I was quoted in the paper today as saying that my biggest challenge was, “focus[ing] on what we’re doing, not what our competitors are doing. If I focus on my competitors, I can’t sleep, I get physically sick and I’m apparently a nightmare to live with.” While I actually believe this, I think it is worth a blog post explaining what I mean.

In 2010 Scott and I decided to spend our time on our two most important initiatives - Architel and ShopSavvy. In both cases we have serious competitors. On the Architel side Scott is dealing with a competitor who plays dirty. Their sales people call our clients regularly suggesting that Architel is facing financial difficulties despite the fact that we are experiencing the best year in our company’s history. They use a quote that I gave to the Dallas Morning News back in 2009 as proof that their claims are true. Additionally since our pricing model is ‘one-size-fits-all’ they simply offer a 30-40% discount over our standard price - of course clients learn the services are not apples-to-apples only AFTER they sign up.

Before the new year, Scott and I had several meetings with our team to come up with a strategy to beat our competitor at their own game. We had a million ideas, but they all had one minor problem - they were about our competitor. Scott turned out to be the voice of reason. “Why not focus on how Architel could be a better company?”, he asked. Of course that was a target we wouldn’t mind hitting. To that end, our 2010 strategy includes a) internal systems improvements, b) service mix update, c) community outreach and d) employee development. We would combat our competitor by simply getting better and telling current and future customers about it.

Ironically, our competitor deserves some of the credit. Without their actions I am not sure we would have decided to revamp our entire company for 2010. Would we have changed our online backup system to use the latest technology? Would we have outsourced our trouble ticket system to experts? Would we have expanded our help desk in the US? Would we have sponsored Fight Night, Chiapas or help send a surgeon to Haiti? To be honest, I doubt it.

So my advice is to focus on your competitors long enough to help you understand how you can make your company better. Take an honest appraisal of your competitor’s offering and then your own and get to work making your offering better. If you keep your eye on your competitor instead of your own business they will likely run you over.

The biggest error worthy of correction was with the time line. My first venture backed company did fail and I did raise $4MM to buy it out of bankruptcy on September 12th 2001, it didn’t sell to Switch and Data until late 2003 early 2004.  The deal to raise the money and buy the assets closed on September 12th 2001 (one day after 9-11).  It took a few years to turn my failure into a success. There were a few other errors, but what the article missed was how my partnership with other entrepreneurs have been key, I have never been ’soley’ responsible for my success.

The article touched on my reliance on partners by suggesting, “I’m more effective being part of a leadership team than THE leader.” First and foremost most people don’t realize that my wife, Michele, is perhaps my most important partner (seen to the right). Without her I wouldn’t have had the guts to quit that first job years ago to start living my dream of being an entrepreneur. Michele has been at the heart of every major decision in my personal and business life. To forget to include her ‘partnership’ would be to miss most of the story.

When I put the deal together to turn around LayerOne I became business partners with my lawyer Brandon Freeman. Without his help I doubt I would have had the stomach to guide the company through Chapter 11 and out the other side. While Brandon and I weren’t perfect partners the work we did together built an amazing business in the end.

My partnership with Brandon ended in 2003 when I bought his interest in Architel. It was then when I became partners with Scott Ryan (as seen in the photo above). Brandon and I had invested in Architel along with Scott back in 2001, but it wasn’t until after we began working together on a daily basis that I figured out that Scott and I had a winning combination. We are very different. We share almost none of the same strengths or weaknesses. Our diversity is perhaps our strongest asset.

Over the last seven years Scott Ryan and I have operated Architel, produced a television series, bought a few businesses, invested in several failed startups, started perhaps a dozen companies including Fancast, ServiceGuy, WhiteBox, Big in Japan and ShopSavvy. I am 100% confident that without Scott’s partnership none of this would have been possible. For his name not to appear in the story is a pretty big omission.

Back in 2008 everyone I knew was feeling wealthy. The housing market was frothy, the venture capital market was exploding and everyone seemed to have money in their pockets ready to burn. I was not immune at the time, but now with all the problems going on today (Haiti, Economy, Unemployment, Deficit) my story sounds  pretty stupid. In the summer of 2008 I was invited to a sales pitch for the yet-to-be-built Cowboy’s stadium.  After a tour and a free steak the salesperson convinced me that it would be smart to buy a suite. It was only $240,000 per year for 21 seats. I explained that while I would love to get the suite, I couldn’t really justify spending $240,000 per year for 20 years.  But then she suggested that if I could find nine friends who were similarly interested I could set up a partnership to buy the suite. Each of us would only have to spend $24,000 per year - still expensive, but great for entertaining clients. After recruiting a few business acquaintances I went ahead and created the partnership and paid the $24,000 deposit on the suite.

Before the stadium was completed I got the bill for the full $240,000 and while I was ready to fork over my $24,000, my friends weren’t so excited anymore. Several were unable to pay due to the unexpected turn the economy had taken, others were scared that the economy might get significantly worse. Unfortunately, all of my previously ‘wealthy’ friends were suddenly acting very rational (too bad we all weren’t as rational back in 2008). I was pretty frustrated because I was about to a) lose the $24,000 deposit and b) miss the opening season at the new stadium.

I called our salesperson and explained the situation. She was understanding and agreed to give me more time to put together a new group so I wouldn’t lose my deposit.  I spent weeks calling, sending emails, tweeting, blogging and posting facebook pleas to find a new group of Cowboys fans to join me. Surprisingly, I did find replacements and even got some of them to send checks. However, before I had collected all of the checks the Cowboy’s salesperson convinced the ringleader of my new group that there was a better suite available and she convinced them to sign a second agreement. It took a few weeks, but I finally found out what had happened and when I did I was livid.  I demanded the Cowboy’s return my deposit and while the salesperson’s manager did apologize, his best offer was to allow me to trade my suite in for a couple of founders seats.  I didn’t agree, I wanted my money back. The salesperson had put my group into another suite leaving me without enough time to put a third group together - the Cowboys got their suite sale, but still wanted to keep my deposit. Eventually I emailed their lawyers, explained the situation and requested a full refund.

Of course the other day I heard on the news that Jerry was suing a bunch of companies who defaulted on their suite agreements - including the partnership I set up. I guess they decided not to return my deposit.  Unfortunately (or stupidly), when I set up the partnership I used a name that was very similar to the name of one of my other companies. People might assume that the other company that I co-own was somehow involved in my debacle with the Cowboys. I got a call from the newspaper asking me to explain how the two entities were related. Of course the Cowboys didn’t bother to realize the difference and named one of my business partners in the suit (instead of me) - despite the fact that he wasn’t part of partnership. Let me just say he wasn’t too thrilled when he found out.

As I clarified in the newspaper, Scott Ryan and Architel Holdings LLC (i.e. IT company we co-own) are 100% unrelated to the partnership I set up to license the suite at the Cowboy’s stadium. I had intended to use my two seats to entertain Architel clients and the name similarities are now clearly unfortunate - I should have called the partnership “Da Boys Inc.” or something similarly unrelated to avoid any sort of confusion. Regardless of the outcome of the suit my lawyers insist Scott and Architel will be unaffected.  I believe that the Cowboy’s suit is merit-less and my lawyers will respond with a counter suit very shortly. Finally, the Cowboy’s lawyer was quoted as saying a few things that weren’t accurate including a) that we had stopped paying for the suite - we never paid for the suite nor did we ever take delivery of the suite or use it at anytime, b) that we had not responded to their correspondence - I was in direct conversations with both the Cowboys and their lawyers up until they filed this suit and c) that the suite was dark during the season - there is LOTS of video proving that the suite was occupied for each game, it was not dark. While this entire affair has left a bad taste in my mouth, I am still a fan of the Cowboys and actually have a lot of admiration for Jerry Jones - I suspect he had no idea what his salespeople were doing to sell his new stadium.

Koby Radonsky from youngStartup sent several emails to various people at Big in Japan offering to feature ShopSavvy as one of the ‘20 Top Wireless Innovators‘ at the 2010 Mobile Venture Summit later this year.  He suggested that if we attended we might be able to meet potential investors.  He dropped the names of a bunch of investors including: John Balen, Woody Benson, David Blumberg, Dominic Endicot, Austin Hill, Todd Hixon, Seth Levine, Sean Marsh, Mark McDowell, Ted Mocarski, Ryan Moore, Patrice Peyret, Deepak Sindwani, Miles Spencer, Roger Walton, Sharon Wienbar and Dave Zilberman.

I emailed Koby back suggesting that we were pretty busy, but that if our participation could help his event we would send someone to Boston in April to present. We don’t usually turn down a good PR event.  Koby emailed back and suggested that I would need to pay $4,500 to present and be recognized as one of the ‘20 Top Wirless Innovators’.  I’ll be honest, I suspected this was a ‘pay-to-pitch’ scheme when I offered to participate. After getting Koby’s second email I let him know about my feelings about ‘pay-to-pitch’ programs.

If I have said it once I have said it a million times - ‘deal flow is the currency of the venture capital community - without it they would fail.’  Imagine inviting a cow to dinner, requiring him to pay and then serving him to your guests.  In my view that is exactly what youngStartup is doing.  Koby didn’t agree explaining:

“I hear what you’re saying but I don’t agree nor do the many companies who pay to present at our many summits and have secured serious funding. For startups looking to grow into million$ companies and then get bought out for more, which is just about every startups dream, 4500 is chump change. If you calculate the time , costs, traveling, meetings, rejections and aggravation a startup has to incur until he connects with the correct VC partner, your way past 4500 not to mention a little burnt out. Our summits put all the correct people in one room and gives the startup his chance to raise capital in one place, one day, in addition to becoming more knowledgeable in the industry, and great networking opportunities. I’m not sure you’re looking at this objectively.”

I think the whole concept of ‘paying-to-pitch’ takes advantage of entrepreneurs. Clearly Koby and his team are not going to get the ‘20 Top Wireless Innovators’, instead they will get the ‘20 Wireless Companies Willing to Pay $4,500′. Wouldn’t the investors be better served by youngStartup to have the ACTUAL ‘20 Top Innovators’ regardless of whether or not they were willing to pay to pitch? While this is likely an select group, it certainly isn’t exclusive. I wonder if youngStartup is charging the VCs to attend as well or are they getting in for free?

I can’t imagine that John Balen from Canaan Partners would sit in a meeting he knew a startup paid $4,500 to attend.  Do you think he charged Blurb or Echopass $4,500 to pitch?  I doubt it. Doesn’t it seem like a conflict of interest? By being party to a ‘pay-to-pitch’ scheme does he have some sort of obligation to listen to pitches from all 20 companies?  Do you think his limited partners know that he is involved? Does he know Koby is using his name to convince startups to pay youngStartup $4,500?

I am specifically calling out youngStartup because a) they spammed ALL of our email addresses, b) my opinion that charging startups to pitch is just wrong and c) he said I wasn’t objective (just kidding about c).

Update (Jason’s comments):

Are you an entrepreneur? Do you work for a startup or small business?  Looking for a job?  Looking for a partner?  Looking for angel investment?  Come on by for a drink and some fellowship with like-minded folks from North Texas.  The event is in the INFOMART (1950 Stemmons Freeway) at the corner of Oak Lawn and I-35.  We get started around 5PM, hope to see you there.  Just RSVP here.

Nathan’s idea as described by Mark Whittington is to, “run a hose up to the stratosphere with balloons and using that hose to pump out enough sulfur particles to dim the sun’s heat just enough to counteract the effects of global warming.”  Al Gore can rest easy, Nathan can solve the global warming problem, but I am getting a little worried.  If the climate is so easy to manipulate what is going to stop nation states from manipulating the weather for their own purposes?

For example, Putin suggested that ‘global cooling’ effects need to be addressed promptly.  Russia has significant resources and could unilaterally decide to increase global temperatures by a few degrees.  What would we do about it?  Would we pay Nathan to reduce global temperatures to offset those increases?  What if Hugo Chavez decided to reduce global temperatures even more?  Would we increase them?  Maybe we would create a global market for temperature.  Each country could buy a temperature - the ultimate temperature would dictated by market forces.  I guess this wouldn’t be fair to poor countries and we would need some of offset to protect them from industrialized countries in cooler climates who sought to warm their shores.

I don’t have an answer, but I thought I would try to spark a conversation…

Of course we have a small advantage in these sort of internet based polls/votes - we have millions of users.  Any time we get into one of these online contests we ask our users to vote.  For example, we created a bit.ly link for the O’Reilly vote and sent it to a segment of our users via a push message.  We kept the message live for three days sending more than 61,000 voters to the O’Reilly website to vote.  Click here to check out the stats for yourself.  Ironically about 10% of these folks voted for our competitor because they viewed the request as ‘SPAM’ (which it sort of was, but hey the app is free so we should be able to ask a favor every few months).  Earlier today we got a note from O’Reilly explaining that they had taken down the poll (we were winning by about 80% or so).  Here is the note:

Thanks for your note and apologies for the confusion. We pulled the smackdown because there was lots of bot traffic skewing the results. It seems that our web team implemented the smackdowns with fairly naive, casual poll software. Votes are handled by simple <a> links with only modest cookie-based attempts to prevent multiple votes from the same machine, all of which means that they’re quite susceptible to skewed results via bots. In this case, it looks like a bot or spider stumbled into the page and kept pounding both vote links.  I’ve removed this smackdown from the site and will hold off on additional smackdowns until we find out more and/or get a more robust poll solution in place. We’ll give the smackdown another try then. Again, sorry for the trouble.

I suspect they weren’t used to so much traffic.  We reached out to them and shared the bit.ly stats so they could determine that the source of the traffic was most likely from actual voters.  Of course it is a little frustrating that we used our ‘goodwill’ to generate votes only to have those votes discarded.  I doubt we can ask these users to vote for us a second time for the same contest.

The CES Mobile App Showdown is still underway (8 days left).  We are currently in first place with 16,457 votes.  We have limited the number of users who have received a push request to vote for us so that we don’t swamp the CES servers.  I couldn’t help but feel that it was silly that we had to limit the number of requests so that we didn’t skew the votes too much in our favor (as we did in the O’Reilly vote).  As long as these sort of votes/polls persist we will happily participate, but I wouldn’t mind some sort of multilateral agreement whereby we would all agree not to have online votes/polls.  How about you?

Tim wrote that ShopSavvy reminded him of “the fundamental shortsightedness of so many of our economic decisions, that flaw in human nature that makes us seize on temporary advantage without thinking of the long-term consequences.“  He suggested that pursuit of the lowest price will ‘hasten the demise of many retailers’ and ultimately result in increased prices.

First, I think Tim’s premise is flawed.  Eliminating mega-retailers won’t increase prices - the internet will make sure of that.  Second, to suggest that applications like ShopSavvy are somehow to blame for the demise of mega-retailers is sort of silly.  If mega-retailers are on the way out it won’t be the fault of applications written by a tiny company in Dallas, Texas.  Why did Circuit City fail?  Circuit City did not lose to the internet, it lost to Best Buy.  Best Buy stores were better stocked, easier to navigate, staffed by employees who seem to care and often have great deals.  For every purchase I make online I make four in a local retailer like Best Buy.  If Tim is worried that ShopSavvy somehow takes away from mega-retailers I think he should realize that the real culprit is the internet itself.

The moment the internet was created retail shopping was forever changed.  The internet made information about products and pricing available to anyone with a computer and more recently anyone with a smartphone.  Savvy shoppers have been checking online retail prices from the very start (see Amazon.com).  I wish Tim’s article had been titled, “Why using the internet to shop might not be so savvy.”  Ironically ShopSavvy can provide a retailer with the ability to understand and respond to a shopper’s behavior. Shoppers who just use the internet are simply lost from the retailers perspective.  I would argue applications like ShopSavvy might be the BEST thing to happen to local retail in a long time.

At the end of the day I don’t agree with Tim’s premise, but I could respect it more if it called out the real culprit.  Tim explains that he rarely shops in physical stores, “I do most of my shopping online, and I love the convenience. But when I do go to local stores to browse physical products, I make sure to buy there, even if there’s a better price online. I’m paying a little extra for that right to walk up and touch the product before I buy it.”

I have a dirty little secret I would like to share with Tim: 100% of retail shoppers know that they can buy everything cheaper online.  They don’t need ShopSavvy to explain this to them. ShopSavvy organizes information (reviews, pricing and inventory) about the products our users are interested in buying.  Ironically, the most compelling part of ShopSavvy is how it helps users discover local prices and inventory.  Our data shows that users spend 75% more time clicking on local prices than online prices.  They want to know that the store next door sells the same item for less AND has it in inventory.  If shoppers were to follow Tim’s advice they would be compelled to buy an item regardless of price.  If I was a retailer and saw Tim coming into my store I would mark everything up 500% knowing he would pay the markup.

I suspect mega-retailers would prefer that Tim do more of his shopping in their stores even if he continued to buy most everything online.  I don’t think they would be offended at all.  If he shopped in Best Buy he might be surprised that Best Buy would match online retailers like Amazon.com.  Mega-retailers like Walmart, Target and Best Buy all focus on price.  They claim to have the best prices, they price match and they offer in-store deals all of the time.  Some retailers like Nordstrom focus on service - I buy clothes at Nordstrom because they help me buy clothes - I do not buy clothes at Macy’s because they focus on price.  Retail is changing - the internet started it.  ShopSavvy won’t be the demise of retail.  Anyway, thanks for the mention Tim (surely we will get a few more downloads because of it).

• easier scanning (with aiming bars)
• scanning hints (progress and tips)
• support for Europe (international bug removed)
• support for Touch (we heard you loud and clear)
• all user reported bugs (price alerts and others)

Here is the deal.  With each release you can get new ratings from users.  Our ratings sucked on 1.0.  Take a minute to download and rate us again – this time try giving us five stars.  It helps us keep ShopSavvy free.  Here is a video:

By Guest Poster: Sanjay Sathe, Founder and CEO, RiseSmart

When I was looking for a change as a senior executive at Dallas-based Sabre in 2006, I got firsthand experience with outplacement services and with searching the Web for jobs. I was surprised by how frustrating and time-consuming it was to use the major job boards (even the ones supposedly geared to executives).

So I stopped looking for jobs and decided to start my own company. It’s called RiseSmart.

RiseSmart applies fresh thinking, powered by technology, to update outplacement and job search services for the needs of today’s employees. We meet jobseekers where they are today – online – delivering personalized job leads and helping them to make the most of social networks, among our other services.

Starting with just two employees, RiseSmart has grown since February 2007 to more than 50 employees. We have earned the outplacement accounts of Fortune 500 companies, and we are generating millions of dollars in revenues. While we still have much to accomplish, our vision is coming together.

But one choice I made in order to pursue this vision was particularly difficult. I left my longtime home in Dallas to move RiseSmart to San Jose.

I am a native of India, and Dallas is the only place in the United States I’ve ever lived. I had children in Dallas schools and a wife who had built a strong circle of close friends.

So, why did I move my startup to Silicon Valley? And should you do the same?

Benefits of Starting Outside the Valley

The answer, as with many difficult decisions, is “It depends.”

Early-stage startups can be very successful outside of the Valley. RiseSmart was headquartered in Dallas for our first 18 months before moving in July 2008, and I think being in the city played to our advantage in important ways.

First and foremost, it enabled me to tap my local business connections, earned over many years, to attract both seed money and initial customers. We were able to raise $1.25 million in angel funding in our first year, something that would have been far more difficult for me to achieve outside of Dallas.

Dallas is also a major corporate hub – a great place for selling our outplacement offering. The first Fortune 500 clients we landed were Dallas companies, and this local success is ultimately what laid the groundwork for RiseSmart winning institutional funding.

Finally, I think because the Dallas startup community is much smaller than that of Silicon Valley, it is very close-knit. When there are potential synergies between two companies, you try to make them work – as opposed to saying, “Let’s do lunch” and moving on to something else.

Different Stages, Different Needs

But when it was time to raise our first round of institutional funding, it became clear pretty quickly that we might need to move our headquarters to get it.

For the most part, it’s simply a numbers game. VCs generally like to be in close physical proximity to the companies they fund – and there just aren’t as many VCs in Dallas (or even all of Texas) as there are in startup hubs like the Valley and Boston.

This difference in sheer numbers has secondary consequences, too. For example, in RiseSmart’s experience, we found that many Texas VCs were focused on the enterprise software and telecom sectors. Silicon Valley VCs entertain ideas from a broader set of industries.

I also think it’s safe to say that, with fewer dollars to go around, VCs outside the Valley are more likely to wait for the “sure thing.” Unfortunately, this can lead to missing out on the next big thing.

This problem is not unique to Dallas. Boston, for example, is the second biggest startup hub after Silicon Valley – but Facebook had to move from Boston to the Valley to get funding, a story that is not at all uncommon.

Ultimately, we determined that RiseSmart needed institutional money to scale our operations, and we got this financing from Norwest Venture Partners (NVP), based in Palo Alto. Upon receiving an initial $3 million investment from NVP, we moved our headquarters to Sunnyvale in July 2008, and later to San Jose.

NVP joined Menlo Park-based Storm Ventures to provide RiseSmart with an additional $4.6 million in funding in October of this year.

What’s Best for You?

So, that’s my story. But what’s the best decision for you?

Here are my top four reasons for moving to Silicon Valley. If none of these apply to you, you should consider staying put.

1. You can’t find the necessary talent where you are now. Unquestionably, there are more geeks per square foot in the Valley than anywhere else. But plenty of major cities – particularly those with good universities – boast more than their share of talent. The talent in the Valley has more experience working in startups, which is a major plus. But it’s also a double-edged sword, as you’ll encounter more individuals who have become cynical as a result of their experiences.

2. You can’t get the necessary financing where you are now. If you’re a good salesperson with a good idea, you should be able to get angel funding wherever you live – because there are rich people everywhere. But when it comes to institutional funding, there are only a handful of startup hubs, of which Silicon Valley is by far the largest. If you want to live in Austin or Boston or Raleigh-Durham, by all means, go after money from those VCs first. But your best bet for landing meaningful dollars is the Valley.

3. You can afford it. It’s no secret that the Valley is prohibitively expensive. This is a really good reason to not move to the Valley unless you are independently wealthy, or until you score VC funding to at least sustain yourself. If you move to the Valley on a wing and a prayer, it can really hamper your efforts to start a company – because what are you going to live on until it takes off?

4. There’s no compelling reason to be somewhere else. All things being equal, Silicon Valley is the place to be for technology-oriented startups. But all things aren’t equal, are they? Perhaps your family would be miserable if you moved. Perhaps your startup is focused on a specific industry, like entertainment, and you’d be better off in an industry town like New York or Los Angeles. Every situation is different.

Wherever you end up, I wish you the best of luck in making your startup dreams come true. The relentless pursuit should continue.