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.

2011 New Years Goal

• Have at least one $50k month gross income – FAIL
• Have at least 10 paying customers for a new SaaS application – Kinda FAIL (UU+ doesn’t really count)
• Learn to play a new non-stringed instrument – FAIL
• Drink more water – FAIL
• Reconnect with Old Friends – FAIL
• Gain at least 5 lbs – SUCCESS
• Meditate at least once a week – FAIL

1 Success / 6 Fail

Didn’t do so good last year, but got really close on a lot.

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.

If you can’t. Fuck you. You’re not an entrepreneur yet. You’re a poser, wantrepreneur.

Why do we teach ukulele on the internet? Because the vast majority of the people in this world cannot express any emotion they feel without the help of someone else. They depend on the works of art created by others to tell their story. The average person cannot express how they truly feel about someone, or how they feel when something happens. They listen to songs written and recorded by other people, they watch movies and cry because they can relate, but they themselves cannot communicate effectively.  Not only that, they don’t realize they can’t!

The value of music and therefore musicians is the fact that they can create things that help other people express how they feel. There is tremendous value in that, as we see by the millions and millions of dollars that musicians, directors, artists earn. Society has shown with their wallets just how valuable the creation of tools of expression is.

This is why Ukulele Underground is important.  Our goal is to create more new musicians.  More new people that can help others express themselves, or at the very least, we help someone express their own feelings. For those who play music, they know how much it really does feel like a gift. For a long time I couldn’t explain why it felt so powerful to me but now I understand its because as a musician, we help others feel. Feel excitement, joy, sorrow, grief, passion, the gift of music is the gift to express how you truly feel inside.

That is our Why.

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.

Our society has shown us time and time again that what we value as humans (at least in the USA) is innovation, creativity, the ability to create art or solve problems; the creation of things of value. As children, we do our best to create things of value. We draw, we paint, we build, we sing, we dance. Yet by high school graduation, few of us draw, paint, sing, or dance. This creativity is slowly discouraged and killed off in the school system. In ironic fashion, we push our children through schools that push them in the exact opposite direction of what society has shown us it rewards.

Our current educational system is set up to produce commoditized employees, which can be swapped in and out, replaced and replenished as needed. This system was create when we lived in an industrial society, but that era has long passed us by. Factories have moved overseas and now even what was once perceived as skilled labor; programming, graphic design, etc can be done overseas fully maximizing our declining dollar.

Our current leaders think the solution is to increase educational opportunities, to help the children of the future to gain better jobs. This is broken logic. At the very best, this is going to increase the gap between the poor and the rich when there is no jobs for those who do not attain degrees of higher education. What is far more likely is that it will commoditize the  high tech, highly specialized labor force creating an even more competitive job market and foster lower wages. We already see the beginning signs of this as many of my college friends have gone to take jobs which do not require a college education.

To me, as a 28 year old (soon to be 29) without any kids, the only way to fix this impending crisis is to begin to teach our children that there is real value in creating things of value. Point out the obvious that society rewards individuals who bring value to the world. Show them that those who we admire are master craftsmen. Point out the fact that by choosing to paint, Picasso added tremendous value to the world. The paintings he created are worth millions of dollars. His art added millions of dollars of value to this world.  Explain to them why we line up to purchase the latest innovations of entrepreneurs. That these are the real world manifestations of this person’s ideas. Without the entrepreneur first imagining the product, it would never have existed. Tell them the world rewards being an individual who cannot be commoditized. Tell them that the world rewards those who are brave enough to be unique and find a passion in life. Above all else, never let them stop creating.

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!