Brad Hargreaves | startup adventures in nyc

I was having drinks with a few entrepreneurs last week, and the topic of business plan competitions came up. I ran Yale’s competition for a year while I was a student there — a sobering experience. Ostensibly, the winners of the contest were the best potential entrepreneurs. In reality, the top awards were often swept by Yale MBA candidates who spent the entire year perfecting a 30-40 page business plan with little intention of starting a real business. They’d take the award money alongside their McKinsey or Goldman signing bonus.

Most experienced entrepreneurs — or at least most of us around the table that night — agree that business plan competitions suck. But is there a way to improve them? One CEO in attendance suggested that business plan competitions be revised to focus on the real tools of a VC pitch — that is, a slide deck and in-person presentation. It’s certainly a better basis than a business plan, but I don’t think it solves the problem. Rather, it still perpetuates a false and harmful archetype of how venture money is raised.

In reality, raising capital is a long game — a process to be measured across years and companies, not weeks and pitches. The people who “win” the real venture capital game are those entrepreneurs who spend years — if not decades — building their reputation and their relationships with investors. This doesn’t mean that first-time entrepreneurs can’t raise money, but that they’re far better off spending their time setting metrics-driven goals and hitting those goals in order to build trust in the investor community than writing a business plan or shopping a deck.

Business plan competitions can’t build a comparable experience, so they’ve created a generation of first-time entrepreneurs who falsely believe that money is raised in front of a Powerpoint rather than series of coffees and beers.

If you made me redesign the business plan competition, I’d do something pretty nontraditional: a unit economics competition. The contest would be in-person and just takes five minutes per contestant: explain your business concept in 1-2 minutes and walk through one Excel worksheet presenting the unit economics in the next 2-3 minutes. No long-form writing or slides, just the basic math that explains the core cost and revenue drivers and assumptions of your company. And no 3-5 year projections, either. While it might be beneficial for entrepreneurs to fully think through their company by spending 150 hours writing a business plan, modeling out your unit economics will provide 90% of the value at a fraction of the time.

Furthermore, the winners of a unit economics contest would be more likely to build successful companies. Unlike a business plan, with a 3-5 year projection at its core, a unit economic model tends to focus the entrepreneur on the near-term opportunities with the highest likelihood of success: the kind of things that will create grounded and focused businesses rather than speculative, multi-threaded companies. And if you’re a broke student hoping to start a business straight out of a university-sponsored competition, which would you rather have?

General Assembly is an urban campus for technology, design and entrepreneurship. I founded it last year along with Adam Pritzker, Jake Schwartz and Matthew Brimer.

As you go deeper into the technology community, it gets harder to remind yourself that the global economy is struggling. Every startup in New York and the Valley has open positions that go unfilled for months. Salaries for developers and designers continue to rise, and entrepreneurs are creating real businesses with real revenue.

It’s all too easy to forget that our nation still has the highest unemployment rate many of us have ever seen, especially among young adults. Over 15% of people aged 20-24 are without a job, the highest in more than a generation. Students graduate from college and often times spend their days fruitlessly emailing their resumés to deaf corporations. Clearly, there is a mismatch between what we are teaching our newest citizens and what they need to succeed.

Critical courses are absent from the state curriculum and given only token acknowledgment in higher education. Design and software development, two of the most relevant 21st century skills, are glossed over throughout our educational system. It’s in this context that we’re launching General Assembly, a new kind of campus to educate designers, engineers and entrepreneurs.

That said, an education is only meaningful in the context of an environment that reinforces its message and provides a community to stimulate ideas and growth. This is why we built General Assembly on the model of a campus. We’re crafting a curriculum and have created a physical space in the heart of Manhattan for hackers and designers to work, collaborate and learn. We’re trying to tackle a big problem, and we certainly can’t solve it alone. But we have to try, and I hope you can join us.

I wrote several months ago that everyone should get funded, and the growth of philanthropy-driven angel funding will fuel it. A few things I’ve seen over the past week have taken my thinking to the next level.

It has become extraordinarily difficult to change culture through pure art. New forms of art are no longer shocking to mainstream culture as Pointillism was to the late 19th century or Cubism to the early 20th. Few know this better than Carter Cleveland of Art.sy, who made a powerful point to me last week: Those who wish to fundamentally change culture in the 21st century — and those who wish to fund those changes — must look toward entrepreneurship.

Over the past fifteen years, startups have been catalyzing global cultural changes that had previously been the realm of artists. Facebook is the perfect example, a company nominally driven by a desire to “change the way people interact”, a phrase that could just as easily be spoken by a conceptual artist. And Facebook has succeeded in changing the way over five hundred million people interact, whereas an artist with a similar goal would be lucky to be featured in a design magazine or score a cameo on the evening news. One could argue that it’s all art, but the medium has shifted from canvas to Delaware C Corporations. Fifty years ago, repressive regimes banned books and modern art. Today they ban Facebook and Twitter.

This thought has been stewing in my head for a while, and Yuri Milner’s commitment to YCombinator drove it home. Yuri has fantastic returns — his three investments thus far are Facebook, Zynga and Groupon — but I’m convinced he’s playing by a different set of rules. Arrington first wrote about US startups as a vanity purchase for wealthy Russians more than a year ago, and there are surely enough wealthy Russians to fill DST’s coffers without forcing a strict focus on returns. But I don’t think DST is an oddball clique — rather, I see them as the model for the future a venture capital. A future in which super-wealthy individual limited partners are driving a fund that is based on equal parts vanity, philanthropy and financial returns.

This is a self-reinforcing trend: as more investors look to startups as a “Broadway-like” investment — that is, something that is just as much about status and cultural change as financial profitability — ever-adapting entrepreneurs will build companies that emphasize these kinds of “softer” returns. As the positive feedback cycle accelerates, we’re likely to see an entire class of investors and entrepreneurs styling themselves as patrons and interactive artists, respectively. This isn’t to say that these entrepreneurs will be building nonprofits; rather, supernormal returns are an integrated piece of the startups’ aesthetic appeal to culturally and financially savvy investors.

This is as long of a prediction as I’ll make here. I don’t think this is a trend we’ll see culminate in the next 5 or even 10 years — this one is going to take thirty years to fully play out and the effects will be felt for decades if not centuries. Entrepreneurship is the new art, and it is a Good Thing — both for entrepreneurs and our society as a whole.

I love seeing people join startups, and it usually makes a lot of sense for everyone. Young tech companies tend to have great cultures and incredibly smart people from which to learn. And lots of startups are very generous with salaries and options — in many cases, enough that an employee can maintain a close-to-market salary and keep the lottery ticket too. But there’s one situation in which it doesn’t make sense to join an established startup: you actually want to start your own company.

As I’ve written in the past, many people who go into startups aren’t necessarily looking for the salary, lottery ticket and cool culture, as much as they may publicly say so. They’re looking to gain independence, establish themselves as leaders and self-actualize. They’re looking for the things you get from founding your own company and believe that joining a startup as an employee will be the quickest way there. But that’s a poor strategy, especially for non-developers.

That tactic mistakenly applies a corporate model of advancement — in which one starts in low-level jobs and wiggles into a management position over the years — to entrepreneurship. You aren’t going to get promoted to founder by spending a lot of time working for founders. You become a founder by starting your own company. Yet over the past year I’ve seen a number of people fall into “the non-founder trap”, which goes something like this:

1) You decide you want to get into a startup. You don’t feel that you have enough [intelligence/confidence/experience/money/ideas] to start your own company, so you search for a job within an established startup.

2) After several months of searching, you take a job in the business development / marketing department of a 10-person company. While your last job paid you $100,000 per year, you accept $60,000 and 0.3% in options.

3) While you occasionally advise on high-level decisions, 95% of your job is emailing potential clients and taking sales meetings — the same stuff you were doing at your last job. The fundraising, investor relations, and personnel management is done by the CEO.

4) After a year or two you would like to leave, but unfortunately your $60K per year salary hasn’t let you save up enough to quit your job and start something of your own. You also don’t feel that you have a good sense of how to raise money or manage the earliest days of a startup. So you begin searching for another job at a small company and return to step (1).

There are plenty of counter-examples. I know a number of people who fell in love with startup life and founded their own companies after working as an employee of a startup. But it’s not a great path for people who really want to be founders, who will struggle to be happy at their jobs and fail to save enough to go out and build their own business. If you want to be a founder, go out and start something. The inspiration, confidence and experience will come.

There was an interesting New Year’s Day post on TechCrunch about something we’ve all noticed: for certain keyword phrases, Google is entirely spam. A search for a high-value keyword like “online degrees”, for instance, turns up little more than affiliate directories run by spammers with a solid grasp of SEO. So many people are gaming Google that it has lost much of its value.

But — contrary to Wadhwa’s implication — this isn’t a special failure on the part of Google’s engineers. Rather, it’s a fundamental characteristic of dominant technologies. Through market dominance, a technology can become the sole target of those who wish to exploit: an easy ROI for scammers, marketers and anyone else out to make a buck. Rather than building and optimizing for multiple competitive technologies, system gamers must only target one.

This is of particular concern for monopoly technologies, or borderline monopolies. Microsoft ran into the same problems fifteen years ago and continues to suffer the fallout. Hackers and virus creators knew that they only had to optimize for one operating system — Windows — and could target a massive share of the market. They ignored Unix and Mac OSes, giving those systems a reputation of relative security and safety against viruses and hackers. But have no doubt that if, say, Mac OS gained sufficient market share and corporate adoption, malware creators would see a new opportunity and begin writing viruses and malware for Macs. Suddenly, finding exploits in OS X would become orders of magnitude more important than it is today.

And thus Wadhwa’s conculsion (“We need a new Google”), makes no sense. We don’t need a new Google, an overwhelming search monopoly. We need a diversity of competitive search engines. Blekko’s engineers are no better than Google’s. And even if they were better, creating a search engine that is immune to gaming is fundamentally impossible, with increasing difficulty as the search engine’s market share increases. Blekko is simply not spammed because it’s not worth the spammers’ time to figure it out.

Display advertising is a great counter-example of a market with diverse technologies, protocols and big players. While display isn’t totally immune to gaming — click arb and ads that launch malware, for instance — it doesn’t fundamentally challenge the value of the technology as overzealous SEO does to search.

When a technology is in a constant arms race with competitors, users win. When it is a black box inside a giant monopoly, the internet’s underbelly rolls up its sleeves and gets to work.

When someone at a tech event pitches me on a nonprofit, I have a tendency to tune out. It’s not because I’m a terrible person. It’s because small nonprofits often combine the professionalism and scale of early-stage startups with the stakeholder motivation and agility of Fortune 500 companies.

The nonprofit model has its place. The structure works for charities, for instance, where the entity doesn’t need to do much beyond raising and distributing money. But it’s a poor fit for entrepreneurs who are trying to scalably effect social change by building a socially-motivated enterprise.

It shouldn’t be this way — after all, most founders who structure their companies as 501(c)(3) nonprofits are simply trying to change the way something works for the better. Usually they have backgrounds in large corporations or academia rather than startups. Thus, they don’t necessarily think about economic incentive — one of the most critical aspects of starting a successful company. The 501(c)(3) model removes economic incentives by eliminating stock and setting market-driven salary caps for employees and board members, preventing anyone associated with the organization from earning meaningful returns.

Sure, people are motivated by things other than money — such as the potential to do good in the world. But successful businesses are able to quantify success, and most measures of social good are difficult to quantify. The social enterprises I have seen accomplish the most are able to align their profitability with social good, which gives them a far more tangible target. They can also give their employees financial incentives for hitting targets that are aligned with the organization’s social goals, a double whammy of motivation to get things done.

Combine all this, and the nonprofit model makes it difficult for companies to recruit top-tier talent. Unlike top-quartile workers ten years ago, employees today understand equity, options and other incentives. They know the value of their time. An all-star developer might volunteer on the weekends for a nonprofit but is unlikely to choose it as a full-time job over a position at a startup or big company. The inability to score top talent is a positive feedback cycle, as a new potential hire is unlikely to want to join an organization filled with mediocre, unmotivated people.

Ultimately, companies are measured by the social good they accomplish, not their tax structure. It makes no sense for a social enterprise to let the latter limit the former.

There’s a common misconception about why people become entrepreneurs. In my chats with founders, I’ve seen that the most common driver — ahead of earning fantastic returns, working flexible hours or learning new things — is simply getting away from a bad boss, or bosses at all.

To those on the outside looking in, the world of startups looks like a boss-free paradise. After all, you can name yourself the CEO, or at the very least have control of a menagerie of roles in your business. Unfortunately, it’s usually not. That’s because someone — perhaps an investor, a customer or a partner — is almost always playing the boss role.

Truly bossless businesses are tough to find; they have to follow a few major constraints. First, they need to hit cash flow positive almost immediately. Without that, you’ll either need to keep your day job (and your boss) or take investment (and investors, which are a different kind of boss). With cash flow, you’re only responsible to yourself and your business. Second, they need to have tons of customers, even at an early stage. That way, each customer isn’t important enough to justify appeasing them. Ideally, each customer is spending such a small amount that their process of dealing with you is automated (in B2B) or your business supports high churn (in B2C). Finally, executing the concept shouldn’t require more than perhaps one or two trusted partners.

There are a few broad categories of businesses that meet these constraints, and I’m fascinated by each of them:

Affiliate Marketing / Lead Gen: This is probably the easiest vertical to get into, as it doesn’t necessarily require any technical skills. Anyone with some marketing smarts and a WordPress install can start generating affiliate revenue, and it doesn’t really come with any obligation to anyone — affiliate program managers are often at least one level removed from the publisher (you), and it’s trivially easy to switch from one affiliate program to another.

One of the beautiful things about many affiliate businesses is that the entrepreneur is also building long-term value — typically, in a targeted email list or site that ranks high in search engines on certain keywords. In that way, affiliate and lead gen businesses are also fundamentally different from (say) consulting, in which it’s tough to argue that the consultant is building long-term value in their business.

Arbitrage: An extremely broad category, “Arb” is big umbrella that could include online advertising arbitrage, proprietary equity trading or perhaps even certain types of e-commerce. But it’s probably the most common of all bossless trades, with a huge number of independent prop traders making essentially bossless livelihoods. The downside of any arbitrage-based business, of course, is that the opportunity can (and will) disappear — of all the businesses discussed here, arbs are building the least long-term value in their enterprise.

Software Sales: To fit the criteria listed above, software business require some engineering skills. But if you’re a hacker, there are few better bossless businesses. This is especially true on the B2C side, with gaming as a prime example.

Note that in some of these businesses — especially B2B software sales — there’s a fine line that prevents customers from becoming bosses, and many entrepreneurs accidentally cross over that line by doing custom work, failing to automate sales processes or relying too much on a few large buyers.

This stuff isn’t for everyone, but I think there is some inherent (particularly American) desire for freedom from people looking over you shoulder, setting deadlines and making demands. And to many of us, that freedom is being a founder. Just be careful what you choose to found.

Say what you want to about law firms, but some of them have nailed a great branding hack: they have taken a stodgy service provider offering and “startupized” it by customizing and branding their work to appeal to founders. Of course, this isn’t just a branding task, there’s often real substance behind it — a solid startup-savvy lawyer can be one of the most critical partnership decisions a CEO makes. But the mere fact that so many first-time founders understand the value of a great law firm is pretty remarkable. 83(b) elections, for instance, are now common knowledge in the startup community, and it doesn’t take most CEOs more than five minutes to track down some publicly-released template seed funding documents.

These firms aren’t simply generous — cultivating a client pool of top seed-stage startups can be a huge win down the road for a service provider when those companies get bigger and pay bigger fees. But as far as I can tell, the path that startup-friendly law firms blazed hasn’t been followed by other service providers, even ones with a similar relationship to entrepreneurs. Who is the Wilson Sonsini or Gunderson of the accounting world, for instance? There isn’t one, but funded startups still pay for outside tax and bookkeeping work. I’ve spoken with several VCs who believe that the lack of startup-savvy accounting and CFO expertise is a talent crisis only exceeded by the deficit of hackers.

This is a branding problem that certain law firms have solved and other service providers haven’t. Because some firms have established thought leadership, savvy founders –even first-time founders — know what law firm they want, and they find an intro to that firm. The discovery process for (say) accountants is totally different, as there aren’t any branded, aspirational accounting firms that appeal to founders. Rather, many founders simply use a friend of a friend or family member to do their tax and accounting work or get a poorly-researched referral from another entrepreneur. This is a huge missed opportunity for everyone, especially the service providers.

Accounting firms aren’t the only ones missing the boat. Here are a few others, although I’m sure there are more:

PEOs and Payroll Providers: I’ve never met a founder who has enjoyed working with a PEO or payroll provider. Dealing with payroll, workers’ comp, insurance, taxes, health coverage and similar headaches is a huge pain, and the PEOs and payroll providers I’ve seen have punted on every opportunity to make it easier. Rather than crafting a unique value prop for startups and charging appropriately, these firms make the mistake of treating startups as “small versions of large companies”, assume that every startup has a dozen departments, charge too little and deliver way too little.

Wealth Management: I’m writing in more detail on this topic in this week’s letter.ly. But in brief, I think wealth management organizations — despite their traditional sales-heavy tactics — are missing a huge opportunity by not developing a savvier brand that can appeal to founders. Of all the wealth management groups, I figure at least one of them would acknowledge the lessons of the Bay Area finance revolution and focus their specialization on risk mitigation and alternative asset classes like P2P lending and real estate.

Office Hardware: The traditional office copier leasing process is miserable for entrepreneurs — which is a shame, because there are a lot of benefits to leasing a machine rather than maintaining your own. Have an office with a mix of Macs and PCs or fewer than two years of tax returns? Good luck.

All of these industries are ripe to be disrupted by savvy service providers that are willing to craft brands and offerings that appeal directly to founders. It’s easier than ever to start a company, and there are far more startups and founders today than there ever have been. So who will tackle the new market?

I had the opportunity to spend Thanksgiving week in Costa Rica, which was a welcome change in scenery from Manhattan. I’m not much for hanging out at the beach, so I found some time to talk to a few people involved in Costa Rican real estate and finance while I was traveling around the country. I was particularly curious about the startup community, which seemed to be totally absent throughout the country.

The difficulty I heard from everyone in Costa Rica was the same: while the country is one of the world’s oldest democracies and most stable Latin American nations, its legal system is frustratingly unfair and unpredictable. Property laws are Byzantine, and squatters have powerful — albeit vague — rights. Costa Rican citizens are explicitly favored in all legal disputes. Tax law is complicated and seems to be made up as you go along. Despite Costa Rica being the most developed country in Latin America, the uncertainty injected into the system by needless legal complications has made technology innovation extremely difficult.

Reports of the United States’ death as the startup capital of the world are greatly exaggerated. Our embarrassing lack of startup visas, bureaucratic burdens and high cost of labor are small inconveniences in comparison to the quality of the States’s legal system, which is largely fair and — most importantly — consistent. In the United States, I have a pretty good idea of what will happen in almost any legal situation. If my company goes bankrupt, there are centuries of precedent governing what creditors can and cannot do. If I want to sue someone, I know the costs and risks. Insurance is available for everything imaginable — mostly because our legal system is so sound.

Consistency is the most underappreciated driver of success in a product or service. This isn’t just about legal structures. Great brands are built through the delivery of consistent and predictable experiences as much as PR, pricing and growth strategy. As a consumer, Apple, Starbucks, Wal-Mart, McDonald’s and dozens of other successful brands will each give me exactly what I’m expecting to get from them. I simply don’t have to worry about the risk of getting something different or unexpected. Humans are naturally risk-averse creatures, and we’d much rather take something guaranteed than something that might be 25% better or 25% worse.

By removing the uncertainty around business law, the state of Delaware has prospered, generating over $750 million in revenue in 2009 from corporate services alone. The majority of entrepreneurs I know send Delaware a sizable check every year for doing nothing other than having less uncertainty around corporate law than other states — and anywhere else in the world. If this isn’t an example of a brilliant hack, I’m not sure what is. For doing something without any fundamental cost — providing a consistent legal framework — Delaware has created a massively successful business.

Ironically, having a stable, un-disruptable legal system around our entrepreneurs gives them the power to disrupt industries and aging business models. Until other countries develop the kind of legal infrastructure that will give innovators the certainty to know that their creations and profits are protected from corrupt officials, greedy politicians, populists and nativists, the United States will continue to produce and host the vast majority of innovative, billion-dollar companies and entrepreneurs.

Jason Cohen has a great post on unfair advantages. One of Cohen’s differentiators — personal authority — is the most useful to first- and second-time entrepreneurs.

So the question arises: how do you build strong and scalable personal authority?

I’ve heard blogging come up often, but I don’t think this is the way to go for most people. Blogging is hard. Rather, building personal authority through blogging is hard, and at the very least it’s total feast-or-famine. Unless your blog heavily incorporates a recognizable brand — like Chris Dixon or Fred Wilson — most people will probably lump your content into the “read it somewhere” bucket and forget that you had any association with it.

Events are different — when you run an event, you’re in front of the crowd. You get to send out regular emails to a large group of people, and the inbox is vastly more powerful than a RSS feed (this is also why I’ve moved some of my content over to letter.ly). In short, events are typically a much better tactic to gain the kind of personal authority that Cohen praises.

Starting an event series is daunting, but it’s actually quite a bit easier than it seems. I get asked about events a lot, so I’ve sketched out a basic strategy to building personal authority through an event series. I try not to be too servicey here, but I think this strategy is too important not to be spelled out:

1) Pick a topic. It should be big enough to potential draw a crowd of hundreds but not so big that you’ll lose focus (and high-quality people). And it goes without saying that this should be something in which you’d like to gain thought leadership. Competition and geography is also important — there probably isn’t room for another general “tech” event in New York right now, so most new events focus on specific verticals, processes or technologies. Over the past two years, I’ve helped create recurring events around gaming, marketplaces, and failed entrepreneurs, all of which fit in the sweet spot.

2) Build your promotional tools. Create a group page on Meetup.com, setting everything to “public” right off the bat. Meetup will actually promote your first event to its membership, which can be significant if you don’t already have a big email list. Create social media pages and an online landing page if you have the technical skills.

3) Find content. This usually means (a) a keynote or (b) some panelists for your first event. Pick the biggest names you can reasonably get in the room. Don’t get too cute or tricky — people are attracted to speakers they recognize and trust.

4) Find 2-3 solid venues. Good places to look include law firms (they love the attention of hosting tech events for free), bars with A/V and desperate restaurants. If you have great relationships with people at each of these types of places — which isn’t that hard to do — you will instantly be one of the most popular people in the small community of tech events organizers.

5) Make sure you have great attendees. Personally email people with leadership roles and deep rolodexes in your topic area. You need these people to show up, and you need to work to get them there. If you don’t, your event will easily become a mixed bag of job seekers, service providers and wannabes. Don’t let it.

6) Play up your social benefit to maintain great content. Because you are providing education to the community and helping entrepreneurs, people will want to help you. You’ll be able to land meetings with awesome people because you are running a community event, and they’ll often be honored to speak. Keep a steady stream (at least one per month) of events happening. I’m pretty agnostic on the “charging” topic, although I usually encourage people to keep their events free if they can. It’ll just make your life easier since attendees are less likely to get upset about all the little things that invariably go wrong at live events — and keep in mind that your goal is to build personal authority, not start a niche events business.

7) Leverage your membership to run events for you. By now, there will be many people approaching you for access to your membership. Your job now shifts from promotion to curation. Learn to distinguish between the self-promoters and the innovators. Pick people who will run awesome events and enable them with venues and promotion. Retain control of the branding and means of promotion (e.g., send the emails yourself, don’t sell your list) and dole out spotlight as you see fit.

The last point is especially critical — events die when organizers feel the need to exert too much control and burn themselves out. If you’re running an event series that regularly gets >50 people per event, it’s very likely that you have smart, well-connected people in the audience that would love to share the stage in exchange for doing almost all of the work.

If you’ve taken a deep dive into tech startups, you know about the scene. The scene is the siren song of the innovation community. The scene will kill you.

The scene is building sexy things that gain the approval of a certain (small) group of people. Sexy things get lauded, and celebrities coalesce out of the blogosphere’s protoplasm. The scene builds and sells a dream. Skip to the beginning of the line; pass go; collect $200 and a DUMBO loft. Get in SAI 100, speak at conferences and spend your Friday nights at launch parties. The scene lends these things great importance. The scene assigns value to popular acknowledgement of value rather than actual value. The scene is all these things – it is at once a state of mind as well as a loose community of people in any city with a large startup community.

I will spend this weekend’s post on a warning: the scene will kill you. It will misdirect your efforts and focus your attention on the cool and the shiny rather than the substantive. Your product will be driven by the spotlight rather than the user or the dollar. It will inspire envy of your co-founders, your friends and your colleagues.

People in the scene don’t say nice things about other people when they aren’t around. They’re too political, too strategic for that. Don’t expect these people to watch your back. If you’re in the trenches building a product or raising money, you must surround yourself with people you trust. You cannot tolerate politics and political people.

Building a startup requires blinders. Fred Wilson is right — being agnostic to the zigs and zags of competitors is critical. But it’s not just about ignoring competitors; it’s about identifying fads and unproductive behaviors and mercilessly cutting them out of an organization. And if you don’t do it, someone else will — and they’ll have a competitive advantage, whether for market share, talent or financing.

The scene provides a useful disguise for wannabes and dilettantes. The back-biting and politics of the scene enable B- and C-level players to skip from venture to venture, destroying value and poisoning relationships.

The scene is why I enjoy hanging out with developers. Developers/engineers tend to be grounded by a sense of the inherent usefulness and value of products. In a city like New York that is swimming with smart, non-technical entrepreneurs, it’s surprisingly easy for an entire community to be distracted from building meaningful things that tackle real problems. The webutante is dying, but not quickly enough.

The scene will kill you and your company. That’s as clear as I can make it. The scene is the antithesis of innovation and collaboration. Avoid political people and cut them out of your organization wherever you find them. This won’t necessarily make you successful, but it will let you be happy with yourself regardless of how things turn out.

I hear a lot of business ideas. The uninitiated may think that there’s a great diversity in thought here, and I’m constantly being exposed to new concepts. To some extent, this is true — I meet more smart people than I’ve ever met before, for instance. But I’m also exposed to a lot of the same business concepts over and over again.

Some — like group buying or fashion e-com — are simply trendy, and winners will emerge.

But some ideas have been brought to me for years, repeatedly, as new entrepreneurs encounter the same problems and come up with similar solutions. Yet none have succeeded. Those industries are graveyards, where many have entered and none have come out alive — yet.

This doesn’t mean these businesses can’t work. How many people stumbled around the idea of building a social network before Facebook blew it out of the park? But I thought I’d share a few examples of “graveyard” businesses I’ve encountered regularly. I’m sure there are more, and I’d love to see some in the comments.

Social/Management Tools for Conference Attendees. “Idea guys” love conferences, and conferences love idea guys. In my completely unscientific experience, one thing most idea guys have in common is a huge slate of conferences they travel around attending. This is a logistical challenge, but it is fairly unique to the type of person who goes to five or more conferences per year. A fairly small market that tends to attract novice entrepreneurs.

A Portal for College Students. Like the previous concept, this one meets the need of a lot of potential “idea” entrepreneurs — in this case, socially active college students — but few others. Growing a product college-by-college is extremely problematic due to the dramatic differences between colleges and the relatively small market in each college, problems I came to know well at GoCrossCampus. CollegeOnly probably has a better model, which can’t really be described as a “portal” as much as a network or set of tools.

Cash Tournaments on Console Games. Surprisingly few people realize that chance games (such as the games played in casinos) and skill games (such as pretty much everything else) are covered by a totally different set of rules, and it is completely legal to let users bet on their performance in skill-based contests. This seems like a gold mine to many entrepreneurs. Unfortunately, this business is fraught with non-legal issues. Skill balancing is a near-impossible challenge, and it is critical for gaining new players — if a user’s first experience with your product is being badly beaten at Madden and losing $10, you’ve probably lost that user forever.

I do like what some companies here are doing, especially Playhem. Would love to see someone get this right.

Honest Hetero “Hookup” Tools: Of all the businesses on this list, I have the least hope for these. Honest heterosexual hookup apps suffer from all the problems of a double-sided marketplace — one side is a lot easier to convince to join than others. If you make the app “honest” — that is, you report an accurate assessment of the market’s characteristics — you are unlikely to succeed. Here’s a rule of thumb: If you see a man on a hookup service, he’s real. If you see a woman, she’s fake. “Hookup” apps that make money follow the (dishonest) FriendFinder model — get the men to pay, fudge the women.

Anything in the Music Industry: A bit of hyperbole here, but not much.