My startup needed to raise $500K to expand our marketing efforts and get the word out. Raising the money was quite easy: I issued some new shares and listed them on StartupIPOs.com. It’s a marketplace for accredited investors. Startups that need funding list their offerings, and people buy their shares. The price is set by the market, which is fine with me.

It works because they force you to use YCombinator’s standard terms, just as if this was Ron Conway investing. So the investors know they are dealing with professional startups and receive all their usual protections: a board seat, preferred shares and so on. But since everything is codified and standardized, we avoid the exhorbitant legal fees (often north of $25K), which really hurt when raising small chunks of money.

Being able to use this service allowed us to continuously raise money. In effect, it’s as if we could IPO for free every time we needed more cash for operations. The need to go through VCs as gatekeeper pretty much disappeared.

It’s pretty cool!

And it’s also a fantasy. Such a site doesn’t exist yet. Partly because it would be illegal in the US of course (you can’t offer equity for sale to the public, and reporting requirements when you have a large number of shareholders are prohibitive). Partly because building a healthy market, where both sellers (the startups) and buyers (the angels) behave properly, free of scams, is not so easy.

Do you know a way to make StartupIPOs.com? If so, please do it, for all startups’ sakes!

Last Thursday I attended Stanford Design EXPE, where a dozen teams of students present the result of their 9 months of innovative work in relation with a corporate sponsor.

The twist is that all projects must build a hardware prototype (I guess because it’s linked to the Mechanical Engineering department). For me, it was a welcome change to hearing pitch after pitch of web and software startups. When you actually build hardware, your horizons expand.

There were good projects.

A dual-screen tablet to communicate with your grandma (there is a definite need here, I just think having two screens doubles the cost of the tablet beyond what people can afford, without adding enough value).

A very impressive demo of a telepresence table that goes beyond video to provide real document interactivity using gestures.

But my favorite one was TRUSTcard. It looks like a credit card (but a little bit thicker) with a tiny keyboard and LCD screen. It’s meant to make casual borrowing mainstream. Can I borrow your $100 textbook for the weekend? Although you don’t really know me, you hand me the textbook, because I hand you this card where I just punched the borrowing information. The card will serve as a reminder that the item is out there, and in the worst case, it can be used through insurance to get your money back.

Their vision is that will save the world because objects will now be reused much more, so we’ll have less junk being manufactured.

I like it.

Of course, it reminds me of crowdfunding and topics close to my startup (for instance, creating an instantaneous contract on the fly is quite similar to the vision behind FairSoftware, except one is for IP, the other for physical goods).

While there are iPhone apps that pretty much do the same thing today (minus the insurance bit, which I think is critical), the students were adamant that the physical trade, the fact of exchanging the card for the object, was hugely important.

How would I fund such a company? I would pitch it to an insurance company that wants to break into the student market. By selling those cards, they would instantly acquire a huge number of customers, that they could upsell eventually when they need car insurance of whatever else college students need nowdays. Kind of like freemium for insurance.

It’s a great idea. Unfortunately, it was designed by students for a class. So it remains to be seen whether someone will actually push this further.

UPDATED: I just had coffee with a member of the TRUSTcard team to discuss the concept further, and try to understand what features are core, and which ones are not necessary. By removing all the fluff, you can typically launch a product in weeks rather than in months, and find out quickly what works and what doesn’t. Stay tuned…

If you have been reading startup advice long enough, you surely noticed two trends repeated ad nauseum.

Iterate Quickly

Also known as “kill ideas fast”, this advice is saying that your idea is probably not worth the pixels it’s displayed on. Ideas are a dime a dozen, execution matters. You’d be better off with a dumb idea in a large, expanding market!

The advice goes on to recommend that you submit your idea to friends, advisors (maybe VCs). Find people who you trust and are honest enough to tell you that your idea is dumb. Don’t fall in love with your idea, move on, try another one.

Trust Your Guts

Also known as resilience or tenacity: when everyone else tells you to give up, when there is no hope in sight, what separates the successsful entrepreneur from the wanna-be: perseverance. Don’t give up.

Or my favorite quote: Instant success takes years!

Making Sense Of It

The apparent contradiction was especially visible during the latest Founder Institute session in Silicon Valley, since several mentors gave both advice back to back. Some founders couldn’t help but notice.

Here’s my take on the contradiction: both your guts and everyone else are right — partially. It takes a very smart person (you) to figure out the gem that your guts detect and remove the junk that everyone else sees.

So it’s not a contradiction at all. We are just going back to the essence of intelligence: you need to keep thinking about every angle of your idea. If you really believe there is something to it, I’ll believe you. But also listen to feedback because while it may be missing your big picture, it is probably right at least on a tactical level. Your rough idea, as you pitch it, likely has shortcomings and limitations.

It’s your job to figure it out.

Today we are excited to announce an enhancement to the way you create projects with FairSoftware.

Many of you asked us for a more flexible way to add co-founders early on and offer more flexibility on the allocation of shares, since you haven’t always found all your co-founders by the time you have your initial idea.

Therefore, creating a Fair Project is now split in two parts. First, you setup your project, with a very simple one-page form. At that stage, all you really need is a name and some idea of what you want to build.

You can leave your project in that stage for as long as you want. You an start adding co-founders from friends you know, advertise your project to the rest of our community, and also crowdsource your idea by gathering feedback.

During that setup phase, you can freely add or remove co-founders and modify the share allocation as many times as you want until you are happy with the results.

Invite Co-Founder

Edit Shares Split

Once you have settled on a founding team, you activate the project. That’s when each co-founder has to agree to the deal by approving the Software Bill of Rights. From then on, co-founders can start contributing, write code, and so on. Everyone is protected legally. As before, you can grow your project and bring more contributors on board.

We hope this improvement will make it even easier than before to start working on apps, even if you haven’t found a team yet.

As always, feel free to send us feedback and requests for more improvements.

Finding a great idea for your startup or Fair Project is the first step to a captivating journey.

Sharing your idea with others is the first step to success. Many software developers I meet are so scared to have their idea stolen that they refuse to tell you anything at all.

Reality Check

Do you know how many people are out there, waiting for you to reveal the greatest idea since slice bread, so they can copy and run away with it? None sounds about right.

Let me tell you a story. I have been through enough interviews with journalists to know that when the person you are talking to says that your idea is “interesting”, it really means that they have no clue what you just said.

It’s the same in social interactions. Of 10 people you may talk to, four will politely say “interesting idea”. Three will give you blank stares. At best, two may tell you that it’s pretty good and actually engage in a conversation that shows they know a thing or two about your space.

The Idea Test

Here are four ideas for a product:

• a better search algorithm for the semantic web
• a voice conferencing system that allows multiple concurrent discussions
• a community for software developers to share revenue
• a home device that offers multi-room MP3 streaming

Now, be honest. How many of these ideas did you think were so insanely great that you want to drop your own plans and jump on it?

None.

Believe it or not, each of these ideas has someone today, obsessing full-time to make it a reality.

You may have noticed that I missed one person in my count of the 10 people you may talk to. Here it is:

You may have a meeting with a VC and maybe that VC invites his entrepreneur-in-residence (EIR) in the room. And maybe the EIR is looking for a cool idea. And maybe his space happens to be pretty much yours. So he might use some of your ideas, morph them into his own, and six months later start something that shares some vague resemblance with the idea you had. Do you notice the number of maybes?

Execution is what turns great ideas into great companies. Most people are pretty decent at seeing where technology is going. Fewer are good at orchestrating all the moving parts so that everything falls in place at the right time.

So next time you chat with me or anyone else, forget the NDA.

Having a great idea is a prerequisite before embarking on the startup adventure. (While John Nesheim is correct that the Internet has made unique ideas less likely, I’ll respectfully disagree with Paul Graham’s view that great ideas are overrated). But how can you tell that your idea is the right one?

In my experience, great ideas follow a fairly standard pattern.

1. The Light Bulb Moment

Eureka! You just thought of a great idea. You are super-excited about it. It’s going to revolutionize the world.

2. The Obsession

You can’t sleep at night. This idea generates so many possibilities in your mind, you can’t stop thinking about it. You can talk about it for hours on end.

3. The Crash

Often it comes in the form of a Google search. Or maybe an acquaintance tells you. Company X is already doing it. Except they have money (you don’t), employees with impressive resumes and contacts. They are way ahead of you. It’s depressing. You give up.

If you don’t have a crash moment, watch out: it means that you are working on something that no one cares about. It’s usually a strong sign that you don’t have a great idea.

4. The Refining

Still reading? You can tell you have a great idea when you survive the crash. Slowly, you realize that this competitor doesn’t quite get it like you do. There is an angle that is unique to your idea. Somehow, yours is different, more profound. You figure out a way to make this competitor irrelevant by refining your idea, applying it with laser focus.

5. Go

That’s it. Your idea sustained the challenge of time. Now you can proceed and execute on it. Stop talking. Start doing. Even though your idea made it this far, it’s still a very long road ahead. But it will be exhilarating.

Ignore all the people that tell you that your idea doesn’t make sense. Listen politely, spend five seconds to extract the nugget of wisdom that may be contained in the criticism, and then brush off all the negativity. In the words of Scott Adams, the author of Dilbert: “the only way to tell a great idea from a bad one is if you are the author”.

Share your thoughts. How often do you have “great ideas” and how far do you take them?