Wasabi Ventures has a friend, Hon, who has been unbelievably successful.  He has built companies and had huge windfall successes and because of these wins, our friend has a hefty bankroll.  But he also is uncommonly frugal — personally frugal and business frugal.  He is also the king of one-liners, so he has self-described his approach with money as being, “deep pockets, short arms.”

The “deep pockets, short arms” approach to start-ups is something to which every entrepreneur should aspire. Having “deep pockets” affords you to have as much flexibility as you can.  You can risk more of your time because you have a personal bankroll.  Salary and personal cash flow are not as important as building an opportunity into a sustainable business.  You also have the luxury of financing ventures yourself.

But you should also keep control of costs.  Being spend-thrift not only preserves cash, but it also forces operations to be efficient.  And it is in this efficiency that breakthroughs usually happen.  You find faster, smarter, better ways to run a business and beat the competition.

Grow your “deep pockets, short arms”, and build your company today.

We are in the midst of one of the great economic meltdowns and revolutions of our lifetime.  The financial markets crisis that has seen Lehman Brothers go bankrupt, AIG on the brink of collapse, and JP Morgan Chase sold at yard sale prices has sent reverberations throughout the business world.  The dollar is weakening on a daily basis, and the credit crunch is hitting main street.  This is an economic ice age.

And like the ice age that brought on the extinction of the dinosaurs and precipitated the rise of the mammal to the top of the food chain (note: this is the WV scientific take on dinosaur extinction), we believe the same thing will happen in this meltdown.  Small start-ups are going to be like the furry rodents that scurried around the jungles of the Jurassic Age.   As the large T-Rexs and other raptors (think large financial behemoths) fail to adopt and adapt to the change in climate, small, more agile creatures do find a way through.  The greatness of start-ups is that they can find holes in the cracks of an economy.  And like the early mammals, they also will evolve and grow into the dominant economic force.

So, as the bad news continues to grow and reverberate on Wall Street, think about the ways you can evolve and adapt.  Start-ups are just the small, furry, agile creatures of this ice age.

All of the general partners at WV are parents of school age children.  And like most parents, we spend a great deal of time with our children.  We take them to their various doctor appoints, swim lessons, gymnastics classes, and every other activity under the sun.  We also cook, clean, and generally care for all of their daily needs. And like most parents, we often wear ourselves out trying to be the best parents we can be.

Parenting also is one of those things that you often cannot see progress on a daily basis.  Your “victories” are clouded in the muck of just doing the job of parenting.  It is often not until years later that all of your efforts are rewarded (think of your child heading off to college, getting married, or finding that first job).  The destructiveness of bad parenting is also not often seen until years later.  Neglectful or ambivalent parenting effort manifests itself years later when the child reaches adulthood.  But either good or bad, you often have a hard time seeing the effects of your actions.

This is where parenting and being a part of a start-up is parallel.  You often work day-in-day out without seeing the huge victories.  You are often so far into the muck of daily operations that you do not see your daily wins and losses.  You often can’t decipher if you are winning or losing.  It is not until years later, that all of those daily victories add up to an acquisition, IPO, or stable cash flow company.

So, the next time you see your child’s smile or satisfy a custom support inquiry, think about the connection between parenting and entrepreneurism.

“Hannibal ante portas” = “Hannibal is before the gates” – from Cicero’s commentary.

The Latin quote above is used often when talking about not wasting time.

At a start-up, the second most valuable commodity behind cash is time.  Technology start-ups have to move fast, and there are only 24 hours in any day.  So every minute wasted is an opportunity lost. And in one of the biggest places time is wasted is in meetings not starting on time.  That usually has a multiplier effect of wasting multiple people’s time all at once.

So I have strict meeting rules:

• If you are going to be more than 5 minutes late, send a note.  I have SMS, IM, email, carrier pigeon available 24 x 7.
• After 5 minutes, the meeting will be closed.  If it is a 1-on-1 meeting, don’t bother coming, I will reschedule.  If it is for a group meeting, don’t bother coming, I will send an update later or you can read it on the company intranet.

The enemy is always at the gates as a start-up.  Save the fiddle playing for when you have won the war. (Sorry for the mixed Latin metaphor.)

As I was watching Michael Phelps last night in the 100M butterfly, I was struck by the life lessons that can be taken away from his performance.

For those that have not seen the race in question, Michael Phelps was unbelievably far behind and appeared to be in a hopeless situation with 10 meters to go. But somehow, he miraculously reached the wall first by .01 of a second. Every single person at the Water Cube and watching TV thought he had lost, but in the slow motion replays, he had won. It also showed that he had done something that most butterfly swimmers are told not to do, he shortened his last stroke in order to extend a little faster to the wall. He said, after the race, that he took the calculated risk because he knew he was behind and had to take a chance. Well, like most great ones, his risk paid off and he is now the greatest swimmer of all time.

The lesson learned from all of this actually play out at start-ups as well. Many are struggling behind large competitors, who have distinct leads in customer base, team size, funding, etc. But great start-ups have to think like a “great one” and find ways to win. In accomplishing this greatness, start-ups have to take risks. They have to use areas of advantage (e.g. large, happy user base or a nimble culture) to steal victory. There will be times when people think the chances that they have to take are daunting or even make their jobs less comfortable.

In taking these chances you will have your turn on the podium, and someone will be putting gold medal being around your neck.

There is a rule as an entrepreneur, “Don’t run out of money.” As long as you still have cash in the bank, you can adjust and change your plans enough so that you still can be in the game. Part of not running out of cash at your business is to be a personally frugal person. If you are wise with your personal money, you probably will be wise with company expenditures.

A great story about frugality comes from Josh Childress. Josh is a professional basketball player that shocked the world by signing a $10MM per year deal to play in Greece and by-passed the NBA. Besides understanding the fundamentals of a pick-and-roll, Mr. Childress also understands the power of watching every dollar, as demonstrated by this quote:

The next time you have to spend money for your business, maybe you can remember the monetary efficency of Josh Childress.

“It isn’t the people you fire who make your life miserable, it’s the people you don’t.” Harvey Mackay

A couple weeks ago, we wrote about the importance of finding help when building your company. But sometimes when you find help, you find the wrong people. Cutting ties with a wrong-fit employee is one of the hardest things to do for any manager, but not doing it can destroy your start-up and make you miserable as Harvey Mackay mentions.

There are a few facts about hiring in a start-up:

• Some people are made for start-ups
• Some people aren’t made for start-ups
• And some people think they are made for start-ups, but they aren’t

Start-up life is hard work and has its own culture when compared to any other type of employment. A successful hire is often forced to work in strained environments without a lot of support. Some people strive in this environment, and others crash-and-burn.

As the manager/owner, your job is to determine if they are keepers or deadweight. At a start-up, you can’t be in the business of grooming talent. There are too many things to do and too many roles to fill. Cut your deadweight quickly and save yourself the headaches.

Most smart entrepreneurs are customer focused. They want to make the customer happy and get more of them. But are there times when you shouldn’t listen to customers?

This question was the topic at one of our portfolio companies, PBwiki , last week. One of the senior developers had put together a list of articles that he had read about development philosophies. The one article that caused the most interaction by the team was an excerpt from The Inmates are Running the Asylum by Alan Cooper. Most people came down on the side that you have to listen to customers to make sure you are building things that the marketplace wants. But I actually took a different twist when I sent this email:

The key message here is that you have to know who your target is and listen to those customers. Don’t think that every customer fits your target audience.

This past week I sent an email to one of our portfolio companies, PBwiki, that really demonstrated the daily grind that is life at a start-up. Every day you have to find a way to make progress and move the ball forward. Here is the meat of email:

Everyday you have to find a way to make progress. Improve your product. Improve your support. Attract that new client. Make a new line, and move the game forward.

One of the most important of Yeh’s Laws of Entrepreneurship is simple but universal:
Get someone else to do the work.

I’m not advocating laziness in entrepreneurs–entrepreneurship is hard work. But you have to realize that hard work is insufficient.

Even the most dedicated entrepreneur is hard-pressed to work more than 12 hours per day. That’s only 84 hours per week, assuming you never take a day off. And towards the end of those long days, I’ll bet our workaholic entrepreneur would be working at only 50% effectiveness–or less.

In contrast, if you simply get three reliable people to work for you 40 hours per week, that’s 120 hours of productive work, in addition to whatever you get done.

It often seems like young entrepreneurs think that working ridiculously long hours makes them morally superior. All it really makes them is tired.

Professionals work hard, but understand that the real key is figuring out how to get others to do the work.