Startups for Dummies - Стартап для Чайников (рус)
1. Be born in a suitable family, in the right country, at the proper time, more or less healthy and with an IQ higher than 100.
2. Go to MIT. You can try to graduate if you want, but a year or two is plenty.
3. Get acquainted with a professor and do some work in his lab. This wouldn’t be a bad time to get married, since so you’ll be too busy for that later on. You don’t necessarily have to marry his daughter—some VC’s daughter would be preferable.
4. Pick a scientific idea and try to take it to absurd lengths. You have to have a system, though. Let’s say it’s a genetic engineering lab developing new GM plants; you could propose creating a variety of bamboo that can have letters and packages shot through it with compressed air. “That’s not as dumb as it sounds,” or so says Mr. Arkady Raikin. “After all, what’s bamboo? That’s right, it’s organic, which makes it environmentally friendly and sustainable.” That last word was in English, even though Raikin was speaking Russian—no such word as “sustainable” yet, and it’s indispensable, even if all it means is the stuff grows back on its own. Same thing goes for talk of carbon footprints—any hedgehog knows that bamboo plants pull CO2 out of the atmosphere.
5. Provided he didn’t come up with it himself, the professor must agree that your idea is scientific, original, patentable, and ready for commercialization. In other words, he’ll own part of the company. You can agree to 50%, but negotiating is perfectly appropriate—that’s a great way for a young scientist/business(wo)man to earn some respect.
6. Register your company—startup, actually. It is essential to give it an important-sounding name, pretentious, but slightly incomprehensible, something like TransBambaCorp or BamberLess (you’ll settle on that when you decide “Bamboo Without Borders” is way too long). Don’t go with something like BEMC2, though, despite the subliminal hint that packages will be delivered at the speed of light; that’s just plain overkill.
7. Prepare a business plan. This is no time to be shy; emphasize the broad range of applications. You can start with the advertising potential; your system can get direct mail materials straight from the local post office to any residence (up to a maximum height of fifteen floors, of course). Who cares if the postal workers will all be out of a job? Then there’s humanitarian aid for developing countries, especially war zones where travel is difficult. Nobody is going to notice some bamboo or pay any attention to it if they do. Save the railroad tunnels, transatlantic oil pipelines, and space elevator to the moon for the very end. Amortization period: three years.
8. Show your business plan to a VC (venture capitalist). Ideally not an intermediary; you are looking for an actual capitalist with his own money to invest. It’s almost impossible to find out anything about his real financial situation, even if he’s your father in law, but if he’s a big guy and he talks loudly, you can trust him. Be brief; he needs to get it right away and evaluate the prospects in a minute or two. Ask for three million, three-hundred and fifteen thousand forty-two dollars, a modest sum, since it’s the product of precise calculations, not some wild guess! He’ll give you an even four million, not bad for a start. To get it, you’ll have to give up 70% of all rights to everything (sharing is caring!).
9. Now life gets interesting. The VC will appoint a board of directors and choose a CFO and an HR director. These aren’t people you want to mess with. You’d better be thinking about a position for employee number one, too. Ideally, go for CEO, with a $325 thousand starting salary and a 10% option, the same as the professor’s share—the professor, by the way, will be your new scientific consultant at 185K a year.
10. Time to rent three basement rooms in Cambridge (that location is non-negotiable for startup) and hire the biologists, genetic engineers, and what have you. Just ten people. Their salaries will be modest, but you can give them stock options (0.02% each) and paint a pretty picture of the company’s prospects so they’ll get in the spirit of things. We’ll be working overtime procuring all the equipment, test tubes, instruments, and rakes, of course.
11. Step one: making a prototype, a functional model of a bamboo line. If bamboo does not grow in your local biome (basement), you’ll have to have soil delivered from China, as well as buckets, hydroponic basins, sun lamps, and a humidifier. At some point, Junior Engineer X will meekly report that bamboo stalks have solid joints inside them, so trying to blow stuff through might not be so easy… Your first instinct will be to fire the creep on the spot. There’ll be time for that later, though. Be nice about it, just say something along the lines of “yikes, kid, you really don’t know much, huh? Go on, get back to work.” Time to find the gene for those internodes and “turn it off.” Assign the task to one of the biochemists immediately. Maybe he can do it, who knows? In the meantime, we can file a provisional patent application for bamboo without internodes and just cut the damn things out.
12. The prototype is ready; you can blow a piece of paper from one room to the other, plus you have a separate line from the basement to the roof. The first step is the hardest. Marconi’s first transmission from America to England was just a few words, but soon radio communication was everywhere! We’ve had to put an aluminum tube inside the stalks to keep them from jamming, but what does running our mouths about that get anybody? Time to apply for patents on “A Sustainable Transportation Biosystem” and “Living, Self-Growing Multichannel Branched Systems and Methods for the Generation thereof.”
13. Time for some advertising and a product demonstration. The pageboys of FedEx and Amazon will come running first, with superstitious joy and promises of financing. The representatives from Google will offer to buy the company for fifty million right away. Respectfully refuse. They’ll insist on doing their due diligence (getting into all of Bamberless’ dirty laundry) and learn all your technical secrets, pull the plug on the acquisition on the grounds that your business is outside Google’s wheelhouse (sneaky bastards!) and start their own bamboo line development program with a staff of five-thousand scientists. You don’t’ want that—due diligence would have been bad enough.
14. Well, looks like we’re gonna need a second round of financing. Our prototype is “operating far better than expected,” but we have to expand our testing process and prepare it for commercialization, i.e. we need more research money. We can get it by grubbing for chump change all over the world, or “appealing to a wide range of investors,” but it’d be way better to set up a strategic partnership with some industrial giant. Let’s say the negotiations with EPC (English Petroleum Corp) go well and they fork over forty million without any guarantees from Bamberless. A press release appears in newspapers and on the internet to the effect that EPC plans to build a 2216-mile of bamboo pipeline in Nigeria, running from the oil wells of the Niger delta to the port of Lagos. You won’t believe your eyes and ears: technical specialists from EPC came to look at the prototype and made it perfectly clear they knew it was “rubbish,” but now they’re throwing that kind of money around? “Indeed!” It’s all very simple, my dear tech prodigy. Four years ago, there was a fatal explosion on one of EPC’s oil rigs, causing a serious oil spill in coastal waters. Billions in fines had to be paid, and heads rolled. The new management was desperate to disassociate themselves from their predecessor’s irresponsibility, so they launched a rebranding campaign. A new “Greenxerology” department was organized to pursue sustainable logistics with a budget of 5.03 billion dollars. They had a lot of money to spend, but not too many ideas. After the specialists got back from their visit to Bamberless, they visited Vice President Corleone in person to talk some sense into them, then wrote an eminently positive report about your prototype. Indeed, they were afraid you would say no to the deal!
15. Well, let’s say Dr. Corleone gets nervous about losing 40 mil or shame and public mockery for their Bamberless boondoggle, and the venture capitalists (including your father in law!) aren’t inclined to invest their money without any safeguards. Well, what can ya do? There’s always a way out, but this one isn’t for the faint of heart… See, there’s this country called Marfusia, and they have a big state concern called MarFacoTechnologies (MFT) headed by a certain Mr. Bambais. He’s a clever guy who knows what he’s doing when it comes to science and technology—and, more, importantly, business and people. Your VC met him at Davos, so he’s got an in. Time for you and the professor to head to Marfusia for a meeting. Not with Bambais himself, obviously, but one of his hangers-on (a guy in a raspberry-colored jacket) will meet your delegation in the sauna with some escort. You promise to transfer your bamboo know-how to MFT and grant them a license to grow the plants from your genetically modified seeds for a period of 99 years. MFT, for its part, will open up a 93-million-dollar line of financing (for starters). You ask why it’s so much—and rightly so, since it turns out the contract has a rider you didn’t get around to reading. Turns out it won’t just be Bambais joining your board of directors; there more members will be signing on—at six million a year. They’ll be delivering lectures. Paid lectures. At the same rate the Clintons get. Plus, travel allowances, tax reimbursements, deductibles, insurance, and you’ll be lucky if Bamberless gets 40 of the 93 million dollars. There ya go, motek—this mousetrap comes with free cheese! It will be necessary, not to mention fascinating, to watch your CFO’s face when you tell him about this awesome deal you’ve set up in Marfusia. There should be no visible reaction. Your CFO might resign the next day, or he might ask for hazard pay. You really ought to go with the EPC option if you can; you’ll get a shorter sentence that way. Hey, relax, I’m kidding!
16. Yay. The second round of financing was a success; now we can get back to work. “What’s our next goal, Professor?” “Now we put everyone and everything into building a pilot plant! Why? You’ll find out soon!” In the meanwhile, you have a lot of new people to hire. You need new scientists and engineers. You also need to plant your friends, professor, and father in law in the director and vice president jobs, and, finally, rid yourself of doubters and naysayers—quickly and mercilessly. There are a few snide voices in the cafeteria telling people that the Chinese were already building bamboo water pipes in 2000 B.C.E., so it isn’t exactly new technology we’ve patented. That idiot. Out of the four people having lunch with him, two instantly related the story of this little history lecture to that witch in HR, while another came to you directly. The malefactor was called in for a meeting with God the Father. “I had to say something, for god’s sake!” Then there’s the fourth witness. He hunkered down and kept quiet. Maybe he didn’t follow what was going on, or maybe he just didn’t see fit to come forward. Either way, there are two vacancies in the mechanics department. Nothing personal.
17. More people means a new building. You’ll be moving from Cambridge to a rented building in Burlington. It’s farther from downtown, but it’s cheaper—and roomy enough to accommodate 100 people and their laboratories. More importantly, it has more conference rooms. Bamberless already has 26 directors and vice presidents, and they don’t have anything in particular to do, so they need somewhere to sit as they weave their intrigues. Gotta open a branch in Holland, too, and stick your IP rights over there, along with a significant portion of the monetary reserves. What’s the subsidiary’s name? InterBambina LTD, of course! This would also be a good time to build a pilot plant—i.e. a bamboo field in Florida. A 14 square kilometer area will contain 250 postal material receptacles (boxes) connected by a network of organic, genetically programmed bamboo stalks, their diameters ranging from 20 to 60 centimeters. The third stage of the plan is a secret—it involves sending people through… provided they’re relatively slim. Just volunteers so far.
18. Get ready to encounter some difficulties (of the “none of this crap works!” variety). The bamboo grows in the wrong direction, the average thickness is 1-2 centimetres instead of 60, the stuff just refused to branch like it’s supposed to, there are these bugs that keep eating the new shoots, and the geneticists got something mixed up and a lot of the stalks are hexagonal instead of round, and they aren’t even hollow inside. Zionist agents! As the saying goes, damn the torpedoes, full speed ahead! It’s not so bad anyway. You can just scale down the pilot program, to 60 square meters and 6 boxes instead of 250, plus order some appropriately sized plastic tubes…and some green paint. Then, out of the blue, Engineer X (you forgot to fire him last time!) writes up a proposal to attach thin bands to the pipes at intervals of 37 centimetres so it’ll look more like bamboo segments. That’s a great idea, go with it! But what fate awaits Engineer X? Firing him now wouldn’t do (there’s such a thing as honor among thieves, after all!) but you’ll have to take him off the pilot project. After a sit-down with the HR lady, you can appoint X as the new director of the microbiology department. True, he’s a mechanical engineer, but who cares? And that department already has a director—well, they can compete for influence! A truly sophisticated manager wouldn’t even tell the previous director, just to make the conflict doubly piquant, but that’s above you pay grade for now, grasshopper—maybe once you have an MBA…
19. The pilot program is complete. Test deliveries of the latest issue of Penthouse, a stuffed cat, and wooden models of Buk-M2 missiles were successful. A marketing video about Bamberless has been released, you and the professor in pith helmets telling the handsome journalist how the whole thing grew in just two weeks and works just fine...just fine, then you (supposedly) send him your commercial director—feet forward. It worked out great, but after the video went up on YouTube, offers came in from Mexico, Columbia, and Thailand…all of them rather dubious. The last of the 40 million will go to management in the form of bonuses. The staff bonus, on the other hand, will be 100 options each.
20. Now Dr. Corleone will arrive personally for an inspection, heading a delegation of 16 employees. His employees got up to speed last time, they won’t make any problems—and your success is self-evident. True, one shmuck did ask if your bamboo can already handle oil (what a shit question!) and you reply with a solid yes—the only problem is the local republican administration has banned drilling at the pilot site due to the danger to the alligator habitat. Nobody had the nerve to ask what exactly that danger was, since it was so obvious that the Don Corleone’s patience was wearing thin…and so was the alligator’s, for that matter. At the banquet, the good doctor attached himself to your commercial director, inviting her to just call him Vito—or Vitya Boy, if she likes. Anyway, he doesn’t need any additional reports. You’ve got the green light!
21. Phase three. Now that the pilot program has passed its inspection, you can move on to commercialization (actually making real money). There are a few ways to go about it. Let’s start with the possibility of Bamberless getting bought out by EPC. If they go for it, what you really need to talk about is price and timeframe. Start by asking for 400 million. Emphasize the unlimited market, how your bamboo lines can grow all the way to the Moon. The company’s evaluation could also theoretically include income in the form of “chargebacks” (racketeering), i.e. when clients pay you to not use your technology, like if they want to protect jobs in the transportation industry, agricultural land, water resources, etc. If the negotiations run into a dead end, you can propose a kickback—but a very elegant one—promising to donate to the “Save-the-penguins” fund, which, due to a startling confluence of circumstances, is headed by Mrs. Carmela Corleone. EPC might agree to your number but draw the payments out over seven years or promise to give you half the money immediately and the rest after you successfully build an oil pipeline from an offshore platform. If the board of directors takes the bait and goes for 200 million, there’s nothing more you can do. You’ll get a 10% share, which isn’t bad…but that might be the end of your career. After a while, the prosecution process will begin. EPC won’t be getting their money back, obviously, but the board of directors and VCs will make you their scapegoat—yes, you, The best Young Inventor on the East Coast! “That bastard concealed the facts! He cooked the books!” If that happens, the best thing to do is take the money and hide out somewhere for five years or so. The CFO might catch hell, too, but he knew what he was getting into.
22. There’s a second option, going down the government road. It’s simple and reliable. Go to the DoE, the DoT, the DoD, or maybe NASA, and apply for a 300-million-dollar grant to build (grow) new transportation infrastructure in Los Angeles or Seattle. It’ll be used to deliver medicine and diapers straight to the homes of senior citizens and single mothers, since it’s dangerous to be out in the streets, after all. You’ll start by giving them a presentation at a big government building, then you can invite them to send a delegation to the pilot site, followed by a visit to Bamberless’ Burlington office and breakfast straight out of your own bamboo plantings. Just don’t try to bribe them and everything will go fine. As soon as you receive the first tranche—isn’t that a pretty word? It’s French—you can start buying up equipment, selecting sites, renting buildings, and setting up a pumping station with three air compressors at two million apiece… basically, you have to kill time until all the money is actually in your account. It’s only then that an unfortunate turn of events will come to light; the bamboo is growing poorly, because the soil’s full of lead. Who could have seen that coming? Maybe Engineer X, but he’s managing the microbiologists now, and he figured if he can’t say something nice, he shouldn’t say anything at all. Plus, the local water is low in calcium, and the local government is demanding too much for their biosphere protection fund (rake-off). “What now, rabbi?” “Bankruptcy, grasshopper! Chapter 11!” Going to court for protection from your creditors, mass layoffs, restructuring, and endless proclamations to the effect that it was a great idea and you’ll never give up. Viva Bamberless! In the course of events, it will become clear that Bamberless owes some serious money to its investors—210 million, plus they have to make some non-conditional payments to certain members of management (including number one)—golden parachutes all around! Significant cash was siphoned off to Holland and InterBambina LTD—foreign jurisdiction where nobody is likely to get at them. Honestly, it seems like they pretty much sucked everything up, and what remains will be disposed of on the final evening before the bankruptcy—a kind of last supper where everyone gives each other bonuses, like the Enron guys did back in the day. But what will happen to the non-privileged stock options that were handed out to rank-and-file employees? Gee, I don’t know. How about you take a wild guess?
23. Your third option is going public—instead of scamming a government agency, you can go after people looking to get rich quick on the financial market (i.e. the public). Bamberless holds an initial public offer and makes shares available for $10 apiece—and there are only 60 million for sale! They all get bought up, and your CFO happily reports that the corporate treasury has been enriched by 400 million. “Wasn’t it supposed to be 600?” asks some smartass who can multiply 10 by 60. There’s an explanation, obviously; it turns out only 40 million shares were put on the market and sold to investors, while the remaining 20 million were distributed to the board of directors and the top managers as a reward for all their hard work—not evenly, of course. To each according to his importance.
24. If you want to be precise about it, there was a little something left over for the rank-and-file employees—100 thousand options for all of them to share. “But how can that be?” the wife of our infamous Mr. X asked. “Come on, Yasha, in the time you’ve worked there they gave you alone 50 thousand options!” “Well, it is what it is…” X said with a sigh. “Before the IPO, they told us that our old would be exchanged for new ones at a rate of 25 to one… So, you see, Sarah, the thing is, our share is 2000 options now, not 50,000… It’s a good thing, we can only sell them in two years, maybe the price will have gone up by then.” Readers interested in the difference between options and shares are invited to educate themselves on Wikipedia.
25. So you decided to screw your employees, but let’s not dwell on the sad part of the story. Who took the risk of creating a startup? Who’s a smart boy? - You’re a smart boy! You have a lot to do, but there’s no need to get hung up on the details. You have to spend the money just like you would have spent the government grant…well, almost. The difference is you have to jack up the stock price first. That can be accomplished via the press and the internet. Put out press release after press release about Bamberless signing deal after deal with all the big companies for all kinds of new bamboo systems. Well, “deals,” might be pushing it, they’re mostly letters of intent, but hey, details. There you have it, up goes the stock price: $10, $12, $15, $25, $35… Mrs. X is already thinking about how she’ll spend the 70 thousand dollars they’ll get by selling their options. Naturally, the 2-year blackout doesn’t apply to major holders of privileged shares, so they (including you, the CEO) can start selling them a little at a time. A million today, another million tomorrow, easy-peasy. The market price fluctuates between $30 and $48—any minute now it’ll hit that coveted $50 mark, right? Guess again. It’s already been 18 months and you’re running into all the difficulties with rolling out the technology described above (plague, pestilence, frogs, boils, locusts, lead in the soil, alligators, etc.) Silly as it sounds, there isn’t much left of the 400 million from the IPO. Can you guess what happens next? Clever boy—bankruptcy. The stock price has already fallen to $8.50, then 85 cents. “This is rough. In just three more months, we would have been millionaires!” our Director X says to his wife. Well, the Lord giveth and the Lord taketh away. There’s an excellent Russian saying for this situation “a hangover from another man’s feast.”
26. 60 million Bamberless shares were sold for almost 2 billion dollars. Some people might be wondering where all that the money went and where it came from. Well, where it went is obvious enough, but where did it come from in the first place, my good man? Well, from your 401(k), where else? The Infidelity-2050 Pension Fund bought those Bamberless shares with your money, paid themselves a modest 0.8 point commission for the transaction (16 million) and listed the losses on your account. And I’ll bet you fell for that clickbait about the technology of the future, didn’t you, dumbass?
27. But what if it had all gone differently? Let’s imagine for a minute that you decided to work with Bambais and his Marfusian compatriots. If so, you might not even have to move to phase three. You can keep kicking the can down the road practically forever—or blowing the air through the bamboo, as the case may be. Your friends in Marfusia would watch benignly from afar. Every year, Bamberless would present a progress report—to the effect that all targets were being met, but they still recommended waiting on the commercialization for a while, since they needed to conduct further research aimed at making the bamboo more cold-resistant and reduce the “turning radius” of the bamboo pipelines to the point they can actually grow at right angles. True, the 70-90 million annual Marfusian petrodollars would be split roughly in half; the lectures would go on, with compensation provided at a fixed rate, with each accomplice, sorry associate, that is—receiving a share appropriate to the work they put in. Meanwhile, the scientists are continuing their research, hoping to get rich on their options. The most important thing in this situation is to avoid information leaks and prevent any potential scandals. Play your cards right and you could keep it going for ten years. If you get bored, there’s nothing stopping you from creating another startup or two, and even pass on your CEO position to a “friend,” while you join the board of directors. In a year or so, your “friend” will try to weasel his way out of it, insisting that he didn’t know anything, while you can make a big show of righteous indignation. “My father-in-law and I trusted him with this Great Company, but he failed to show any leadership! He thought he could just go with the flow!” Here’s the main takeaway, though: if the company has managed to settle into a stable phase two like that, you have to change CEOs and CFOs at least every 18 months. For their own good.
28. The best choices for leadership roles are former managers from respectable companies, preferably foreign residents that are already at retirement age. Ideally, they should be able to distinguish bamboo from coconut palm and be somewhat down on their luck. Obviously, you don’t need competent employees who know what they’re doing—in fact, they might be bad for the company. You can do as you please in the HR sphere; fire people, coerced them into anything, play them again each other, sling mud, even force some of them to attend “conflict management” courses. Then you can fire them. The only people keeping their jobs will be dyed-in-the-wool schemers and retirement age types who know what’s going on and can still string a sentence together. There’s no need to scare anybody…but the Marfusian capital’s arm reach is long.
29. All good things must come to an end. After eight to ten years, the startup gets so risky you just have to close up the shop. But how? That’s right, bankruptcy, just like in the previous scenarios. You can let the employees go in two to three stages and sell the 2-million compressors for scrap metal—the pipes too. You’ll want to settle up with Bambais fair and square. You can screw the other investors, though—they’re decent people, they’re not about to put a hot iron on your stomach or threaten your family. Let them sue you if they feel like it. You’re still young—and already fabulously wealthy. All you need now is another startup idea.
© Dimus 2016, English translation I.Wheeler 2019
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