As well explained in the “Built to Last” book, core values can be a critical factor in the success or failure of an organization. Having been a player in this industry for more than 10 years now, I also strongly believe that core values need to be openly defined and shared, and we need to remind ourselves of them. They often tend to be relegated to the shadowy depths of the hiring binder or put on corporate accessories. 

 “Build to Last” also has a nice equation defining the relationship between Core Values and Core Ideology:

Core Ideology = Core Values + Purpose

I truely like this formula, and today, I will define and share our core values. They are only three of them:

Honesty: The hard one.

While this value might seem too obvious to state, and one which could be taken for granted, it is probably the hardest of all to attain. The hard part is not to be honest with others, which I think most people are (in most respects), but rather to be honest with oneself.

For example, in business, we have all had or at some point will face the temptation of bending the truth in our favor. Most of the time, it will even work. This can manifest itself by inflating some numbers, forgetting others, making artificial product families, justifying new products just for internal competition, or pushing an organizational bias strategy company wide. While these actions might look intrinsically dishonest, I do think they can be taken by relatively honest individuals. The issue is that sometimes, people get caught up in the game, forget to be honest with themselves, and just yield to the “picture painting” enticement, which consists of painting the best possible picture with some well placed defects to make it seem real (this is often called “spinning”). In short, they forget to ask themselves: “Do  I really believe in it?”.

I am deliberately using strong words on this topic, because I think "spinning" is the biggest corporate virus today, which slowly but surely inhibits the growth of organizational creativity, while rewarding the ones that spread it. My hope is that by placing honesty – with ourselves and with others – at the forefront of IntelliJuris’ core values, we can neutralize or at least slow down the spread and reach of this disease. One thing important to realize though, is that we can all catch it!

Passion: The fun one.

This is the easy and fun one. I do think, as many do, that passion is critical to the success of a company. One way to put it is that passion with focus drives talent, and talent is the source of innovation. As Paul Graham points out in his essay “Mind the Gap,” “One person could be 100 times as productive as another.” This is probably even truer today, in our technology industry, where, given the wealth of freely available technology and services, the real business values are becoming more in the composition of services rather than in the building of one. As elaborated in “The Tipping point”, small things can have a big impact, and finding these small things does require talent.

Discipline: The not so fun one.

While this one might sound obvious and little bit harsh, I think that real discipline is critical to building a successful business. Too many times, I have seen organizations with great a great talent pool not really performing at their maximum because of lack of discipline. One reason is that discipline often gets confused with process, procedures, and paperwork, or even is regarded as opposed to agility and creativity. I think it could not be further from the truth.  I actually think that the right kind of discipline enables agility and creativity, and reduces process and paperwork. Real discipline is more about a state of mind or a working style than procedures. Also, I think that discipline is as critical to execution as passion is to innovation. And, while some might disagree with me, ideas are cheap and execution is everything; hence the importance of discipline. (“Luck is when preparation meets opportunity.” ~ Seneca)

So, here we go, a raw look at our core values. At some point, we will also go over our anti-values, which are, in my mind, as important.

In the software industry, and probably in other industries as well, there are two types of startups: the scale-first type and the monetize-first type (sometimes called lifestyle business). Any organization needs to eventually do both, but in the beginning, a startup needs to decide to focus on scale or monetization. Seesmic and Balsamiq are great 2008 examples of each type of startup. (Good comment from Vasudev Ram, Not everyone needs to or wishes to becomes a Google or a Yahoo! or a Microsoft)

For those who do not know yet, Seesmic is a typical Web 2.0 Silicon Valley startup, with a famous founder, a vision to revolutionize something on the Internet (in this case video conversation), a $12 million dollar investment, and a primary (or exclusive) focus on growing the community (i.e. no revenue plan yet). The service successfully established itself as a leader in its own space (video conversation) and seems to drive some interest from traditional media companies (e.g., BBC).

While Balsamiq addresses a different but equally promising space (i.e. the designer-developer workflow), the company has taken a completely different approach. Balsamiq is a self-funded entity, mostly a one-man show (coder and marketer) with a clear and simple revenue plan from the start (already generated $160K in 2008), and it even managed to get some great marketing buzz thanks to the founder’s marketing ingenuity in sharing what other entrepreneurs do not want to share (e.g., revenue, customers, and detailed strategy).

Which one is better? Which one is most likely to succeed? Well, both have pros and cons, and mostly depending on the entrepreneur.

Some entrepreneurs care more about creating the next Internet phenomenon while others care more about creating a self-sustainable organization. The good news is that the software industry has (or at least had) room for both types.

Scale-first pros & cons

“Scale-first” startups such as Seesmic definitely have the potential for a higher return on investment, which often explains their significant cash infusions. They often focus on creating a phenomenon, which can be very invigorating for the founders, investors, employees, and even the community. This energy can fuel some great innovation and even dedication from the community. The other significant advantage is that “scale-first” startups are often seen as the visionary ones, and their founders can use their celebrity status cleverly to maximize their marketing activities. Loic Lemeur is definitely a master of this art.

The catch, and there always is one, is that “scale-first” startups are inherently riskier and can sometime solve a need that does not have a market (I am calling this a “market false positive”). The biggest risk probably comes from the exhilarating nature of the business, which can drive entrepreneurs and even investors to lose sight of the real business opportunity, resulting in a great waste of time, money, and personal life for all parties involved. Last but not least, there is also a lot of narcissism (often an unavoidable side effect of frame) in this community, which can bring lot of confusion regarding what the real market opportunities are (BTW, I am not saying it is the case of Loic).

Monetize-first pros & cons

On the other hand, “monetize-first” startups tend to be more down to earth and usually only bite off what they can chew (as Peldi so sophisticatedly put it on his Balsamiq company Web page). While still risky, the risks are much lower, as the whole strategy is to invest in proportion with the market demand. I also think that lifestyle startups provide a higher personal satisfaction, as the entrepreneurs feel more in control of the execution (100% vs. 30% or so). Also, the low-key nature of the business usually attracts more practical and humble parties to the table, which can optimize the company operations quite a bit.

However, even the humble route has some catches. First, investors are harder to find. While the current market conditions might help a little, software venture capitalists are shooting for bigger investments ($4+M) with high multipliers on exit (x10 to x15), and given that buyout has become the only realistic exit strategy for most investments, making revenue the first priority will implicitly base the value on it and consequently limit the possible outcome (x3 to x6 of revenue depending on the business). Comparatively, in the dot-com and even in the Web 2.0 era, exit strategy has usually involved around $7 to $30 per user, which is obviously a much bigger and faster return opportunity. However, as John Prendergast noted, monetize-first enterpreneurs might not need or want an exit. Recruitment can also be an issue, as second-level talents tend to gravitate more to bigger ideas than to small or local ones.

While it might be easy to be sarcastic about one type or the other, each has its share of pros and cons. At the end of the day, it is about the entrepreneur’s style more than anything else. The worst move for an entrepreneur is to try to avoid following his or her own style. I learned this the hard way when I started Sportner (a social network for people who play sports). I started a “scale-first” business though I am fundamentally a “monetize-first” entrepreneur.

So the only advice of this article is that the right style is your own style!

Personally, while not a customer, I am a big Balsamiq fan. Peldi is really one of the great examples of a successful “monetize-first” entrepreneur. Just check out the Balsamiq Company Blog (especially the 2008 flash back).

I also like to describe Seesmic as a great example of the first category. I think Seesmic investors eventually will make a relatively successful exit for around $25M to $50M to a media company that wants to get its feet into Web 2.0 or to a Facebook or Google based on the new Seesmic social-desktop strategy (which could become Seesmic new main strategy).

Although this model has created some great Internet companies (Amazon, Ebay), it also created the dot-com saga that we know all too much about. Even for companies with good ideas, putting the “Buzz before the Bits” could be very costly.

In today’s internet (often referred to as "Web 2.0"), the environment has changed dramatically, and has become much more favorable to innovators. Three main factors have contributed to this change:

• Extremely low cost of infrastructure: In contrast to the early days of high start-up cost, today’s “commoditization” of infrastructure hardware and software allows entrepreneur to start with just an idea, skills, and time. It is probably clear that this new era will not have the same effect on Sun that the dot-com era had.
• Abundance of technical information and tools: Thanks to open source and advanced search capabilities, the abundance of available technical information and tools is unprecedented. This significantly reduces the cost of development and deployment, and allows start-ups to just focus on their core ideas.
• Past experience: The dot-com experience has brought a lot of wisdom and some humility to the technology industry. Entrepreneurs view their ideas with much more objectivity now, and often know from the start if an idea would be better as a stand-alone business or as complement to another service. VCs have become more prudent about investing as a result as their painful dot-com experiences. Angels avail of some very mature processes and forums in which to evaluate early ideas.

Consequently, innovation has become cheaper and investors have become wiser. With innovators doing more to drive process. This, ultimately is a good thing for everybody, including investors.

This reduction in the cost of innovation, coupled with new challenges of creating a long-lasting businesses (see VC Squeeze from Paul Graham), is pushing entrepreneurs to evaluate the “flip” strategy (selling to a Google, Yahoo or others) before even talking to venture capital firms. The Riya-Google Rumor from Techcrunch might be the latest example to date.

All of this is not to say that venture capitalists are not adding any value. Actually, they add a great deal of wisdom due to their memory of the dot-com bust. In a great panel about Internet 2.0, Josh Stein of DFJ pointed out that many of the ideas of 1999 could be good inspirations for today’s market. Indeed, we are seeing many of them resurface. It is probably fair to say that many of the dot-com ideas were too early for their time, and that Web 2.0 might be the right distribution for many of them. Only time will tell, I guess.

In short, Internet Innovation is back on, more innovative and more "free" than ever. This is a very exciting time, and great things will come out of it. So, we should enjoy the wave and give the best of ourselves.

"Too early Buzz" could:

• Disappoint early adapters: Having some Buzz before the Bits raises user expectations unpredictably, and therefore significantly increases the potential for disappointment. Disappointing early-adapters could be very harmful and costly, since they are the foundation of future growth.
• Distract execution: Trying to evangelize to a broad audience a product that has not been validated by end-users might be very disorienting for the product team. After a while, the team might be too off base to be able to get back on the user’s need. Eventually, time, money and interest will run out … and a potential great idea might be lost for a while.
• Weaken competitive position: Coming out too early and too loud gives a potentially vantage point to competitors.

Adding to the intertwined relationship between idea, buzz and execution, it is important to note that the better the idea, the easier the Buzz, and the harder the execution.

This does not mean that Buzz is bad. Obviously, the right amount of Buzz at the right time is critical. The technology industry is full of successful companies and organizations that have been very diligent and effective in managing this balance, resulting in their success. Unfortunately and probably naturally, there are also plenty of great projects that started with a relatively "high Buzz" but never saw the light of the day.

So, in short….. Bits should be before the Buzz … then the real question becomes when to start Buzzing?