learnings from the valley: social text
before visiting silicon valley i was only vaguely aware of ross mayfield as a blogger and knew next to nothing about his company socialtext. after almost an hour and a half with the man himself that's been put to rights.
ross and his two co-founders established the company in 2002 (right after the bubble burst). his initial idea was an enterprise blogging company but one of his co-founders suggested wikis were the way to go. they started with $5,000 seed capital, worked out of their homes and blogged like crazy about the process of starting up the company - a great form of cheap marketing. ross admitted that the market has got "noisy" and it's no longer able to build a profile on blogging alone. "Build a core base you can leverage" was his advise to the start-ups.
faced with a bill of $20-30,000 to incorporate the company, they found a law firm willing to waive their fee in exchange for equity! i couldn't see any of the irish law firms opting for that approach.
the company now has 50 employees, 25 of whom work remotely. that presents challenges - not least committing to writing everything down everything so teleworkers can access info, although as a wiki firm that's probably best practice anyway. all the remote staff also get a $4,000 annual discretionary travel budget, to allow them spend face time with their co-workers.
ross described silicon valley as "one big marketing function" with a lot of supporting services and advisors easily accessible. he also shared some details of his time in estonia, when as a 24-year-old he managed to blag a job as an advisor to the estonian government.
i particularly liked his description of socialtext's addressable market: "the other half of enterprise software that hasn't been written yet".
Hi John
Thanks for the Paddy's Valley notes. By coincidence I was speaking to someone involved in a new Irish startup this week and their legal firm had taken equity for a substantial portion of the costs involved. They would not be a small firm either.
keith
Posted by: keith bohanna | December 14, 2007 at 08:08 AM
That's interesting Keith. Good to see local business advisors realising start-ups have specific needs. I wonder though if the founders had a track record and that's why they did it. Would be interested if many law firms are doing this as it's certainly not something that they tell us about.
Posted by: John Collins | December 14, 2007 at 09:58 AM
Cheers for the write-up, John. My biggest regret from PaddysValley was not taking notes at this meetup.
Posted by: Eoghan McCabe | December 15, 2007 at 07:46 PM
> I wonder though if the founders had a track record
Yep, solid founder and management team who tick lots of boxes.
> as it's certainly not something that they tell us about.
I have not heard it in a long time either
keith
Posted by: keith bohanna | December 17, 2007 at 07:01 AM
I'd have to strongly disagree with the idea of paying for services with equity.
Handing off equity at an early stage is a big mistake. You'd need to have guarantees of *future* business discounts and I doubt a law firm is going to be with you for the long run.
There would even be conflict of interest potential there.
Equity is like blood...be very very wary of parting with it.
Posted by: neil c. | December 17, 2007 at 03:04 PM
do you know of any firms these days in Silicon Vallye or Los Angeles that would do work in exchange for equity. Granted they would have to like to like the concept or the people running the company.
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