1. Good (CEO) Help Is Hard To Find: "Joel posits that no software company can succeed unless there is a programmer at the helm. I agree. In fact, I would generalize this to: It is unlikely that a technology company will succeed without a (former) technologist at the helm. A CEO who does not understand technology will:
- confuse the technically possible and the impossible
- be misled by development schedules
- usually overestimate the value of acquired technology
- perform poorly in negotiations that value technology
- not understand the relative value of standards, open source, and proprietary technology
2. Don't Take The Money: "It turns out that Fog Creek Software doesn't want venture capital. Good! We often turn away businesses like Joel's because they often don't really need venture money. If a company is on a steady organic growth track, can finance product development out of revenues, isn't involved in a highly competitive market where the first mover can achieve significant lock-in, and doesn't have a high-risk, high-return profile, it has no need for venture financing... Venture capital is often required for software that has to developed on a rapid schedule to keep up with changing hardware, or requires an expensive direct sales channel, or is competing in an application with strong first-mover advantages and network effects... It is much better to reject a good candidate than to accept a bad candidate... Different rules apply to different worlds, in software and in venture capital. Software businesses that can be built slowly, organically, aren't racing network effects and don't need business advice from outsiders shouldn't take the money."
3. Snidely Whiplash And The Liquidation Preference: "Unlike investing in public companies, where there is copious data and many regulatory bodies controlling the flow of information, private companies are primarily funded based on trust. I don't think I'm airing any VC secrets when I say that you, the entrepreneur, will always know more about your company than we will, since you spend 24 hours a day working on it. The Snidely Whiplash problem is that a really smart, evil entrepreneur could rob an investor blind... There is another, harder, problem. Dudley Do-Right is upstanding and honest and is a true believer in his idea. He'll do anything to get his company funded. We VCs who see hundreds of ideas a year are more cynical. We'll think that it is a pretty good bet, but there are lots of those and not all of them work out... A high liquidation preference helps in this case by forcing the entrepreneur to go for a higher return (though potentially risking the company) rather than the safer bet. This enforces a discipline and understanding on both the VC and the entrepreneur that this is to be a high risk/high reward proposition."
4. The Best Of All Possible Worlds: "I am an RSS true believer. It seems to me that metadata as a byproduct of social software engines (be it blogging or social networking or whatever) is not only enviable, it is inevitable. RSS and FOAF and other yet-to-be-determined social software data protocols will become standards because it simply makes good sense for them to be standardized. Anyone paying attention to the unbelievable development and adoption curve of wireless can appreciate the immense value driven by standards -- and, in particular, standards that are truly standard. So it came as a bit of a shock to me that when I questioned the panelists on the implications of RSS and the Semantic Web, they were less sold on the inevitability of it all."
5. It's The End Of The Web As We Know It And I Feel Fine: "The sheer volume of spam as a percentage of overall Internet traffic will make untrusted email communications completely unviable as a form of communication. Spam filters will necessarily be overwhelmed but email traffic without those filters will be impossibly unmanageable and therefore useless."
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