Since I am in the process of getting friends and family to invest in my business, I figured this was a better time than ever to talk about the importance of rewarding investors and the mindset one must have, when it comes to raising funds from investors (this post refers mainly to friends n families but is applicable to VCs , Angels etc).

One of the mistakes Business owners or aspiring entrepreneurs make is that once the investment money starts rolling in, is that these business owners look at the investments as a sort of “payday”. This is the worst thing you can do. If anything, when raising funds to help your business grow (or start), you must look at all investment received as not only debt, but as a beginning point for your business. Because now, you have been entrusted by the investors, that 1) You will not lose their money and 2) That you will , to be best of your abilities, help them to make a return on their investment that is commensurate with the risk involved with investing in your business. If there is one thing to take away from this blog is that, if all else fails, try your best to preserve/regain the investment money that you have received. This is not always possible, and in certain scenarios, it is expected, if the business risk was too high. It is important that in such scenarios, this risk has been thoroughly communicated to the investors.

When it comes to rewarding your investors, you want to be as generous as possible.

“Of course I’ll reward my investors, But why be more generous than necessary? After all, I put in all the sweat, blood and tears into my venture“.

Warren Buffett has always been known to take a low salary (Ok Ok.. his present salary of $100,000 is not LOW by any standard, but compared to what the man brings in for Berkeshire Hathaway, it really is quite low, especially when compared to his peers. There is nothing that stops Mr. Buffett from saying he wants a yearly salary of $10 Million Dollars. The thing is, because of his track record of how he treats his investors, they would most likely have absolutely NO objections, if he were to decide such a thing.. but WB being who he is, its not something he cares about).

Your investors are the ones that believed in you, when the banks didn’t. They are the ones that looked past your bad credit scores (if they even looked at them at all) and past the fact you don’t call them as often as you should. Most of the time, they are not really investing in the venture, in so much as they are investing in YOU. By that, I mean that they are investing in your character and in your abilities to do the task at hand. I have investors that were just like “I don’t really get what your doing but here’s $500. I trust you“. If you are able to generate a great return on their investment, all the better. If it is clear that your mindset is “Investors First, My pay-day second”, not only will they brag about you, but they will deeply respect you.

At Digitalvaliance, customer service is of the utmost importance. You can blow away your customer with your design/application, but if your company were rude throughout the entire process and overcharged for services, chances are , they would never recommend your services. The same principle applies to investors.

I find that by striving to make my investors happy, not only does Digitalvaliance have somewhat of a “family” supporting it, it motivates me to work harder.

Don’t get me wrong, you can’t reward your investors and not reward yourself, as that would defeat the purpose of having your own business. Make sure your investors agreement clearly outlines how you intend to reward your investors, but keep in mind that you want strike a balance between what makes sense business-wise, and what would make your investors happy. Also keep in mind that you never want to “Over Promise, and Under Deliver”, as that is the one of the worst things you can do. This last point applies to many areas in business.

“Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.”

My mind is so scattered. It is usually very hard for me to blog because I rarely think about one thing.

I find myself daydreaming about ridiculous ideas and alternate realities. This can be good and bad. Sometimes, it’s led to my having negative thoughts about things because I’ve over thought a scenario. Gladly that doesn’t happen anymore. I am always playing out different scenarios in my head and I ask myself a bunch of different questions everyday. I often find myself thinking if i were Superman, What would I be doing right now? What If I could walk through walls? What if I could speak all the languages in the world, what would that be like? How different would I be if I were white? What if I wasn’t born, how different would the world be? What if I were blind? If I am Larry Ellison, what would I be doing now?

I have always been like this for as long as I can remember. As a young boy, I was very into my imagination. I had action figures and played out fictional worlds. I actually didn’t stop doing this until quite late in life (lol).
You’d often find me in my room, with my action figures, pursuing some inter galactic adventure or coming up with cool inventions on paper. I have always been a “techy” (Stanford terminology for someone who is pursuing a technical major.. contrasted with a fuzzy, who is someone pursuing a liberal arts major), and so most of my imaginary world was usually sci-fi related (I tend to really like Science Fiction Movies and books as well) When I was younger, my friends and I talked about how cool it’d be to live in a computer world, where you could get plugged into a world without limitations, a world where things like gravity could be defied etc. In this world, you could have super human strength and run as fast as the speed of light. Later that year, the Matrix came out(.. a movie I have watched over 20 times and counting..) Before Loopt, my good friend Sam Alemayehu and I were working on a project to allow friends to locate one another using their cellphones..

Unfortunately on the flipside as I mentioned before, my imagination has also sometimes caused severe anxiety about some situations, but I have learned to control this aspect of my imagination.

Imagination is very important, when it comes to creativity. Imagination drives Creativity which in turn drives Innovation. To be an effective leader, one must be creative in the tackling problems of their respect fields.

On Saturday, I had the opportunity to attend Startup School 2008 at Stanford. It was a conference featuring some of the top Silicon Vally entrepreneurs including Jeff Bezos and Marc Andreesen. The website describes it as “Startup school is an annual free conference for hackers interested in startups.”Although I wasn’t able to stay for the entire conference, as I had to meet a client for a design project, I made sure I attended the talks given by Jack Sheridan (WSGR), David Heinemeier Hansson (Creator of Rails), Marc Andreessen (Creator of Netscape and Ning Founder), Jeff Bezos (Founder of Yahoo) and Greg McAdoo (Sequoia Capital).

Why did I only want to listen to those guys speak? Well firstly I have great respect for the Ruby on Rails Framework. After messing around with PHP and mySQL for a few years, with occasional scripting in PERL, it was very refreshing to use Ruby on Rails to develop my first real web application for my senior software project entitled myFlee, an online market place for college students. I have since decided to pretty much develop all my web applications in Ruby on Rails unless a client specifically wants me to use something else, in which case, I may reject to take on the project. Don’t get me wrong, I would be willing to write components of a web application in another language (I even still integrate some PHP & Perl scripts in some of my web apps), but to build an entire application from the ground up using something other than RoR, would be something I have no desire of doing. For my day job, I develop in J2EE and getting the simplest things done, takes forever and since Digitalvaliance is currently a part-time venture, I need to maximize my productivity.

Secondly, I thought the other guys would have some additional insight into the “startup game”, as they are all seasoned vets with experience relating to the legal, financial and technical issues . Jeff Bezos talked about Amazon’s exciting new webservices (AWS). I unfortunately wasn’t able to be at Michael Arrington’s talk (Techcrunch) but I made sure to watch the video, as he took had some really good things to say.

DHH gave one of the coolest talks I’ve been to in a while. Outlining his talk would have to be another entry on it’s own, but luckily Omnision recorded the presentation so you can just watch it there. He didn’t talk about Ruby on Rails, but instead talked about the current business model of most startups and why 37Signals, the company he is a partner off, has been profitable from day one. DHH made fun of the current mindset of most Web 2.0 companies, being that they first strive to get as many eyeballs to their site as possible and then think about how to monetize. DHH contends that there is nothing wrong with charging users,particularly niche users, a small price to use a service that would make their lives a lot simpler. DHH dubbed this group of niche users, as the Fortune 5,000,000. DHH reminded us that not everyone will get a billion dollar valuation (referring to facebook) for their companies/product and that these days, it seems as though people are looking down on “million dollar companies”.

I very much agree with what DHH had to say. I am a personal user of Highrise, 37Signals’s Simple CRM tool which makes my life as a daytime software engineer and night time entrepreneur a lot simpler. This is a tool I first tried out using the free plan but got hooked immediately and upgraded to their Simple plan. Once Digitalvaliance picks up a little more, I envision further upgrading my plan. It is not a complex or complete CRM tool by any standards (compared to SugarCRM or Salesforce), but at this point, I don’t need such complex tools which is why Highrise is perfect for me (and the remainder of the Fortune 4,999,999)

At Digitalvaliance, our goal has always been to target the Fortune 5,000,000 and it was refreshing to hear that DHH shared our insight.

I remember the first facebook application I installed. It was the “Where I’ve Been” Application, an application that allows you to mark the countries you’ve either been to, lived in or want to visit. It was a really cool flash application and I remember not really thinking much of this whole facebook applications phenomenon. I liked the “Where I’ve Been” application a lot, but besides that most of the others got my nerves. I would get invited to install tons of applications and it was just getting ridiculous. “Why are you throwing a virtual sheep at me?” I still haven’t accepted or rejected most of them because it would take too long to do so.

When I first heard that TripAdvisor was offering $3 Million for the application, I was in shock. “For a freaking facebook application?!?! Are you kidding me?” To understand my point of view, as I stated in my first blog entry, I seem to have a knack for really cool ideas. When facebook created it’s market place, I had already come up with the concept for an online college market place. I had thought about developing an application for it, but was discouraged to do so by a friend (I know, I know, i didn’t follow my heart and let some guy stop me from pursuing an idea). Instead, I created the application for my senior software project class but never really launched it since I had a hectic summer.

At Startup School (See previous Post), I met the creator of the facebook application, Entourage who had just sold his application for an undisclosed amount to SGN (Social Gaming Network). He and his buddy (who had just sold the nicknames application) were taking a trip to Brazil to celebrate their sale. I mean, I always knew that space was lucrative, but It never really hit me until this past weekend. It’s like the difference between knowing who Michael Jordan is, and then actually playing basketball with Michael Jordan.. very very different.

It’s funny because a few weeks ago, a freshman friend of mine, Perry R and I, were talking about the facebook application world, and being a former facebook employee, Perry knew a lot more about that world than I did. For part of Digitalvaliance’s offering, I was thinking about Digitalvaliance helping people develop their facebook application as part of its offering. Perry offered his advice, but said that instead of helping others create applications, that we should seriously look into creating our own applications, as it was a very lucrative world.

Since then, we have kept tabs on facebook applications in general and have ideas for 3 applications, which will go into development next week. We are not looking for the “next big thing” persay, but we want to have a presence in that space, as we feel as though it is perfect for our mission of “Bold Creativity”

Now I know a lot of you are going to be like “suure you came up with an idea like facebook marketplace” or “knack for really cool ideas eh? well who doesn’t?! “. Those who’ve known me for a long time, will be able to attest to this. However because of my academic endeavors and other engagements, I was never able to make “the leap”. I’ve kinda watched on the sidelines while most of my ideas have been brought to fruition by others. Most of the times, its because I lacked the resources to bring my ideas to life. At other times, it was simply because I had the following mindset: “I am at Stanford to get my degree, and once I’m done, I don’t doubt that I will come up with a really cool idea, like I’ve always been able to do but right now I am developing myself and my brain”.

Most people get mad when an idea they had, gets implemented by someone else and that person becomes successful. I get mad too, but I usually can’t help but smile. It makes me realize that my creative “mojo”, is as strong as ever and that at any given time, one of the 20 ideas I have written on paper could really become huge.

I’ve always considered myself an entrepreneur. When I was 13, I was a video gaming addict. My dad bought me and my sisters a Super Nintendo on a business trip. Shortly thereafter, my days after school, consisted of video gaming, playing basketball / roaming around the apartment complex and doing my homework (which I rarely did at home) . I was very good at most video games, but there were some games that were just very hard to beat. I found that I was really good at finding information on the internet. This meant that I was able to find obscure video games cheat-codes online.

Hence, I started a business to supply cheats of any video game that people needed. The business model was as follows: The user would submit a request using my website and I’d respond with the types of cheats I found, and they’d pay me for my services, at which point I’d release the codes to them. I wrote the website using a combination of notepad and Front page. I used a custom CGI-script to send myself the user submissions. I hosted it on virtualave.net. No one could have told me that I didn’t have one of the next great ideas. Our house helper at the time, Stella (RIP) encouraged me and said she liked the idea. However for many obvious reasons, the idea never quite panned out. I will say that I did get 3 requests for cheats.. although they never followed through with their payments.

That actually was really my first and only real business venture (until Digitalvaliance) in the sense of the world although I’ve been involved in many business transactions/deals since then. I have always made sure to pursue roles and responsibilities that would allow me to grow into a savvy business person. I made sure I was the president of several student groups and that I learned how to lead and deal with people, because I just knew that later in life, I was going to be running my own businesses and needed to have those qualities.
Digitalvaliance is the first business I’ve founded with the help of friends and family. With our tag line of “Bold Creativity”, we aspire to provide creative web applications for our customers at creative prices. We will also be developing some of our own applications to be used by the masses. We have a lot of ideas for where we want to take the company, and so I am very excited to see where the company will go and how some of the ideas will pan out.

PS - If i could go back to being 13, I would have done my cheats-company very differently. I would have created an online community for users to submit their own codes and cheats for specific games, and generate revenue by selling or renting games online and by placing advertisements within the website.