Miker

17th level Hacker

Paul Graham and Geek Dinner

We went out to hear Paul Graham speak last night and after that we gathered together some geeks to meet for dinner in Palo Alto. At first it was going to be a small group, we thought maybe 5 or 6 people. But by the time we actually sat down there were 15 people at the table. Il Fornaio worked out quite well for the gathering. The space they gave us was actually big enough for 15 people. I hate when you go somewhere with a big group and they give you a table that you can barely stand around shoulder to shoulder. They were open late. And it was pretty cheap. The bill split evenly came out to $17 per person, which isn’t much considering that most people had wine and there were a lot of entrees served. Some people had just desert or a cocktail, but still that’s pretty cheap for a group outing.

The talk by Paul Graham was very good. I got there late, and Elle and Niall had called to tell me they saved me a seat in the first row. As I was walking in Paul was up front talking and reading from a sheaf of notes. I thought to myself “Uhoh, if he’s just reading off some prepared speech I might get pretty bored.” And given that I can’t get a cell phone signal from up at the PARC building where the presentation was held and there’s no wifi onsite that can be really distracting for the people around me. Wasn’t an issue at all however. He was just using the notes as guidelines and telling some really amusing stories about his direct experiences. That was what really made it engaging I think, that it was about specific experiences that Paul had himself. Many of the points are pretty obvious when you abstract them out of the talk, like you should be concentrating on growing your business if you’re looking to be aquired because the condition of growing value makes you more attractive to potential suitors, and the best way to get in front of those potential suitors is to go in proposing partnerships and licensing deals. But there were a ton of bits and peices of practical tactics scattered around the overall strategy stuff. No way I’ll be able to get them all, but here’s a bunch that stood out for me:

  • When talking about planning to get bought at some point he said that license deals can actually be a liability in some cases. The person who aquires you or your technology isn’t going to look favorably on being tied to a license deal that requires them to let their competition use the technology as well. There are contrary examples, like Google licensing search to Yahoo and Altavista to prevent those companies from working on search on their own. But it is something to keep in mind while you’re out there shopping around.

  • He really encouraged getting an investment bank involved if your deal is big enough that it makes sense to do so. Under the standard structure they use they’re properly incented to make the deal in a way that’s really favorable to you when it’s favorable to them. They make the process much easier.

  • He stressed that potential aquireors aren’t really all that likely to steal your idea and make their own copy. It does happen, and he gave an example of a Japanese firm that stole their business plan and technology and setup their own shopping site. But in general things like that don’t really happen. The best way to protect against it is to keep some key factors of what your innovation is out of your discussions. You can give away a whole bunch without giving away everything essential to reproduce the system. If you think that copying is a real risk just figure out a few nonobvious areas in which to hold back some info.

  • The most important metric for most people evaluating the company is the number of users. Most aren’t well prepared to evaluate the technology itself, but they can observe the effects of a good implementation. It’s assumed that if you have crappy technology you won’t have many users and that if you do you should. So the best thing to do is to grow your customer base to prove that the technology is good, it’s better than trying to figure out how to describe why your tech is great. You can prove it quite easily by pointing to the group of existing users, which is more valuable to other areas of the business than a description of the technology anyway.