the society and time we live in: you can go for it, fail, and then go for it again. Nothing is lost, a lot of experience is gained. You can’t act a fool, but you can reach for the stars and miss.

There are techniques for dealing with stress and folks have to learn them and they have to learn them now. I am worried about my friend Mike Arrington. He has to get an office space, he has to change his diet, he has to sleep, he has to exercise, and he has to delegate. He’s starting, Heather is a great asset in that regard.

The good news of the NYT story for me is that Mike’s quotes are a cry for help. He’s looking for a solution to his stress. Here is the best one I can give him: it’s all a big game, don’t take it seriously. If TechCrunch were to implode–and there is a chance that every business could implode–you could run it down to just Mike blogging every day like he did at the start and have a great life. That should give Mike the freedom to know it’s all upside. He’s playing with the house’s money to a certain extent. Everything is icing when you turned a hobby into a 30-50M business.

Of course, taking that from your brain into your heart is not so easy. It takes time to get that perspective.

I’m going to do a longer post on dealing with stress but here are the most important things I can think of:

1. Diet
2. Exercise
3. Spending time with good friends doing fun things
4. Perspective
5. Sleep
6. Talking about things that cause you anxiety with people you love and trust (i.e. letting the steam off)
7. Flow moments (this is a blog post in itself)
8. Vacation

Stress is the number on work-place issue in my mind. We’ve got to figure out ways to deal with it. I think I lack some perspective on the issue since I don’t experience it. I’m going to do some followup posts but I’m hoping this post will bring some folks out of the wood work to discuss the issue and how they deal with it.

What are your ways of dealing with stress?

{ Mahalo by Mermanic }

1. I’ve been so happy over the past week… I wonder if the puppies have anything to do with it?

2. When you create a startup you’re creating your own world. I highly recommend that when you do this you build a world that you and your team want to live in. For example, I don’t like working with folks who punch a clock and who do average work. I’ve always resented folks who do average. So, when building the team at Mahalo I just asked everyone up front: are you interested in a balanced life or in obsessing over building a revolutionary service? People will opt out if you tell them up front–and over and over again at the company–that your startup is for folks looking to do amazing work.

3. In relation to point two, we’ve created a system here at Mahalo that rewards the folks who do excellent work and give the folks doing very good work a road map of how to get to excellent. If folks do “ok” or “good” work we just tell them that they should find a new place to work. We do this with six month reviews. The upshot of this is that if you get rid of average to good folks it makes the very good to excellent people more incentive to stay. Excellence breeds excellence, and average work drags down the excellent folks (i.e. “why should I do excellent work if the person doing OK work gets to be here as well?”).

4. We’ve got an amazing team of ~50 people here. Folks are having fun, working hard, and learning a LOT. It’s been just over 100 days as a public product and we’re soooooooo far along. Really feels like we’re in the zone. Can’t imagine how great the next 100 days will be.

5. Robert Scoble pointed out this week that there was almost no coverage of the DEMO conference after MASSIVE coverage of the TechCrunch40 conference. I noticed this as well, and I can tell you the reason: we had better companies presenting better ideas. This stands to reason when you think about: a) we didn’t charge folks, so we got first shot at the best companies, b) because we didn’t charge we could have really early stage companies with bigger and riskier ideas, and c) when you have great companies the press stays to “see what’s up next.” It didn’t hurt that we had Google, AOL, Yahoo, and Facebook all make announcement at the event as well.

6. I think this might be the last year of the DEMO conference, or at least in it’s current incarnation. My personal goal in starting and partnering with Mike on the conference was to kill the “pay to demo” virus. As I’ve said, I find that concept offensive as an entrepreneur. That being said, I think DEMO had like, what, 50 companies pay ~$20,000 to present… so, I think if folks are willing to do it then maybe it will always exist?

7. I’ve decided to not talk about politics on this blog. It’s just not worth the effort.

8. I hate politics. My personal believe system says that if you want to change the world go ahead and do it, and don’t use political channels to do it. If you want a community garden or park I suggest going out, raising money, and building it. Why wait for the government? I think the fact that so many people feel that the political system is the way to get things done is a HUGE problem. If you want to get things done just do them. If you don’t have the means to change something then go find the means to do it–but political systems are the worst for getting things done.

9. After working on the open internet I don’t think I could ever work in a closed system where you need to ask for permission to do things.

10. Folks are reporting that AOL is moving to an advertising network model. That’s kind of smart… ad networks are great businesses and AOL certainly has a lot of advertising assets. That being said, I don’t think the portal strategy is dead. In fact, I think Google is building a next generation portal and Yahoo is about to revamp their’s. Facebook is a portal strategy as well. Perhaps the thinking is that AOL is stronger in advertising then in portal development, so play to the strengths.

11. Propellers traffic–according to Alexa–is greater than the Netscape.com domain. This tells me that Netscape.com benefited GREATLY from switching to the social news space. In fact, switching stopped the three year decline. The problem was, of course, that you can’t see an increase on an Alexa chart when you have two things occurring at once: a) the netscape browser default audience going away and b) the social news service audience growing. So, I feel some vindication over the “netscape was a failure meme.” Netscape is a growing and thriving community and it will be a top 500 site over the next year if AOL keeps investing in it–which I hope they will.

12. And yes, I feel some vindication that Digg’s latest group of features were “copied” from Netscape. Digg added messaging and relationships a full YEAR after Netscape. Of course, no one will ever say t hat Kevin copied us–but that’s ok. They will never say that Kevin copied Pownce either. Frankly, I think it’s cool to evolve each other’s ideas and create competition. I just think the digg crowd treated our hardwork unfairly because we were doing MASSIVELY innovative things in social news that DIGG itself incorporated a year later. I wonder if digg will start paying their top user next?!?!?

13. All that being said, I think Kevin Rose is great guy and very smart. We actually have a nice time when we hang out and have plenty of things to talk about. it’s funny how the media pits folks against each other for sport.

14. Related to that random thought, some how I’ve be labeled as “anti-Facebook” by a large group of the media. Just because I felt overwhelmed by Facebook doesn’t mean I’m anti. A lot of folks have felt overwhelmed by the Facebook onslaught of 2007, and Zuckerberg himself talked about how they have to pull back the throttle on application spam. So, for the record: I love Facebook. I use Facebook every day. I am NOT anit-Facebook, in fact I’m pro-face book.

15. That being said, I think if you build your company based on a Facebook application you’re a fool. If you want to build a real business on the web you need to have ownership of your brand and destiny. If you want evidence of this talk to the AOL information partners when AOL switched from as rev-share to advertising based (circa 94/96). It was PAINFUL. Some day Facebook will be publicly traded and how they operate is going to be based on SHAREHOLDER value, not Facebook application developer value. That’s just the way it is, and frankly the way it should be.

16. That doesn’t mean building Facebook apps isn’t a business or that you shouldn’t do it. It’s a great thing to do if it bring people back to your core product or service. However, I would build your business with the contingency of “what if our Facebook traffic went away?”

17. I really need a vacation I think. I’ve been burning it for months now….

18. I think I’m the happiest I’ve ever been in my life right now.

19. The 4400 is a great show, you should catch up.

20. Law and Order SVU was great last night.

21. I’m going to be in a movie with Josh Hartnett next year. The movie is about–wait for it–August of 2001 in Silicon Alley. Yes, I play myself.

22. This is the second movie I’ve done. The other was with Peter Sarsgaard and is called “Center of the World.”

23. I give Valleywag 48 hours before they post clips from #22.

24. I think I’ve said enough for today.

Comments are open for one day.

We’re looking for someone to be Editorial Director of the Weblogs, Inc. Network.

It’s a consulting style gig you get to work from anywhere, you get paid a flat-fee and you do the work on your schedule. That’s our model, we’re trying to build a company with people working from home (or wherever they like), when the like to work and how they like to work.

The model of commuting to an office every day for two hours, punching a clock and watching the clock is so disgusting to me now. I’ve found that most talented people out there prefer to work on their time schedule, pick up their kids from school, work late at night or by the pool with their laptop. Who am I to fight thatespecially considering that is my preference as well!

OK, back to the gig. I basically need a right-hand (wo)man to help me run Weblogs, Inc. on an editorial basis. So, like Xeni, Gordon and Rafat helped me build Silicon Alley Reporter, I need a Star. Someone who is motivated to create great things, doesn’t look at the clock and wants to kick ass every day. Really don’t have time for lame people these days I can’t be chasing people to do their jobs.

The goal of the job is to make Weblogs, Inc. kick ass: help me find great bloggers, train them and support them every day. Blog cool stuff when you see it, help me come up with ideas for new blogs, create logos for them, find great domain names for them and build them.

An average day might start look like this:

1. Find a new blogger for the Google Weblog.

2. Do a couple of posts on the Social Software weblog because our blogger is traveling that day.

3. Turn off some comment spam on Engadget.com

4. Hit the gym.

5. Give the editors of Autoblog.com a tip about a neat iPod hack for the Mini Cooper.

6. Come up with an idea for a yoga blog, find a name for it, work with a designer to create a logo and then start the search for a blogger.

7. Play some City of Heroes with the boss manwOOt! wOOt!

8. Read through 200 samples sent in for our advertising industry blog and pick the five best ones.

9. Take a dip in the pool and brainstorm on ideas for the next two dozen blogs.

10. Obsess over all the tips coming into the network from our readers.

This is a work-from-anywhere position and it’s a consulting gig (i.e. 10-99). Perhaps some travel to come to cool events with me and blog (i.e. CES, Sundance, tech events).

You must grok blogging 1000%, kick ass and never say die to get this position. You have to be looking to build something and not be complainer about working at a startup company. If you’re looking for a cushy job and want to punch a clock please don’t waste my time and send your resume over to CNET.

You take this gig you’re gonna learn a lot, have a ton of responsibility, make a name for yourself, build a Rolodex and go off and start your own company in two or three years. You’re also going to work your ass off and create some of the most innovative shit on the Internet. That’s the deal.

Email me at jason <at> calacanis <dot> com and tell me why you’re the right person for the job, tell me about yourself, tell me about your failures, tell me about your successesheck tell me what you would do if you were running Weblogs, Inc. because we’re trying to figure this whole blog thing out ourselves and you’ll be having a direct impact on how we run the business!

Let’s rock and roll!

I’m in the Web Entrepreneur Panel 2004 hosted by my friend Phil Kaplan. From the SXSW site:

A panel of independent entrepreneurs from across the country discuss building, growing, and maintaining successful Internet-based businesses.

Philip Kaplan , Founder – Fuckedcompany.com
Evan Williams – Google
Jim Young , Founder/CTO – Hotornot.com
Jeff Dachis , CEO – Studio Holdings
Richard Yoo , Founder & CTO – Rackspace Managed Hosting

Some of my (paraphrased) notes:

Jeff said he looks for companies that can go from startup to market dominator and get to $20 million in revenue. He said he looks at things at a macro level. He said he will only dedicate himself to a business if it is a home run.

Yoo says he evaluates business that are stacked in his favor. He says he can feel it when it is a good idea.

Young says that good ideas are a dime a dozen, but the main difference is being able to execute on them. Do you have the resources and contacts to make them happen. There are lots of good ideas, but good ideas that you can do are rare and you need to jump on them. He is very unprotective about his ideas, and he likes to ask people about his ideas.

Williams pointed out that most business do something other then they were intended to do. He said Pyra wasn’t created to build blogger.com. Williams said he was used to be very product orientated, as opposed to being business focused. He says O’Rielly says “business is the context in which to do interesting things.”

Kaplan says he thinks he should go with an idea when it pulls him inwhen he gets obsessed with it. When he can’t sleep and eat, and when the idea is all he thinks about, that is when he knows he wants to do it. Phil says he automates everything as much as possible and that he anticipates every question that someone could ask and puts the answers on the site.

Young said when you get your first competitor you get scared, but it is faltering because your idea is worth imitating.

Dachis talked about how you start with a product-centric view, then once the product is out there and everyone has the ability to copy it and use it. To take something from a product to a company is a big leap.

Phil: Nobody cares about how the software works, they care about how it works, how easy it is to use, etc.

Yoo talked about RackSpace.com and hosting is a commodity business, and that there twist was that they went after power users and gave great services. They got a lot of people who were used to dealing with $10 a month hosting that was not robust, and that these users were spending all their time on technology and not on their service. He said high-tech support was how they dogged the competition. He says now people have gotten better in hosting, but that his reputation and brand are protecting him now.

Dachis agreed that branding helped him at Razorfish, and that he made his web services firm the high end and out priced everyone by hundreds of thousands of dollars.

Williams pointed out that brilliant branding of the panelists including RackSpace.com, FuckedCompany.com, AmIHotorNot.com and Razorfish. He said if they didn’t have great names they would not have been great.

Young spoke about how press was key. Salon did a story on AmIHotorNot.com and Young claims that the press is viral and you just need one good story to get hundreds of hits.

Dachis said that he got started because Razorfish.com had done some cool stuff early. Dachis said he was aggressive about sending press releases (he joked he would do a press release if he tied his shoe laces). Dachis said that he had too much attention and was turning away tons of clients (how ironic).

Kaplan says his web businesses take six months to reach profitability.

Young said everyone at the start thought they were a porn site, so he started a company Eight Days so that he could call people and not say he was from “Eight Days” not “Am I Hot or Not?”

Dachis says “Make money don’t take money.” He says the VC thing got out of control. Williams says that some business can’t be bootstrapped, he points out Google. Dachis concedes you’re not building a cable company with no money. Yoo said RackSpace.com was profitable in a year. Dachis says he paid himself a $1,000 a month till 1999, and that it is nice to finally get paid as an entrepreneur.

Kaplan asked the panel about fear of failure, and asked everyone on the panel about their previous failures.

Williams says Pyra/Blogger.com was his third business. He says early failures are key and that people should “fail fast.” He says don’t worry and just “do stuff.”

Young says AmIHotorNot.com was his second business, and that his first was a failure that he walked away from it. He says that his first company is where he got his skills from, and that failure is a great way to learn.

Yoo says it is not fear but commitment (he got a laugh for that). Rackspace was his fourth company. He says his early companies failed because his team was not open to outside opinions. When he did Rackspace.com he got other people involved to tap their wisdom. When you’re a 20 something you feel like none of the little issues can make a difference. He says all the small decisions are what combined make or break a business. He said he learns quickly now, and that he learns what he and his team are good at as individuals.

Yoo said you have to be careful of not working to hard because you will have not time to meet women (biggest laugh).