FAW #15: Paul Graham of Viaweb
A powerhouse entrepreneur
If you are a programmer or entrepreneur, you have heard the name Paul Graham. This is a guy who wasn’t satisfied creating just one successful company, he needed to establish an incubator to grow many successful tech startups simultaneously. I had read his book Hackers and Painters before finding his story in Founders so I already knew the scoop on the creation of Viaweb (fyi: many of the essays from that book are available on his web site). We had actually applied to his Y Combinator summer program a year ago when we were first getting JumpBox started. This guy is a mentor to many tech entrepreneurs through his essays and his talks - he has a no-BS approach to everything and writes with a powerful, crisp style. It’s clear that he’s in it for the love of the game and simply enjoys working with smart people to develop game-altering technologies. MacGyver used to be my hero growing up- I believe now it’s Paul Graham.
The essence of Viaweb’s innovation
Like many others, founders Paul Graham and Robert Morris started out building the wrong thing. They were seeking to put art galleries online with their startup Artix. They quickly realized that art galleries had little desire to be online. They changed up their plan and decided to do make store builder software to produce online stores. It was originally intended to be desktop software that would generate files that would then be uploaded to a server but early in development they had an epiphany in realizing that they could write the administration piece as an online application itself. This was an exciting proposition for a couple reasons, namely as Graham says, “I was pretty excited, because it meant we could start a company without having to learn Windows. Neither of us knew how to write Windows software and we didn’t want to learn. It seemed like this huge steaming turd that was best just avoided.”
“Terrified of customers”
With $10k of seed investment and a summer of working out of an apartment in Cambridge, Massachusetts they were able to get a prototype of their online store builder working. When they realized it was going to take more than a month or two to make it happen they hired another engineer to distribute some of the programming load. They realized they were going to need more money and they faced a decision whether to focus on raising money or getting revenue via customers. Graham admitted that being more technical in nature, they were afraid of having customers: “Being a sales guy and being a hacker are two very different kinds of work. We were very comfortable dealing with hacking, but dealing with customers seemed like this terrifying unknown. If it seems strange to you that we were afraid of customers, imagine how the average sales guy would feel about modifying the software running on his laptop.”
The advice I hear repeatedly from entrepreneurs is “get to revenue as quickly as possible as this puts you in a stronger position when you are talking with investors.” While I wouldn’t say we’re “terrified of customers,” we’ve grappled with this dilemma with JumpBox- on one hand we try to live extremely lean and limit sales and PR until we’re completely satisfied with the quality of our offering. But on the other hand you hear the advice of people that just say “go, go, go- it will come together along the way. It’s more important that you’re out there evangelizing and getting customers.” We saw Reid Hoffman, the founder of LinkedIn, speak at a Churchill Startup panel in Palo Alto and he said, “if you’re not utterly embarrassed by your first release, you’re waiting too long.” We’ve tried to strike a healthy balance (if not erring a bit too much on the conservative side of moving slower than we should). But we’re loosening up the coffers a little, attending more events and in fact decided just today to pull the trigger on ISPcon next week in Florida.
The 37signals philosophy of staggered development windows
Paul Graham seems to share a similar philosophy to the 37s crew in many respects (btw, 37s put their entire book “Getting Real” online for free - we bought it when it first came out but it’s well worth a read at that price ;-). One similarity I noticed in how both companies developed their products was this notion of “staggered development” and “alone time.” When Graham and Morris were writing the LISP code behind Viaweb, they had opposite schedules- Graham was nocturnal while Morris was an early-riser. This actually proved beneficial though allowing them alternating windows of focused work. Paul said, “Robert used to get up early, whereas I stayed up ’til four and got up at noon. So we would kind of work a 24-hour schedule. I would write some new code during the night and send [Robert] an email saying, ‘OK, we’ve got all these new features in my part of the code.’ Then he would write the corresponding stuff in his part. So we got code written very fast.”
Misidentifying the customer
Viaweb’s initial thought was that their customer would be catalog companies looking to extend their distribution online. It proved a false assumption though and turned out that catalog companies were more defensive with the perspective that the online channel would invade their existing mail order territory- they just wanted to close their eyes and ignore it. They had an existing mass distribution channel and therefore were not super motivated to explore the online store option. This is a classic instance of the “Innvoator’s Dilemma” and pushing a disruptive technology on someone whose incentives are not properly aligned. Once Viaweb realized their customer was the individual merchant looking to take their single point-of-presence retail outfit and gain access to a ton of new eyeballs, they crossed the threshold from selling uphill to taking orders.
“eCommerce isn’t about transaction processing”
Paul said, “Our secret weapon was that we knew that e-commerce was really about graphic design, not transaction processing. Unless you had a site that could convince people to buy, you didn’t have a transaction to process, and what convinced people to buy was how good the site looked. So we made sure that our software made great-looking sites - not just better than our competitors, but better than most of the sites that big companies paid web consultants half a million dollars to make for them…We didn’t even process credit card transactions ’til about two years in. We would just forward the order to the merchant, and they’d process it like a phone order.”
In our world the equivalent to this statement is that virtual appliances aren’t about hypervisors and virtualization platforms, it’s about simplicity of the experience and intuitiveness of use. We spend a great deal of energy ensuring that our stuff is dead-simple to deploy. The litmus test for success here is the day that I can point my mother to our web site and she can figure out how to download an Open Source CRM system and install it on her computer using JumpBox- when we achieve that level of usability, we’ve done our job.
Investors are like horses
While I can’t personally validate this statement yet, I found it very interesting. Graham said, “You know, in retrospect I think the big problem with our investors was that we weren’t forceful enough with them. I think investors like to be bossed around, like horses. It reassures them when you’re in control. But these guys were much older than us and had given us huge sums of their money, so it was hard for us to boss them around.”
Our situation is a bit different in that the mean age of our investors is about 27yrs old. Investor relations thus far has been a pleasant monthly update - we were fortunate with getting investors who trust us thoroughly and haven’t encountered the “skittish investor syndrome.” But I can see how being wishy-washy would potential create more problems than being resolute when the outcome is uncertain. The risk is always there, that’s the nature of the game.
Going back to “high school”
Unless you’re working towards an IPO with your startup, the most realistic exist will be an eventual acquisition. While we have way bigger fish to fry with JumpBox before we worry about this day, it’s something that will ultimately happen. Paul said, “It was kind of weird that when the deal closed, we all became Yahoo employees. It was like one of those dreams where you have to go back to high school. Up till that point we’d been independent, and then suddenly we were employees, with bosses. And the weirdest thing was, we, or I at least, actually started to think of them as bosses. Now whatever I did was either submitting or rebelling, whereas before it had been just doing.”
Having answered to middle management dorks at a 2000-person company for a few years, the thought of having to answer to people other than our customers and shareholders is… well… unattractive. Yahoo gave excellent terms to Viaweb employees- they didn’t have to vest at all, they were free to leave on day one. Consequently, Viaweb people stuck around to ensure the acquisition went smoothly. It’s our hope that one day we find a company that we mesh well with that has the massive resources to help fuel the JumpBox revolution we see for deploying all linux software in this fashion.
On selling and telling the truth
Graham said, “I found I could actually sell moderately well. I could convince people of stuff. I learned a trick for doing this: to tell the truth. A lot of people think that the way to convince people of things is to be eloquent - to have some bag of tricks for sliding conclusions into their brains. But there’s also a sort of hack that you can use if you are not a very good salesman, which is simply tell people the truth… Another advantage of telling the truth is that you don’t have to remember what you’ve said. You don’t have to keep any state in your head. It’s purely functional business strategy (Hackers will get what I mean).
Indeed we do. Our strategy is to plainly state what a JumpBox does, how we think it can help people and answer their questions as openly as possible using our public forums. We’re admittedly horrible sales people which is why we shifted from our original plan of selling the toolset to enterprises, a path that would have demanded considerable salesmanship. The idea of being anything but straightforward with your offering in a startup selling to consumers who all have blogs of their own and don’t hesitate to digg scandalous stories for attention seems suicidal- you’d get publicly crucified as a company if you tried that. And companies do all the time.
Yahoo purchased Viaweb in June of 1998 for $49MM in stock. The Viaweb software became the core of the Yahoo Store offering which is still offered today.
May 23rd, 2007 at 2:04 pm
[…] The concept of “alone time” was something they devoted an entire chapter to in their Getting Real book. It surfaced again in Hansson’s interview. He began working for 37s while he was still living in Copenhagen, Denmark so he had a 7-hr offset in time difference which meant there was only a small window during business hours with which he could communicate with the rest of the team. This actually proved to be a blessing in disguise as it imposed yet another constraint (communication time) that forced them to become hyper-productive with the time they had. They found that by having staggered development schedules and limiting communication to brief windows (like the Viaweb guys) they were able to get much more done. […]
June 1st, 2007 at 4:49 pm
“They found that by having staggered development schedules and limiting communication to brief windows (like the Viaweb guys) they were able to get much more done. […]”
Yet, in the end, Hanson moved to Chicago.
I think there’s a halo effect around various conditions, especially hardships or obstacles; if things work out well, there’s a presumption that certain stand-out features (time difference, sleep difference, whatever is easily noticed) is part of the reason.
Perhaps those things really *did* contribute, but I notice that while people talk of the value of this or that constraint, they rarely either a) maintain them once they are able to avoid them or b) seek them out on purpose.