There’s no two ways about it, we’re in a tech bubble. It has cooled down a little but there is still a lot of dumb money floating around just looking for somewhere to go. What is dumb money? Dumb money is money provided by people who can bring no other value to you other than money itself. Its often the easiest type of money to get in bubbles as these people are the johnny come latelys who want to jump off the last bandwagon they were on and onto the latest and greatest thing. These types of investors do not understand your market nor do they want to, all they want is to give you money and have you do all the work and get more money back. Dumb money brings very little except high expectations and pressure for you to constantly be moving the graph up and to the right on their timetable.

Why Do People take Dumb Money?

There are many reasons why people take dumb money but I believe the two biggest reasons have to deal with the type of people who become entrepreneurs. First, as Eric Reis states, entrepreneurs operate in areas with very high uncertainty. Getting investment capital makes you feel good. It means someone believes in you or your idea enough to put their money behind you. A type of personal validation. The other reason is often entrepreneurs are arrogant enough to believe that all they need is money and they are capable of doing everything themselves. While this may be true, it is rarely the case and great angels and VCs can offer so much more than just cash.

Dumb Money does not mean dumb people

Dumb money usually never comes from dumb people. If people have that kind of money to throw behind an idea, they are usually not dumb as they got to that point somehow. What makes smart people hand out dumb money is when they try to invest in things they don’t understand. If they can’t understand your situation as an entrepreneur AND your market, chances are you may be accepting dumb money.

 What can you do as an entrepreneur?

If this is your first rodeo, I’d highly recommend bootstrapping your first business. It will allow you to wear multiple hats and find out truly how tough it is to start something and how its even harder to grow something substantial. You’ll discover what areas you’re weak in and need to outsource and what areas you excel at. It will ultimately prepare you better for success even if your first bootstrapped company flops.

If your mind is already made up that you need investment capital, I would highly recommend being extremely selective in who’s money you take. Only take money from people who can directly bring value your company, even if this means turning down money from someone you highly admire.

There are many ways investors can bring value to your company. If you are starting a consumer facing company, find investors who have deep connections with your target market that can bring instant credibility and brand awareness to your company. If you don’t know much about scaling a company bring on investors who have experience growing a team and revenues. If you are starting a B2B business, find investors who are already engaging in commerce with your target market. If its not instantly clear how this investor can benefit you and your company, DO NOT TAKE THEIR MONEY.

There’s a ton of dumb money floating, don’t take it, taking it makes you a dumb entrepreneur.

When we started UU in 2007, both Aaron and I already had tried our hands at a few businesses, none of which had any kind of success and most lost us money. My ego was at an all time low and it definitely could not handle one more failure on the quickly growing pile of failures. So I devised what I thought was a genius way to not have another failure in UU.

“Let’s start UU with such a low amount of money, that if we make any kind of money at all, it would be a success!”

We decided to each put in $100. Actually Aaron and I put in $100 each and Aldrine bought a Kala KA-S ukulele for our first give away.  With our plan in motion we quickly became “profitable”. We pre-sold t-shirts and used the presale funds to start our merch store. I sold our first few ads on our website. We were quickly making a few hundred dollars a month, then a few thousand dollars a month. Thing were going great and we were excited to finally have something that had this kind of traction.

The problem was we never paid ourselves. Every penny that UU made went right back into the business. To buy new merch, upgrade servers, upgrade software, going on tour to meet and thank the fans of the website, buy health insurance etc. We kept a healthy balance in our business bank account but our personal bank accounts were getting drained. We were all still relatively young, I was 25, Aaron and Aldrine were 23 when we started, so we saw any money coming in as success.

To solve this problem of not paying ourselves, we all got side jobs. Aaron and I went to work for my dad doing manual labor at his business while Aldrine started teaching private lessons and playing more gigs. Where a rational person would have decided this business venture was indeed a failure, we chose to look the other way and pretend everything was great. This charade lasted for almost 3 years.

Luckily we did eventually come to our senses and luckily when we did we had done enough things right to pay ourselves but I can’t help but to think that if anyone who actually knew what they were doing was running UU, it would not have lasted this long nor even be a thing today.

During the event I got to hear all the exciting things that are developing on Oahu and Maui and I have to admit it got me a little jealous. Hackerspaces, Meetups, Conferences, just the ability to easily meet up with and hang out with like minded people, that’s something I’ve wanted since we started UU 3 years ago that Kauai really does not have. Though Hawaii as a whole is still very far away from becoming a geek hub like San Francisco, Seattle, Boulder or Austin; Oahu and Maui seem to be taking steps in the right direction while Kauai… well ignorance is part of its charm.

After exchanging some emails with Russel Cheng, I’ve decided that if no one else is going to hold the flag for Kauai, I’m going to have to so I’ve decided to start a monthly Kauai Tech group.

The mission of the group is simple. To help culture the tech (Web Ap, SaaS, mobile ap, interactive content) scene on Kauai and develop a true startup culture here on the island.

The monthly meet ups would be a way for like minded people to get together and share their projects, get feedback and help each other grow their businesses. On an island where the only thing you do with computers is IT (at least according to most here); finding people might be a little difficult but I think I can wrangle 5 or 6 people together for a test run. It might take a while to get traction but like any venture the most important thing is to start. Will keep everyone updated on the progress as we work towards our first meet up.

This whole concept is completely contrary to the best way to learn anything. NOBODY is an expert when they start. The best way to learn, is to do. If you fail, you get back up, learn from your mistakes and try again. Its the process of doing, failing, and trying again that creates real world expertise.

Don’t be afraid of failure. Conquer the fear and try to fail in the most spectacular way possible. Most importantly, when you do fail, get back up and try again. The path to success is comes with scraped knees.

Fast forward 2 years later, I now have to eat my words and a big slice of humble pie. This girl knows her stuff and her latest venture Indinero is a product I have never been this excited for.

What is Indinero?

Not UU's indinero dashboard

Indinero is best described as Mint for small businesses. Its a cloud based application which links all of your business’s financial accounts (bank accounts, paypal, credit cards, etc) together and presents the data in a google analytics style format.

When I started my first business in 2005, I went out and bough Quickbooks because its what I knew my dad and his accountant used to do their book keeping. To this day, I still have no idea how to use that program even after numerous attempts at learning.

Indinero is the perfect alternative to Quickbooks for many small businesses, especially web based businesses who earn most if not all of their income through their merchant accounts and paypal.

As soon as you have your financial accounts linked, the dashboard provides easy to understand graphs and charts that visually display your cash on hand, your cash run-way (how long you can survive with no income at the current burn rate), this month’s income, this month’s expenses, and the net result.

There’s also the ability to categorize transactions so you can create graphs that show where your money is being spent. Once your transactions are categorized, you can study trends if your company is on the rise or fall and it makes it easy to see what things you may need to invest more attention to.

The application even generates monthly P&L statements for you to get a quick overview of your company’s health.

Is it Safe?

For those worried about the security of their money in their accounts, Indinero uses a high level SSL and https on all their pages. Indinero also has no ability to take money out of your accounts, only displays data. They also have security consultants on hand constantly making sure their site is protected. Its probably no more or less safe than using your bank’s online banking features. It comes down to you comfort level with these things. If you’re not someone who links to do online banking, Indinero might not be for you.

Any Complaints?

My only complaint about Indinero is their lack of pricing options. They currently have three account levels, Solo (free for 50 transactions), Small Business ($30/month for 500 transactions), and Enterprise ($100/month for unlimited transactions). My current business does a little more than 50 transactions a month but much less than 500. I wish there was a plan in between 50 and 500, maybe a Ramen Profitable level for $15 /month?

Conclusion

All in all, I can’t say enough great things about Indinero, it is a fantastic idea executed incredibly well. It was one of those things for me where I didn’t even know I wanted this until I saw it. If you own a small business and have trouble tracking your company’s financial health, you owe it to yourself to give Indinero a spin.

I hope to accomplish a few things by doing these interviews:

1. I want to champion the idea of pursuing your dreams and following your passion. If you choose to pursue your passion, you will probably bring more value to the world than if you didn’t. Money is how the world tells you that you are bringing value to it. Follow your passion and you will be rewarded. Its so ironic that the people we idolize are the ones who are doing what they love, yet our whole lives we are constantly discouraged from doing so. I want more people to realize this fact.
2. I want to inspire people to start something. I want to show them that they can do it. That they are smart enough and will succeed if they are willing to work hard. It is especially important to me that the youth of Kauai realize that with the internet, they have all the same opportunities that anyone else in the world has. Nothing is impossible anymore. Everyone has a shot. It’s up to you to take it.
3. I want to learn from these people about how to grow my own businesses. What I could be doing better and some of the hurdles any successful person must fight through and overcome. I’ve made a lot of mistakes in business and I’m sure many could have been prevented by learning from those who have been through it before. I also think by listening to those who have done it before, I can pick up some new idea on how to grow my own business.

If you have any suggestions on who you would like me to interview, please post them in the comments below and I will take a look and try to get them on. I will probably start close to home and with people that are accessible to me.

Thanks!

Ok, that may have been the case, our ad server might have been a little outdated and there was a lot of noise on the web just a little while ago about a huge security hole in that platform. I deleted the ad server, all the malicious code, rolled back all the files on the server to a safe back up and thought I was fine. Then last night we were hacked again. Same exploit. I did some research and found many other Godaddy customers experiencing the same problem with no wordpress installed or with it being fully upgraded. A security company has made suggestions that the vulnerability is due to Godaddy’s implementation of phpmyadmin. Godaddy however remains adamant that the blame rests entirely upon its users. So in venting my frustration late last night and this morning, here’s the experience I had.

For me to say that site5 and Godaddy are on equal footing and should provide me the same customer service is stupid. I am not that egotistical to think that Godaddy should give a crap about me. Why should they, I think we pay them maybe $100 a year. Godaddy is a HUGE company with millions of customers, Site5 has thousands of customers. I know I rank very low on Godaddy’s priority list and to them, losing us is not a big deal.

The point of this post is that if you are a small(er) business (like site5) and hungry to win, social media can really do wonders for you if you use it correctly. Social media is good for 2 things, listening to your customers/potential customers and scaling your customer service.

If you are exceptional, your customer service serves as all the marketing you need. Social media allows happy customers to sing your praises to potentially millions. And as we see with Godaddy, the opposite is entirely possible as well. Bad customer service = millions bad mouthing you. Do a search for Godaddy on twitter and you will see I am not the only one frustrated by the way this is being handled. The message is no longer in the hands of the company, it shaped entirely by the consumer.

Site5 is not perfect, they recently had a very bad email crash that affected many of its users, some of my clients and myself included. The way they handled it however was worlds apart from how Godaddy is currently handling their situation. They admitted it was entirely their fault, credited each person affected with a month of hosting fees, and Ben the CEO got on the phone and called customers who were affected by the outage to apologize. This is great customer service.

The twitter interaction with Ben is only a small part of the communication I had with the company today, most of it via email. They assured me that they could handle our entire migration, make sure all our files are clean, and try to work out a discount for switching over.

We’re going to end up paying site5 a lot more than we pay Godaddy currently and that is fine, I feel like we will be well taken care of and treated with a lot more respect. In this “thank you economy” showing your customers you care first then asking them to pay is the way commerce works. We thank businesses by giving them business. Those that grasp that now will prosper in the future.

Now I just need to get my personal blog to site5 and I’ll be all set.

Related Links:

Godaddy Blog post on Malware attacks

Sucuri post on the attacks on Godaddy

So this brings me to this internal debate I’ve been having with myself for the past few months. I want to start a podcast series about entrepreneurship and the process of starting a business (focusing on web based) from the ground up. In this series I would cover my thoughts on the changing business environment, how the internet is changing everything, resources, book reviews, inspirational interviews, etc.

I basically want to help as much people who want to start something of their own live their dream life.

What’s Holding Me Back?

Well basically three things.

1. I am embarrassed by the fact that although I feel I know what I am talking about, I still don’t have the proof that I do. I haven’t hit a homerun in business yet and I wonder if its too early for me to start talking business without having anything (financially) substantial to show for it. Right now, I have many theories/beliefs about what works, what doesn’t what’s important but I’m only now beginning to validate or invalidate these ideas.

2. I honestly have no idea what people want to hear about. There are many things that I’ve learned along the way that I guess I’ve taken for granted. I recently had a skype meeting with a few friends of mine who are looking to launch a new website. The questions I thought there were going to ask were completely different from what they actually wanted to know. They were asking things that I honestly thought everyone knew, but when I took some time to think about it, no not everyone does know these things. Questions like, “What legal things do I need to form a business?” or “How do I get payments online?” I’ve learned such a long time ago, I forgot that when I was first starting, I didn’t know where to start either. I think many things I don’t even think would be good topics are exactly the type of things people want to hear about.

3. My plate is becoming increasingly full. Although we’ve brought on some great people to help with the workload at Ukulele Underground, The projects we are launching will take up a lot of time. Not only that, Eatkauai.com still has a long way to go, and the record label needs at least 1 project this year. I also have some client work I need to finish up and a lot of other people who are asking me to design and create their website. I’m worried about spreading myself too thin with yet another project. It’s always been a bad habit of mine to not finish things that I start. It’s a habit I’m trying very hard to break.

So That brings us to this…

This project is something I think would be incredibly fun for me as I can honestly talk for hours about business if the party on the other end will bear it. I do have my concerns though, so honestly I would like some feedback so please leave a comment if you think its a good or bad idea. I’ll be mulling it over and hopefully by the end of the month, I’ll have made my decision if I’m going to do it or not.

DarkSydePhil – DarkSydePhil is a gamer based in the north east. In 2009 he began posting videos of himself playing video games while providing commentary to the in game action. Within one year his youtube channel skyrocketed to over 40,000 subscribers thanks to his hilarious often angry in game commentary.

Why do I think he can turn it into a business? First off, gaining 40k subscribers on youtube in a year from 0 is an indication that he resonates with a specific demographic. Sure 40k is a fraction of the top subbed channels on youtube, but the difference is DSP is very niche and attracts a very specific and lucrative advertising demographic (males with disposable incomes). This audience is growing at a very high rate as well. When December began he was around 30,000 and shooting for a goal of 35,000 subscribers, It reached 40,000 before the year.

What he should do? Create a web presence outside of youtube that allows his viewers to become an online community. By creating a community your options for monetization grow. You can do advertising, sponsorships, products. By creating an online community you allow your viewers and fans to create content on your website via their discussions. Money will come with the eyeballs and the earlier he creates his own space on the web, the faster he’ll get there.

Obstacles – His content (video game playthroughs) skirt the line of legality. Some may argue that play throughs are copyright infringement. If you consider video games the newest form of interactive story telling then this may be the case. There have been court cases that have established that putting recordings of movies and music online as illegal but there has been no precedence set for play throughs as of yet.

Ryan Gutierrez aka gootecks – Gootecks is a top SoCal Street Fighter 4 tournament player. In early 2009 he decided to dedicate more of his time to growing the fighting game scene and began pumping out podcasts, video content, and his own branded event ‘Street Fighter Bar Fights’. Within the last year he has appeared in the documentary ‘I Got Next‘ by Ian Cofino and has been featured on G4 TV.

The good thing about gootecks is that he gets it. Street Fighter fans are amongst the most passionate fans of any video game. They study and devour everything related to the game and many have been doing so since the early ’90s. With the release of Street Fighter 4 in 2009 and the upcoming Super Street Fighter 4 in March 2010, Gootecks has done a great job positioning himself to be one of the faces of the Street Fighter community. He is also friends with Justin Wong, the best SF4 player in the country and if they started working together it would undeniably demand the attention of everyone in the community. I’ve talked to Ryan a few times the last year and many of the ideas he has are awesome and if executed properly and with focus, there should be no reason why he can’t make a very comfortable living for himself doing what he loves.

There are many others who I am watching, some further along than others but these 2 are the ones who I am most intrigued by mainly because they are 2 more examples of the shift in media and media consumption by consumers. I believe that the next, next generation of celebrities will be born on the internet and not on TV and watching people like DSP and Gootecks grow their brand equity online is a good test of my theories.

Anyways, those are my thoughts, who do you think will have a breakout year in 2010? (besides me of course )

This new idea however is something that I really think is needed here on Kauai. It’s the first project that I’m attempting that is targeted towards Kauai as it’s market. It’s a problem (not a very serious one mind you) that I encounter probably weekly, and I’m sure others encounter even more. I thought of the idea back in the Summer and after suffering some analysis paralysis, I’m going to start this one this tomorrow and hope to have an early beta ready to go by the weeks end. I hope people on Kauai find it useful and help me grow it into something special because I think if completed, it can become something that benefits everyone that lives here.

I’m also going to document the steps I take with this project here on my blog so others can see how I go about developing and launching websites. It’s probably pretty boring but hopefully some people find it interesting.

More details to come. I know this is horrible timing to do this with Christmas coming up but that’s how I am. When I get the desire to do something, I usually do it as soon as possible (Which is probably why I am G1 in Street Fighter 4, no self control I tell you).  Now if only I could figure out a way to solve my Christmas present buying problems ….