Interview with Mike Moritz, Chairman, Sequoia Capital

This is a great interview with one of the most prolific veterans of Silicon Valley. Enjoy:



Learn to code

You can read my views on ‘MBA vs Learn to code‘ here. It has been the most read article on this blog by a long shot. This morning I saw this video on Michael Fox’s blog and thought I had to reblog it because it is so great.

Where I come from when someone doesn’t know what they want to do in their career, their parents push them into commerce, business or banking. If you’re open minded and not sure where you want to go or what you want to do, my opinion is that you should learn to code. If you can code you can actually create stuff.

The programmers of tomorrow are the wizards of our future. You’re going to look like you have magic powers compared to everyone else. - Gabe Newell (founder of Valve)

I  come from a highly technical background as my strengths and passions lie in infrastructure, design and architecting systems however code is where the rubber meets the road, and I don’t code, although I wish I could. Learning to code is on my bucket list.

Watch this:

Earning equity

When founding a startup there are hundreds of decisions to be made during the course of the founding years that can significantly impact your business.

One of the most impactful decisions you’ll make will be how, and who you choose to grant equity to.

If you are taking outside funding and hiring employees you’ll need to make these decisions pretty early on and you’ll need to live with them for the life of the business.

When you have something hot, everyone wants a piece of it. People will try and convince you as to why they are worthy of being a founding employee, how they can add value during the early days when you need help getting established. It is very easy to give in to requests by colleagues friends/associates who might not have what it takes to be a founding employee. When you have 5 staff chances are you need 2 or 3 engineer type people and 2 business/marketing/sales people however if you have a technology product then they should all have a level of technical competence. Finding people that satisfy this mix of skills is not easy.

During the early days you need to be tough and true to yourself as to who is worthy of equity. You need to listen to your instincts. Chances are your mate who can code or sell is not the right fit. Recruiting the right hires is a process in itself and needs to be done thoroughly, and equity must be granted deservingly.

With his in mind, I am of the opinion that there are only three ways to receive equity:

  1. Be a founder – This means being the one who incorporated the entity and started with 100% of it. This is the highest risk, but highest return way to own a piece of the action.
  2. Earn it – This means working for the business over a period of time so that you earn shares that ‘vest’ according to the option pool, usually a 4 year vest with a 1 year cliff.
  3. Pay for it – The other way is via an investment in the company at a valuation that is fair to the founders and fair to the investors and leaves  enough skin in the game for the founders to be incentivized and raise additional funding if needed.

In my opinion there is no other way to get equity. At the very early stages when it’s just the founders and no investors, it’s very easy to part with equity however at this stage it’s unlikely you’ve worked with these people before and therefore it’s risky to just give them something without being able to work together to see if they are the right fit. You need to date before you get married. The same applies in startups.

My advice here is not to part with equity (outside of the founders) to anyone until you’ve got a formal investment in place, and as part of the term sheet insist that all employees, directors and advisors be a party to the option plan and its associated vesting terms. This means that the CFO or the whiz executive you’ve just found has to earn their right to own a piece of the business.

As the founder you can play man in the middle between the option plan terms and your stakeholders by advising them that all stakeholders, including director grants, are subject to vesting. This removes the need to have those uncomfortable conversation around equity. My key point is to try and get your vesting terms in place prior to granting equity to anyone (during you Seed round), otherwise you’ll end up making promised you can’t keep.

Oh… and as a founder, don’t ever forget the risks and sacrifices you’ve made to get to where you are today. Chances are those people asking for equity are just seeing the tip of the iceberg, but with this is mind, A player employees are always worthy of generous equity grants. You can’t do it alone.

BuyReply text-to-buy

A couple of weeks ago we announced our text-to-buy feature. I believe text-to-buy is our most powerful feature yet as it allows anyone to buy anything from any medium without requiring an app download. Every single mobile phone has text messaging so when you use BuyReply text-to-buy, your addressable market is 100% of mobile phone users.

Our split tests between ‘app based’ call-to-actions such as QR codes and BuyReply call-to-actions that require an email or text has seen 25 x higher engagement using our ‘no app’ technology.

Text-to-buy is most powerful when used on TV, however it is also very effective print (newspapers, catalogues and magazines), outdoor advertising and wherever else you might want to sell within your ads.

Click over to the BuyReply blog to read more about text-to-buy!


A good friend of mine @hiltmon has recently launched a new app called TimeToCall. If you are anything like me, working out time differences when making international calls is a struggle.

World clocks sometimes help but if its 4pm and you want to know what the time will be in New York when it’s 9am the next day, you need to do some thinking.

This is where TimeToCall comes in. You enter the location you are calling from then add destination locations. You can then use the slider to change the time to the time of your call and the clocks below update automatically to the correct time.

Here is a screenshot:

It’s a simple solution to a common problem and often those are the best ideas, and it’s just 99c on the App Store.

Best of all, Hilton has documented his journey of creating TimeToCall. It’s recommended reading for anyone thinking of making an app. There are 10 parts to it and this post contains links to all of them.

So if you frequently need to calculate times for overseas calls, go ahead and download TimeToCall.

Well done Hiltmon!

Technical Luck

When building products for the Internet, no-one builds ‘everything’ from scratch. Web services are almost always a mashup of existing technologies and third party services that come together to form a product. Entrepreneurs use API’s, SDK’s and hardware from a range of vendors to create their products. This might be as simple as using an existing open source software stack to launch a WordPress blog, hosted by Go Daddy. The end goal for the user is to create a blog, but they don’t want to be concerned with developing a platform to do this, or configuring servers. They just want to be able to write and publish their thoughts.

I often think about start-ups and the timing of their success with regard to the technical capabilities the preceded their services and whether or not their business could have existed 6, 12, or 24 months ago. The ability to leverage an existing technology and build something valuable on top of this, is what I refer to as ‘Technical Luck’.

A good example of this is Square. Square is a payments platform that is currently valued at $4bn. What would have happend if Apple did not allow for the headphone socket on the iPhone to work as a microphone? If this was the case, Square would not exist because they could not process payments via the Square card reader that plugs into this port. This tiny feature enabled Square to build a $4bn business.

Another example is Instagram. If Amazon Web Services did not exist, Instagram would never have been able to scale to meet demand with just 3 or 4 staff. It could have been a disaster.

There are services out there that let you leverage incredibly powerful and scalable features that make it possible for Entrepreneurs to move swiftly.

These examples of ‘technical luck’ make breakthrough products and services possible simply because of a some pre-existing features or services that can be leveraged in a few lines of code.

The year in review

Just over a year ago I decided to found my second company. I spent the first half of 2011 travelling and wasn’t sure what I’d do after exiting Lind Golf. In between mountain biking, hiking and exploring South America it became clear to me that I wanted to do two things:

  1. Start another company
  2. Solve a big and audacious problem via globally scalable solution, and see it all the way through.

When I came up with the idea for BuyReply I vividly remember thinking how balsy it was to believe that I could actually see this concept through to the point where had a stable working product and do it in less than a year with pretty minimal resources and no programming capability.

For an entrepreneur, the only thing harder than being an entrepreneur is not being an entrepreneur… so I took the plunge into the startup world for the second time. I took a chunk of savings from Lind Golf and hired the best development team I could find. I made them a product roadmap that spelled out exactly what to build and supplied them with 468 photoshop layouts of every screen of the platform, both mobile and web versions, and somehow we made it happen…

Earlier in the year, a friend of mine sent me this Ted video. For the first part of 2012 I felt like this guy… Then I found a co-founder, hired a few people and got the interest of customers and investors:

We wrote our first line of code in January and over the last 12 months have worked tirelessly to bring our awesome product to life. For the first 6 months of 2012 our team spent 16 hours a day coding, designing, testing and building the core of BuyReply. There is always the “ramen noodle” phase at the beginning of a startup and the first 9 months of 2012 was just that. It’s the time when you bury your head in the sand and build the foundations of your product. We spent much of 2012 in this state whilst also building relationships with customers and partners along the way. My development team was checking code in at 4am day after day, week after week. They did an an incredible job and I’m proud of the progress we’ve made… However we’re just getting started – 2013 is going to be even more eventful as we close our first funding round, grow our team and tell the world about our product. If 2012 was about building BuyReply, 2013 is largely going to be about building our profile, and getting the marketplace to know that we exist!

So to all of you out there, happy new year and good luck for 2013. Keep chippin away!

The Team & Hiring

As a startup CEO when investors ask you how you intend to spend their money, your answer is most likely going to be people. Startups are not capital intensive businesses which is why investors love them. A very small but talented team (think Instagram) can go a long way due to the scalability of the internet and web applications.

Give or take some money for rent, marketing, and hosting, 80% or more of your investment are going to be in people.

When you raise funds you need to make sure that your money is going to get you the traction you need to either become cashflow positive or to build the business to a level where you have enough traction to justify a higher valuation. In order to do this you need people who are going to help make this happen. This means identifying your weaknesses and hiring staff who make up for what your founding team lacks.

You can broadly break down your company into these skill sets:

  • Sales/Marketing
  • Technology/Engineering/Design
  • Strategy/Administration/Finance

Startups often begin with a heavy focus on engineering and strategy. After all, before you can sell something you need a product to sell, and that requires engineers and product people. Only once you have a product can you start marketing and selling it.

After your product is built, the next hires should be people that can help you generate cashflow and/or traction. That means sales people, community managers or online marketers. They should be relentlessly focused on communicating with your target market in every way shape and form, driving traffic and getting your company heard across the web and real world.

Often in the early stages you don’t need much more than a designer, a couple of engineers, some marketing/sales people and a couple of admin/support staff. As the company scales these skills are amplified by growing each respective skill set to support the initial team.

Hiring is probably the hardest thing you’ll do as an entrepreneur. If you interview two engineers they might both want the same wage, but ask them to code and one might be good, but the other one might be off the charts good. How do you know this up front? Well thats the hard part. Until you put people to the test you never really know how good they are. My advice here is to be brutally honest with every hire you make. When they sit down for the interview you need to explain that you are building a team of world class players and that their first 3 months of your employment is a probationary period. If they are A-players, this shouldn’t worry them. If you set these expectations upfront there will be no surprises down the track.

The last thing you want to do is turn around staff often. It takes time and costs money to hire and educate then on your product and once your cash is burnt, thats it. If you don’t use your funding on the best talent you can find, your chances of getting to the next stage of growth are much lower. In addition to this it is important to incentivise the right staff with stock options. This aligns your team with the company. Just like hiring, you need to ensure your equity is protected against bad decisions. To protect yourself against bad hires, its common practice to make stock options vest over 3 or 4 years with a one year cliff. This cliff provides you with 12 months of time to get to know the hire and ensure they are the right fit. If a staff member is terminated during this time, none of their options vest.

Good luck building your team. Its a challenging task but very rewarding when you get it right. The difference between a good and great team is almost always the difference between a good and great company!


Be your own bitch

This week we saw the relationship between Zynga and Facebook change. You can read the SEC filings here. Starting in May next year Facebook will be able to create their own games and market them directly while at the same time Zynga will be able to accept payment off of the social network and make games that are currently only available through Facebook available directly via their website.

What this means for Facebook is that their share of game credits will be fragmented and that users will be able to play games without being logged into Facebook. On the flip side Facebook can make their own games if they wish and make a direct margin on credits.

There are a coupe of lessons here as I see it. The positive for Zynga is that they were able to quickly build a business off the back of a huge user base due to some exclusive privileges negotiated between themselves and Facebook. The problem however is that the party is now over and Facebook have decided to treat with Zynga as a standard developer is treated. What’s more is that Facebook have cleverly included this provision:

Zynga’s right to cross-promote any games that are off of the Facebook web site from Zynga services that use Facebook data and to use e-mail addresses obtained from Facebook, will be limited by Facebook’s standard terms of service, subject to certain exceptions.

What this means is that Zynga can’t use data collected from on Facebook to convince users to move across to Zyngas proprietary versions of the games.

When I started Lind Golf we built a database of customers from sales on eBay then over time we ended up starting our own website and used that database to launch what is now In Zynga’s situation they are prohibited from marketing to the email addresses collected via Facebook.

The reality Is that anyone who builds a platform on another proprietary platform runs the risk of the rules changing down the track.

Zynga isn’t the only company that’s been castrated by a proprietary platform. Jodee Rich’s latest venture was recently cut off from the Twitter firehose. You can read about this here. He is now taking legal action against them (perhaps he should just become a lawyer, he seems to like the court).

The lessons here are that you need to control you own destiny. Good examples of this are open source software platforms where there is not proprietary body. The Internet is built upon these standards. Standards like HTML, email, TCP/IP etc are non proprietary standards. It’s why Steve Jobs didn’t include support for Flash in iOS. He didn’t want to be at the mercy of a middleman.

As for Zynga, their stock chart says it all:

TV + Mobile

There is a trend unfolding at the moment in that TV broadcasters are looking for ways to increase engagement by leveraging mobile. Research shows that most of us are using a connected device watching TV. Apps like Zeebox, Fango and Getglue are playing to this trend. TV commerce is a space that we are interested in at BuyReply. Our system is the perfect transactional mechanism for buying directly off the screen as you don’t even need any apps to transact. All you need to do is send an email or a tweet to buy. We can link into apps as well but it’s not 100% necessary. We view our technology as complementary to these apps. While BuyReply is focussed on fulfilling transactions, these apps are there to drive engagement but also have some eCommerce capabilities.

I’m not sure how this game will play out as its looking as if each network is promoting their own app. For example Ten and NBC use Zeebox while Seven uses Fango. Will viewers change apps when they change channels? Will viewers check into multiple shows via multiple apps? As consumers we want to have a single app that works across multiple networks however TV networks are large powerful companies and driving a consensus amongst them is a tough gig however as we know, the consumer always wins and over time I suspect this trend will converge into a single app.

The potential of engaging audiences via mobile in real-time with TV is staggering and we are excited to be a part of this ecosystem as the way we consume television shifts.