For instance, check out this simple visual of an evolutionary algorithm evolving the design of a car (in Flash) to traverse the landscape without the red circles touching the ground. It’s a simple visual demonstrating what I’d guess to be a complex set of code. (Evolutionary algorithms are optimization algorithms designed to evolve/mutate on their own, using mechanisms inspired by biological evolution: reproduction, mutation, recombination, and selection.)

In business, one thing you can count on is that everyone is extremely busy. Therefore, it’s important to apply the fruits of your efforts to visual metaphor, so that stakeholders (investors, customers, partners, etc.) can empirically see their progress without even caring about how it was done. For board meetings, they’re called KPIs (key performance indicators). It gets harder though when software engineers and business people need to communicate. This is why I think it’s so important for engineers to learn to SHOW their progress, instead of simply achieve progress. No one else is going to care what you did or how you did it, until/unless you can demonstrate it. The perception of progress, therefore, is much more important than the actual progress.

Jordan Mitchell, the author of this post, is the CEO and Founder of Others Online, his 4th Internet startup. Others Online helps ad networks better understand, target and monetize their audience. Jordan blogs regularly and tweets even more!

Early this morning, I presented at the Northwest Entrepreneur Network breakfast. NWEN (www.nwen.org) helps people start companies by giving them tools, connecting them with service providers and making connections to other people, advisors… and I love that. This was a chance for me to summarize my thoughts and experiences (to date) and connect with other entrepreneurs. I always learn something when I do these kinds of events, both about what I have done right/wrong in the past and how I can be better in the future. Here is a link to the PPT that I presented, a continual work in progress.

I also met a bunch of really interesting people working on cool ideas. Thanks to Jared and Peter for setting up the event and to everyone who asked me such good questions after the talk. I look forward to the future discussions and coffee meetings.

If you have questions or follow-ups you can connect with me on LinkedIn, Twitter, Facebook or send plain old email (tam@gist.com) and I will do what I can to help.

T.A. McCann serves as founder and CEO of Gist. His past experience includes Vulcan Capital and Polaris Venture Partners, where he was an entrepreneur-in-residence.

Here’s a newsflash: Your idea probably sucks, and it doesn’t matter because your business will probably turn out to be something completely different.

Sounds wrong?  Let’s see.

In 1998, a company received $4.8 million in funding to “beam money between Palm Pilots.”  I’ll code-name this product: MoneyBeamer.

Here’s the pitch. Alice wants to give Bob some money, but Alice doesn’t have cash or her checkbook. There’s no ATM around. Both Alice and Bob do own palm pilots and they both previously installed MoneyBeamer and, despite having forgotten all their normal modes of money transfer, they did remember to bring their palm pilots. MoneyBeamer will allow Alice to send money to Bob. Well actually it won’t, but it will remember that Alice wants to send Bob money, and once Alice gets back home and connects her Palm Pilot with her computer, and after she dials up to the Internet, MoneyBeamer will contact a server and transfer the money, provided of course that Alice has the money and didn’t secretly change her mind in the meantime.

Would you have invested in them? Not with an idea like that. You’d be wrong though — it was PayPal. Their work with encryption was combined with an idea for a consumer-targeted on-line banking system made it the easiest way to send money by email.  They were sold to eBay for $1.3 billion.  Today they process $2,000 in payments every second.

I’m sure you won’t recognize this web-based sensation:

This is Game Neverending: An in-browser multi-player on-line game “with no way to win, nor any definition of success.” (Sounds like a lot of Web 2.0 companies to me.) It never saw the light of day.

What was most interesting (to its alpha testers) was that people could share game objects by dragging them into chat windows.  They saw this as a useful enhancement to chat applications in general, so as plans for the game fizzled out the engineers created a Flash application for real-time chat plus file-sharing with a particular emphasis on image-sharing.

Unfortunately the Flash application was only real-time — your pictures didn’t stick around when you closed it. And this was fatal because it turns out people were interested in the sharing part more than the real-time part. So in yet another upheaval they rewrote the Flash application as a regular website and lo, Flickr was born. Now it’s the largest photo-sharing site in the world with 3 billion photos and 5,000 more uploaded every minute.

Of course a rant like this wouldn’t be complete without self-deprecation, so let’s accompany the Ghost of Christmas Past into the annals of my own company, Smart Bear.  My first idea was a product called Code Historian; it could dig through the history of a file and show you what changed.  Accurate name, but turns out to be almost useless.

Like an adolescent, the company went through many embarrassing stages (forgive the broken images, ’tis the way of the Way Back Machine):

1. Mar 24, 2003: Hideous.  ”Do one thing and do it poorly.”
2. Dec 22, 2003: Fugly.  ”Three products… is that enough for a Suite?”
3. Oct 10, 2004: Lame.  ”Everything above the fold, most expensive first.”
4. Jan 11, 2006: Getting there.  ”You really need a graphic designer.  No, really.”
5. Sep 10, 2007: Ain’t bad.  ”At least you admit ‘code review’ is all that matters.”
6. Present day: Nice.  ”Hey, where did those other products go?”

At one point we were selling six different tools; the only one that mattered in the end was Code Reviewer.  Perhaps a screenshot will make this clear:

The point of all this isn’t to berate anyone for their crappy ideas. In fact, just the opposite — the point is that it doesn’t matter what your first idea is. First, it’s probably wrong. Second, the only way to find the right one is to try the wrong one and see what happens. You won’t find it by fiddling around with PowerPoint slides and Photoshop mock-ups.

So get out there and make some mistakes!  As Neil Davidson said recently:

You don’t need stratospheric growth and a billion-dollar addressable market to bootstrap a software company. A $50,000 market opportunity is enough to get you off the ground — once you get started you’ll figure out the rest.

(Neil is the co-founder of Red Gate.  It started as yet-another-online-bug-tracking-system that no one cared about but is now a popular purveyor of fine SQL database tools with 95,000 customers to their credit.)

Jason Cohen wrote this post and allowed us to syndicate it. He is the founder of Smart Bear Software, maker of Code Collaborator, the world’s most popular tool for peer code review and recent winner of the Jolt Award.

My wife and I have decided to permanently relocate to Port Townsend, where we have a home and increasingly, have become involved. I have been offered an opportunity to work in the maritime industry, a passion nurtured by my ship’s captain father and my  grandfather.

I will be working for the Northwest Maritime Center of Wooden Boat Festival fame. A new building is under construction and many cool things are happening. Also, my wife recently opened a store for writers (www.writersworkshoppe.com) in downtown Port Townsend. I couldn’t resist the pull of those two, long neglected, passions. This will allow my wife (my most important passion) and I to share these priorities in our new home.

Working with the entrepreneurial community from this perspective has been invigorating and rewarding. NWEN has been a special organization for almost 25 years.

Working with a board of directors that is truly committed and extremely supportive of both the entrepreneurial community and me, has been a great pleasure. I will miss it. I thank them for their support.

A keystone of our efforts in the last 14 months has been to keep NWEN relevant and move it forward in ways that kept us relevant over time. I believe it has in the following ways.

1)      The board, always NWEN’s true strength, has added several strong entrepreneurs in the past year. They join a board that is very active and devoted to furthering NWEN’s mission. The board is the lynch pin to everything good that has happened here.

2)      Staying relevant meant moving to a more flexible format for all NWEN offerings;

a.        moving to an on-demand system for educational offerings that allowed popular workshops to be held as often as the demand was there.

b.      Launching eIQ (entrepreneurialIQ), a series of 90-120 minute sessions, held as often as demanded, in a low cost venue and at a low cost. The first 3 sessions will be offered in the next few weeks with more coming on rapidly. Watch.

c.       Revamping our Investment Forum. NWEN is all about early stage entrepreneurs. Our job is to provide a forum that is relevant to them. We are replacing the Early Stage Investment forum with the First Look Forum. Presenters will be companies that have likely, never presented before. Again, the venue will be smaller, there will be fewer presenters engaged in a more interactive format that emphasizes the learning process. It will be held 2-3 times each year. Business plans will be received year round, when the entrepreneur is ready not when NWEN is ready. It’s an exciting new format. Watch.

NWEN has helped thousands (that is not an exaggeration) of entrepreneurs get started. Through good times and bad. It has grown with the region. To some degree, the region has grown because of NWEN. It will continue to do all it can to support and nurture anyone with the guts to, not only dream, but actually dive into the mysterious, wonderful, stressful, dangerous, high risk, world of starting a company with great aspirations.

Thanks to everyone for this time. I wish you all the best in the years ahead. I’ll watch NWEN grow.

Cheers!

Share Knowledge and Experiences
Mentors can help entrepreneurs by sharing their knowledge and experiences relative to what they are currently working on.  By sharing these experiences, it helps to alleviate some of the frustrations that can be experienced when things don’t seem to be going in the right direction.  Experience in dealing with the entrepreneurial process helps to get past these obstacles and keep working on fleshing the ideas out.

Networking
Chances are the mentor will have far more colleagues and associates than the young entrepreneur.  Meeting the right people in your field of interest is essential to ultimately achieving success and will help the entrepreneur to branch out and learn about the networking process.  Building relationships with potential clients, investors and colleagues can be a determining factor in the success of an entrepreneur’s career.

Credibility
Just as a mentor can help with knowledge and experience, as well as introducing the entrepreneur to the right people, his or her reputation can also help to lend much-needed credibility to the unknown entrepreneur.  Many times, potential investors and clients want to know who you are working with and what kind of relationships you have with others.  Having someone there to vouch for you can certainly help alleviate any potential misgivings in this regard.

Success
Strangely enough, success seems to be one of those contagious things.  Surrounding yourself with successful people as an entrepreneur can help mold you into the success story you would like to be.  Mentors have a way of taking people under their wing and guiding their protégés through the process, ultimately giving them their “secret” to success in the process.

Confidence
A great mentor will be someone that gives much-needed confidence to the entrepreneur, and is also going to be the person that the entrepreneur bounces all of their ideas off of.  Learning to develop this confidence and the ability to take calculated risks will be essential in a successful entrepreneurial career.  Take advantage of the new ways your mentor will help shape you and keep the new perspectives and ideas coming.

This post was contributed by Kelly Kilpatrick, who writes on the subject of top business schools. She invites your feedback at kellykilpatrick24 at gmail dot com.

For example, at a recent Northwest Entrepreneur Network breakfast meeting, Managing Director Lucinda Stewart of OVP Venture Partners explained, “OVP does about six to nine deals a year, which is whittled down from about 3,500 contacts, of which maybe 200 or so are a possible consideration and only 10 percent move on to the due-diligence stage.”

With so much at stake for both the CEO and VC firm, it’s easy to see why both have to be selective. With that in mind, Stewart shared some of the not-so-obvious decision-making that OVP and other VC firms go through when determining which businesses to fund.

What VCs are thinking:

– How big is this market? VCs want a big opportunity so they’re looking for big markets. In addition to market size, they will be assessing how open the market is. A deal becomes very exciting when it’s part of a big, open market with no entrenched leader.

– Who knows this person? If you don’t know anyone at the VC firm, then leverage a back-door contact who can recommend you. Lawyers are a great source, as is anyone the VC respects. When these sources are leveraged, a meeting is more likely. Without smart networking, a CEO is forced to send emails or cold calls, which are usually dead on arrival.

– Is this an out-of-the-box idea? VCs know that an upside in typical categories isn’t usually there. That’s why they get excited by business ideas that demonstrate break-out thinking, or doing things in a completely new way.

– Can they prove it? If an idea is innovative it’s just as critical to show a pathway to validation. Unfortunately this often presents a chicken-egg scenario. Without market validation or IP (intellectual property), a great advisory board should be assembled to reinforce concept validation. These individuals should be well-known industry veterans who can speak to VCs about why the idea has merit.

– How deep is the management team? What’s commonly seen is a technology founder without a partner. VCs want biodiversity and sales DNA on the team. If you can’t sign up partners without funding, it’s advisable to find people who will confirm that they will come on board once funding is available. Expect the VC to contact these people.

– Are the leaders experienced? VCs want a smart, focused entrepreneur who can bridge the big idea with the right background, and has a logical execution plan. This demonstrates knowledge and experience and establishes confidence with the VC. If you’re not a serial entrepreneur, the bar will be much higher.

Since most companies don’t have everything a VC firm wants, it’s important to know what a VC is willing to trade off. According to Stewart, stable management beats the smartest team. When it comes to product versus vision, product is king because it’s key to getting market feedback. It’s also important to emphasize your ability to assess and if needed, fire quickly. To a VC, that ability equates to time, and time is cash.

The secret language of VCs: Once you engage with a VC, it’s important to be able to accurately interpret VC code words so that you know where you really stand. Here are a few somewhat tongue-in-cheek interpretations of the most common VC phrases:

The VC says and (what the VC really means):

“Entrepreneurial CEO” (totally uncontrollable, bordering on maniacal)

“We work closely with management.” (We talk to them on the phone once a month.)

“Unique” (no more than six competitors)

“Ingredients are there.” (Given two years we might find a workable strategy.)

“Basically on plan” (Expect a revenue shortfall of 25 percent.)

“Acquisition strategy” (The current products have no market.)

“Core business” (Obsolete product line)

This post was written by Cheryl Isen, founder of Isen & Company, a strategic marketing and public relations firm that helps emerging companies increase corporate visibility and brand awareness.

Location: Schaeffer Auditorium, Seattle University, Seattle
Time: 7 pm - 9 pm
Cost:  FREE
Register Now >>

What you will Learn:
Are you working on something that you think may be a break through idea or perhaps wondering what the really great break through ideas are?  Whether you already have your idea or are looking for something to help you figure out your next big idea is, join us on December 2nd to hear insights from Nick Hanauer who has been described as “truly incredible about spotting so many of the successful ideas in the Northwest for the last 10 years.”

Nick will share his thoughts on what break through ideas are and offer examples of companies he views as having developed true break throughs during the past ten years.  Best of all, Nick will offer his perspectives on how you know a break through idea when you see it and where he thinks the next break through ideas will be.

As always with NWEN Think Tank events, there will be opportunity for dynamic and engaging interactive dialogue.  This event is certain to be a unique and outstanding program so don’t miss it.  Early registration is recommended.

Featured Presenter
Nicolas J Hanauer is a founding partner of Second Avenue Partners, a Seattle-based company that provides management, strategy, and capital for early stage firms such as HouseValues.com, Ice Energy, Insitu Group, Modumetal and Newsvine. Nick is Vice Chairman of Marchex and serves as a Board Member and Advisor to House Values.com.

Hanauer became the first non-family investor in Amazon.com in 1995 where he served as a Board Advisor for the company. In 1996, he founded and served as CEO of internet media company Avenue A Media; later re-named aQuantive, Inc. and became Chairman of the board when the company went public.  aQuantive was purchased by Microsoft in August of 2007 for 6.4 billion dollars; the largest acquisition in Microsoft history.  In 1998, Hanauer founded Gear.com and served as Chairman of the company for three years until it merged with Overstock.com.

Nick began his professional career at Pacific Coast Feather Company as the company’s executive VP of Sales and Marketing, and helped grow Pacific Coast from several million dollars in sales to more than 300 million. He remains the company’s Co-Chairman and Chief Strategy Officer. While still an executive with Pacific Coast, Hanauer co-founded Museum Quality Framing Company. Today that company has 60 stores and is the largest of its kind on the west coast.

Today, Hanauer is actively involved in the Seattle community and Washington State’s public education system, and serves on the boards of the Cascade Land Conservancy, The University of Washington Foundation, The Seattle Alliance for Education, The University of Arizona’s Mt Lemmon Science Center and the Biosphere2; a University of Arizona climate research project.  He published the book “The True Patriot” with co-author Eric Liu in 2007.

Nick Hanauer received a Bachelor of Arts degree in Philosophy from the University of Washington in 1981.

Thank you to our Think Tank Sponsor:

When you’re an entrepreneur, the #1 goal of every day, week and month is to NOT DIE.  You’re continually dodging bullets, and must continually look out for and focus on every risk — running out of money, losing a key customer, pissing off an investor, losing a critical member of the team, etc. When you have no momentum (and even if you do have momentum), there are hundreds of ways to screw everything up — then it’s “game over” for you and your company.

Jordan Mitchell, the author of this post, is the CEO and Founder of Others Online, his 4th Internet startup. Others Online helps Web site publishers and networks better understand, target and monetize their audience through the use of proprietary affinity profiling software. Jordan blogs regularly and tweets even more!

1. You determine how the relationship progresses.
2. This should not be used for sales prospecting. The primary purpose of both parties should be knowledge transfer and assistance.
3. No fee or hourly rate will be assessed by either party to the other.

But my friend and board member Mike Crill was quick to remind the companies he works with who the audience was for this presentation — multimillion dollar VC-backed companies, primarily in the Bay Area — and gave his own advice in a blog post aptly titled “To Better Days“. In it he correctly points out that early-stage companies operating on or raising angel rounds under $1MM will find their circumstances different than venture-backed firms or late stage companies, and provides some advice.

Investors are going to look for deals with traction.  If you can’t demo your product, go get a job or go back to school.  The competition for angel dollars is going to be too tight for you this year.  If you can sell your product, then sell.  You’ll find more success in selling product than selling shares.

He points out three timeframes working against the CEO raising angel money this year:

• Market stability — we’re in a timeframe of extreme market instability, which is apt to continue through the end of the year.
• Election year — Bush is a short-timer. He’s got senioritis. He’s far less apt to bend over backwards in the last three months of presidency to rise to the occasion and fix the economy, than to just pass it on to the next guy.
• Recovery cycle — I’m not sure anyone predicts a rapid recovery.  Get used to it.

I think the main point Mike makes is that while Sequoia made an effort to tell their portfolio companies to “get scrappy”, those of us not VC-backed are already scrappy. (Not that it’s meant to make us feel better, but …) Our world is different. We’re not sitting on several million dollars and executing a Go Big or Go Home strategy.

While you should just read his post, his advice is roughly as follows:

• If your product is selling, focus on execution.
• Focus on smaller rounds, and accomplish key objectives. Set your targets low and oversubscribe if you have that option.
• Lay off any B and C players on your dev team. Sell what you have. Build v2.0 another day.
• If the market is being less receptive to marketing, reduce your marketing costs. Focus on ROI.

Jordan Mitchell, the author of this post, is the CEO and Founder of Others Online, his 4th Internet startup. Others Online helps Web site publishers and networks better understand, target and monetize their audience through the use of proprietary affinity profiling software. Jordan blogs regularly and tweets even more!