I signed @carbonmade up for Twitter back on March 19, 2008, mainly to protect our trademark. I didn't start tweeting, though, until the second half of 2008. I didn't really get into it daily until 2009, when I realized Twitter could be all about communicating quickly with lots of mentions of your brand. The following is what I learned along the way and the process of how I got there.

Search Made Things Easy

The difficulty of finding and interacting with followers all changed when Summize was introduced. Summize, for people who don’t know, was the precursor to Twitter Search. Before Summize, I had no way to find @carbonmade members. It was like talking into a void and hoping that someone would hear you.

I caught wind of Summize around a month before Twitter acquired them in July, 2008 and began to use it heavily. Through Search, I could follow prevalent topics around our brand — something I wasn’t able to do earlier. The keywords I mainly followed were "carbonmade" and "online portfolio". I could certainly have searched for other keywords as well, but I focused mainly on these two.

There's always the devilish side of your brain that says you should search out your competitors and interact with people who mention their name, but I could never bring myself to drag them through the mud. I'd rather compete on other things. That said, it is beneficial to scope out what people are saying about the other guys, but I don’t do that obsessively.

Publicizing Your Twitter

I never feel comfortable promoting anything social media-related like our @carbonmade Twitter account until we have a strong presence. Otherwise you potentially scare off customers, because of how small and unestablished you look. It’s one of those reasons I’m against having forums on your website until you’ve got a large userbase, because otherwise it looks barren. (I’m actually against having them at all, but that’s for another article.) But even without promotion, after a period of searching, following, and interacting with our members on Twitter, our account slowly began to grow.

After acquiring several hundred followers, I thought it was time to introduce Twitter to our everyday Carbonmade members who are (1) either on Twitter and haven’t tweeted out the word Carbonmade or (2) haven’t signed up for Twitter yet. The only way to reach these people was to publicize our Twitter account on our blog, link it up directly in our sidebar, and put it in the footer of every email we send out. (I also include a link to our blog in every outgoing e-mail.)

The first two ideas — blogging about it and linking it up directly in your sidebar — are not necessarily novel, but I think my idea of putting a link to Twitter in the bottom of every email is to some extent, at least as recently as early 2009. Your members don’t always read your blog, so it’s hard to ensure that everyone is going to see it in the sidebar. That’s why you have to put it in your outgoing emails, which are typically read all the way through (especially support/sales e-mails). It was around January of 2009 when I thought to do this and I could simply feel the effect it had on our user count (this was before TwitterCounter and similar services).

Timeliness Counts

Even with Twitter Search in place, and being able to go to the website and search for keywords, it was still a cumbersome process that wasn’t very time efficient. You had to search, open up a new window with the person’s tweet, follow them, reply to them, and repeat. Lots of windows and lots of clicks. It consumed an hour a day or more and I was desperately searching for a better solution.

I experimented with the built-in searches through services like CoTweet (web browser), Twitterfon (iPhone), and Tweetie (iPhone). None made this approach simple. I actually handled our Twitter account entirely through Tweetie’s iPhone app for several months, but typing on an iPhone and keeping track of everything that was being said was no picnic.

I began to fall behind on tweets, as we were getting dozens a day, and if I skipped one day then I’d have twice the work to do to catch up. Don’t even think about skipping a Friday and a weekend and trying to catch up with everything on Monday. I’d be looking at a hundred tweets that I’d have to follow and reply to if I did that.

The introduction of Tweetie’s desktop app for the Mac solved all my problems and made things so much simpler. Tweetie allows you to save searches and when you re-open it, you’re automatically placed where you left off. Genius. It made all the difference, as I wouldn’t have to perform a search and scroll down to the person I last replied to.

Now, you should use this method until you’ve reached about 1,000 to 1,500 people following you on Twitter. I suggest you change your practice after your account looks something like "Following: 1,254, Followers: 1,400." At that point what I did was unfollow all people I was following (e.g. 1,254) excluding myself, Dave and Jason — my two business partners — and anyone else who works on or for Carbonmade. Your account will look more authoritative and people are more likely to follow you if your ratio of followers/following is impressive.

No matter what tool you use, and regardless whether you start unfollowing people at around 1,500, the single most important thing to do is to stay on top of tweets. To have any success at all, you need to make this a part of your daily routine, an activity set aside for several times a day. Why? Because these unassuming people who have just tweeted out “carbonmade” don’t know you’re paying attention. So contacting them three days later with a “Hey, John, thanks for using Carbonmade. I hope things are working out well” is far less effective than grabbing their attention within a few hours of their having shared their Carbonmade portfolio with their followers.

Case Study: Paying for Followers

I often debate with friends about the best way to use Twitter for business. One thing we often discuss is whether paying for followers is a smart move or not. Jason Calacanis, CEO of Mahalo, was the first to take the side of “yes” when he proposed paying Twitter $250,000 to be on their Featured User List, which brings in several thousand new followers a day and is hand-selected by the brass at Twitter. While this was mainly for show, Jason had a simple point: The more followers you have, the more people your message will reach — especially with re-tweeting — and this is valuable for any brand.

Paying for followers is a gray area for me as I’ve always been one to play it strictly above-board. So while you’re not hurting anyone by using a service like TwitterCounter to buy advertising space, you are artificially inflating your followers count, which seems somewhat shady to me. The idea behind paying for followers is that the greater your follower count, the easier you’ll be able to accumulate new legitimate followers who see that thousands of people are following you and then conclude that you must be an authoritative source.

You can only debate this for so long before someone tries it in the spirit of research. One of my friends bought $300 worth of advertising on TwitterCounter, which yielded him close to 3,000 new followers — some bots, but others simply new Twitter users looking for accounts to follow. He reported positive results: His follower count is now trending upwards at a greater rate than it ever was before. So I’m hesitant about advising you do this, I do think it’s something to consider seriously.

Case Study: Chat

For the past six months, I’ve been starting impromptu chats with @carbonmade’s followers by tweeting out something like: “Join the party! Chatting still at http://drop.io/carbonmade/chat. Come chat with me and win a free Whoo! upgrade.” Eric Friedman beat me to the punch in discussing why you should talk to your customers and let them talk to each other, using my chats at Carbonmade as his example. He summarized my position well: “Many companies have two way communication via blogs and comments — but there is something powerful about a real time chat where you actually get to interact with the folks behind a business.” Try it out. I think you’ll see positive results as I have.

Case Study: Contests

After many successful months starting chats through Twitter, I got the idea – mainly inspired by SquareSpace’s #squarespace Twitter iPhone challenge earlier this year – to giveaway a free Whoo! upgrade if people completed my sentence. For example, just last week I tweeted out “Tweet out ‘You should sign up for @carbonmade because...’ and win a free Whoo! upgrade. Feel free to be creative about it. ;)” I’ve done this three or four times now and always get great responses. My favorite from last week was by @jfcorcoran tweet that linked to a hilarious Caddyshack video of the infamous gopher: “You should sign up for @carbonmade because it make you feel like this!”

This has the obvious effect of treating your loyal @carbonmade followers to a free prize (an upgraded account), gets their creative juices flowing, and exposes your brand to people on Twitter who follow them but may not have heard of you. Since most people follow and are followed by people who are similar to them, in our case it’s likely that we’re reaching more creative folks who follow these people.

Value

One of peoples’ main gripes about Twitter (at least early on) was that it adds no value to your daily life – and could be seen simply as a procrastination tool. While there may be some truth in that, it’s a lot different for businesses. A clear example of Twitter being exceptionally good for business is what has happened at Dell. Dell reported back in December 2008 that it had made $1 million in revenue through Twitter. And then more recently The New York Times reported that by June 2009, Dell had earned $3 million by this means.

While those figures are larger than your average business is making on Twitter, they should give you an idea of how effective marketing on Twitter can be. For Carbonmade, although it’s more difficult for me to quantify how much we’ve earned, I do know that we’ve signed up a few hundred people who must not have had a clue what Carbonmade was before hearing about us through Twitter. We track all signups from the twitter.com URL in our backend.

Not only are we gaining more users through Twitter, but we’re also interacting with our members in a way that was never previously possible. I spend plenty of time each day — as mentioned previously — replying to people’s questions and interacting with them. This near real-time interaction allows me to be more living presence than a simple e-mail address. This translates into more loyal members, because they see you as more of a person and less of a company.

The final value it adds is the quick snippets of information you can send out that can be re-tweeting to hundreds or thousands of people who may never have heard of your brand. This is easily measured too by following the number of re-tweets your brand gets and will be even further clarified when Twitter releases their new re-tweet mechanics.

Conclusion

If your business is just starting out and is not on Twitter, I understand that this may not be your primary focus. You’ve certainly got more important things to worry about. But as soon as you’ve amassed a fair amount of users and have people to interact with, it’s clearly a must. The constant real-time updates, getting to know your users on a more personal level, and the shaping of your brand are all augmented through Twitter.

Just make sure not to get lazy. As with blogging, you need to keep producing content and interacting with the people that follow you. Keep your activity up and make sure to do it with a smile on your face and treat it like fun, not work. Nobody wants to hear from a corporate Grinch.

This is the history of Carbonmade from its start in early 2006 up to our reaching 100,000 registered users in March 2009 and how we got there. It’s not a story of rock stars and energy drinks; just three guys working on something they enjoy and grinding it out every day. When Carbonmade started, it was nothing more than a small tool for Dave to update his portfolio. Today it’s a healthy, thriving business supporting the three of us full-time without any outside investment.

Before Carbonmade

The stars were first aligned in 2004, when Jason and Dave began working together formally, having founded a small design studio called nterface. They’d dabbled on projects together as early as 2001 as freelancers. Jason was working out of San Francisco and Dave was in Chicago. Jason has since moved to Chicago. They did a lot of great design work for bands, popular websites like Scribd and MerchNow, record labels and other websites: see Dave’s portfolio for more of their work.

While Dave and Jason were making a name for themselves running their design studio, I was running a startup out of my college dorm room at Yale called TypeFrag, founded in 2003 and later sold in January, 2007. I was a brash nineteen-year-old when I started it, but it wasn’t the first thing I’d done. I’d been running Internet startups since I was eleven years old and I have some stories to tell if you happen to be in NYC and want to grab a beer. Just to name a few:

1. A small ISP I started back in 1995 as a summer job was shut down after a run-in with the FBI. Apparently our servers were compromised and government computers were hacked using them.
2. A few years later, I was running some web hosting servers out of my parent’s house on the Yale campus (my parents are professors there and this was before I attended). I was forced to shut that down after a phone call from the IT department on the night of the Oscars. They thought our house’s bandwidth usage was my mom, a film professor, running some sort of Oscar-night website.
3. Then came Game Communications. My business partner at TypeFrag and I entered a business plan contest at Case Western Reserve University (where he was a student) and took the first prize of $75,000.

That all sounds great, but I was never truly happy with what I was doing until I met Dave and Jason and began working on Carbonmade. Carbonmade just felt like home. I’ve always been fascinated with art and design — my grandfather having been a full-time painter, my father a painter on occasion, and my mom a film professor. I had an artsy childhood to say the least.

The Early Carbonmade Years. How’d We Get Started?

In early 2006, Dave came up with the idea of creating a simple tool to enable him to manage his personal portfolio. We all know the pain of having to keep things updated manually. So Dave designed and Jason coded the first version. Although it was originally conceived just for Dave and a few of his design buddies to use, we opened Carbonmade up to everyone after many requests. “Who the hell would want to use this,” we thought. We were amazed.

At the request of many of our new users, we released two quick bursts of updates: one two months after Carbonmade was first introduced and one six months after that. The first consisted of minor bug fixing and tweaks. The second had some more significant features: we launched Whoo! a paying plan at $12/month. (Originally everything was free, but server costs add up in a hurry. We just hoped to offset those costs.) The other two things we added were captions for images — for which we’d had many requests — and a strategy for building up our extremely popular portfolio listing. The portfolio listing was originally just for us to be able to track the few dozen people who were signing up, but it quickly grew into something unwieldy.

How’d We Market Carbonmade?

A few bloggers started sharing Carbonmade with their communities and growth began to pick up: there were 3,504 portfolios on August 7th, 2006, when Tom Coates wrote his review (the first detailed description). Our appearance was much the same then as it is now, though. It’s fun to look back at how ahead of the curve Dave’s design was; some people think Carbonmade is less than half a year old.

Throughout most of those first couple of years, we never imagined that Carbonmade would reach 1,000 portfolios, let alone 100,000. But things really picked up quickly, and it was all through organic growth. We’ve spent only a few thousand dollars advertising Carbonmade.

Organic growth is funny. People we never thought would use it are using Carbonmade. We figured we’d get illustrators and photographers, but we had no clue going in that makeup artists, architects, fashion models, and landscape artists would use it too. We have an incredible variety of creative people from all walks of life. How could we anticipate that São Paulo, Brazil would be the city where we’re most in demand? And that half our traffic would come from overseas?

We are very fortunate to have enthusiastic people using Carbonmade. It shows once again that if you build something that people enjoy using and care about, it’ll market itself. We benefit from the people using Carbonmade sharing not only their portfolio but their positive experiences with their friends. Creative people are likely to be friends with other creative people who turn out to need portfolios themselves, and this creates a rapidly expanding circle. Unlike users of Facebook or Twitter, our users derive a direct benefit from showing off their portfolio, which in turn is free marketing for our service.

I also attribute our success to our commitment to making sure everyone has a good experience. We constantly say: “This thing is big. We’re no longer just building it for Dave and his friends. We’ve got hundreds of thousands of people to worry about.” It’s what keeps us up at night. It’s no longer about what’s best for us, it’s what’s best for our users. I hope that doesn’t come across as bullshit, because it’s the truth.

Then There Were Three (2007 and 2008)

Fast-forward to 2007. It’s funny how small the world is. Dave and I actually first talked back in 2006 when I asked him to design some business cards for TypeFrag. He declined the job. I was later able to convince Dave and Jason to design and develop Uncover — a Yelp-like restaurant and bar review website geared toward nightlife — and we all just clicked. Uncover proved difficult to get launched and slowly fizzled out. But I had met Dave and Jason, so it all worked out.

Our working relationship developed out of the camaraderie we felt working together on Uncover, and I began doing odds and ends for Carbonmade unofficially in 2007. I then joined nterface officially as an equal equity partner and the “everything else” guy in January 2008. It might have happened months earlier, but we put off the legal stuff until the start of 2008 for accounting and other reasons.

When I joined nterface in 2008, we were still doing client work to make ends meet (and working on a second app — more on that later). But after drastically overhauling our attitude to Carbonmade — within a very short period of time — we changed our little side project into a legitimate business. Since then we’ve become profitable enough through Carbonmade to be able to focus all our efforts on its development.

While from time to time we released a few changes in 2008 — most significantly portfolio search and PayPal as a form of payment (PayPal really helps for International customers) — 2008 was sort of a lull for us, except of course for our amazing growth. We just didn’t get all that much done on Carbonmade.

Why were there no significant updates? Well, making the transition from doing client work to a small startup (even wrapping up a few small projects) takes a large shift in attitude and takes more time than you might think to get adjusted. (It’s also something I hope to talk about in 2010 at SXSW with Danny Wen if our panel gets approved.) We still did put in thousands of hours of behind-the-scenes work. There was also adding a third person to the mix, which naturally took a while to get used to, as well as Jason’s move to Chicago. These all presented new challenges.

However, the biggest thing that held us back was that instead of going all out on Carbonmade, we decided as a group to create a second product for creative people. We spent the first nine months of 2008 developing this. We put so much time into it that we even have a working beta that’s been seen by, and praised, by a dozen or so of our close friends. However, none of the three of us were satisfied with how it turned out. And above all, we didn’t enjoy working on it. Not only that, we’re only three people and that’s hardly enough to support one product, let alone two. So that was a mistake.

All wasn’t lost, though, as we did a lot of research and development for this product, and we’ll be able to incorporate parts of it into Carbonmade. We learned a lot, and, best of all, we found our calling, which is to continue to develop Carbonmade. 2008 was a year of transition and self-discovery for us, and we’ve emerged with renewed purpose. Sometimes you can trust your instincts, other times you have to learn from your mistakes. Now more than 100,000 people have spoken. Carbonmade is our future, and nobody could be happier about that than we are.

100,000 Users and Beyond (2009)

As I mentioned earlier, by the end of 2008 we felt that Carbonmade was our future and we needed to focus all of our attention on that. We reached the benchmark of 100,000 users in March 2009, and we’ve continued to grow at a fast pace, with 158,000 users as of this publication — nearly 10,000 new users a month.

While our good fortune continues, we are working at a fever pitch on our new version. It’s taking longer than expected, but we don’t subscribe to the "Release Early, Release Often" philosophy. Admittedly, we’re perfectionists to a fault, but when you’ve got 158,000 pleased users, you can’t simply disrupt things with a series of bells-and-whistles updates just to follow a silly motto. You have to take your time and do things right or you risk upsetting a lot of people. But more on that in another article.

We’ve got a fancy new office with the boys and girls of Harvest, Dave has moved to New York City, Jason is coming in early 2010, and things are picking up quickly. We are now more accomplished than ever before, and hope to get out something new and significantly different shortly. Keep your eyes and ears open — and, of course, remember that successful companies are not built overnight.

I wrote a comment for Hacker News back in August in response to a guy's question about what a non-programmer should do in a startup. My response received 164 up votes and is the tenth most popular comment of all time. In this article I add some depth to most of my previous twenty bullet points.

Product Development & Road Map

As the business guy, you've got to look at everything with a big picture mentality. Think macro, not micro. I've got to think about what we can do today that will bring us to where we want to be in six months, one year, two years, maybe further along. You don't want to spend all your time thinking too far in advance (dreaming, in other words), but you definitely need to have some sort of road map.

Luckily, everyone on our three-person team thinks about things in a different way. Dave and Jason are meticulously focused on the present — they're doing the daily design and development on the new Carbonmade release — whereas I'm looking toward the post-release phase. Dave often says that he can't let himself think about the future or he wouldn't be able to focus on the present development. This isn't to say that I'm not involved with the day-to-day on our new product release, or that Dave and Jason aren't involved in our road map; but we all need our focus to be on different areas.

So while Dave and Jason are concentrated on getting our new release to market, I can take a more macro approach and focus on what's next. We'll then come together, go over my plans, and decide jointly where we want to go from there.

Managing Cash Flow & Budgeting Bills

I've told a lot of entrepreneurs that I think managing cash flow is one of the most important challenges. Sadly, this is something you learn over time and with experience. It's really instinct — knowing whether $500 is better spent, for example, on marketing or development. It can't really be taught.

At Carbonmade, I routinely break down our expenses in Excel and create quarterly budgets based on our projected revenue, payroll, merchant fees, and expenses. I don't project beyond three months, because that would be irrelevant for us. I work with Jason to estimate our fluctuating server costs and other expenses.

It's my job to give Dave the thumbs up on a new MacBookPro purchase or respond to Jason's request for a better DNS solution. (Side note: We're about to make the switch to DynDNS.) I've got to make sure we don't overspend and that we plan our budget accordingly. For example, upgrading our servers may be better put off until next month, and I need to make that decision.

Since I handle our budget and cash flow, paying our bills is a natural progression from that. While we use AmEx for most purchases, especially the big ones like server expenses, I write all of our checks — from payroll to marketing expenses to office rent — when a credit card doesn't make sense. I keep the checkbook for the company and make sure that every bill is accounted for.

Customer Service

Providing excellent customer service singlehandedly transformed Carbonmade from a side project into a profitable company. I can confidently say that, as pro-active customer response is the most significant “update” to our product we've released to date. When Carbonmade began, we were still a full-time consulting company, and we didn't have time to respond to our customers. As the company began to grow, I stepped in and made it my initiative to handle all incoming e-mails right away and add a human touch.

The first thing I did was go back and respond to a backlog of about six months of e-mail, apologizing for our silence and explaining why we didn't respond. In the same e-mail I would ask if anyone still needed help. Most people were very understanding when I explained our situation. From that point on, I never leave an e-mail unanswered when I go to sleep and I make sure to answer any new e-mails that accumulated while I was sleeping before I shower and brush my teeth in the morning. Throughout the day I answer all e-mail as soon as it comes or at least as soon as I can get to it.

Now, you shouldn't do what we did and not answer e-mails the first six months. You should be on top of this from day one. If I e-mail a new startup and don't get a response in a timely fashion, it's really a turn-off. It's not a lot of work and should be a priority, especially early on.

Investors

Probably because we are a self-funded company that's never taken financing, we get a lot of investors reaching out to us. While we're not opposed to taking financing at some point, we're in the unique position of not needing it right away, if ever. And that's really attractive to outside investors!

The e-mails from investors come in weekly, and while I haven't taken any meetings to date, I do take the time to respond in every case and to answer any questions they have. We're focused on pushing out our new version, so I tell any investor who e-mails me that while we're interested in meeting at some point — if that's what we decide to do — we're pushing any meetings back until after our new release.

And if we do decide to meet somebody, I'll be the guy there pitching our company, listening to what they have to say and answering any questions. It's going to be a lot of work and I'm not necessarily looking forward to the distraction when it happens. While we're not opposed to financing, we want to see how our revenue projects after our new product is released.

Incoming E-Mail

We don't just get customer service-related e-mails, we also receive lots of partnership requests, e-mails from investors, sales-related e-mails, marketing opportunities, etc., and I handle all of these. Timeliness matters here too, but it's generally not as important as with customer service e-mails. I try to get back to everyone before the end of the day, but these e-mails usually take longer to think through and write. With customer support, I've seen every question a thousand times (literally), so that's a lot easier for me to do quickly.

The trick to answering these e-mails is not to close the door on any opportunity. Keep everything open to discussion. Be friendly and don't shoot anyone down. If you're presented with an “opportunity” that's totally ridiculous, then you just politely decline, but there's no reason to be judgmental.

Social Networking (Facebook, Twitter, etc.)

I wrote an article on how I use Twitter for business entitled Let's Be Friends two weeks ago, so the details are in there for you to read if you're interested. Social networking has definitely impacted our business and allows our customers to reach us outside of e-mail. It's the kind of experience that feels far more personal and allows us to publicize our brand in a way that blogging and answering e-mails do not.

Marketing (AdWords, Text Links, Banners, etc.)

Marketing has definitely taken over my life the past few weeks and will continue to do so for the rest of 2009. Carbonmade barely spent a dollar on advertising until a few weeks ago when I began experimenting with Google's AdWords and banner advertising on various websites. I'm in the process of building out our brand.

While I'm waiting until the next version of Carbonmade ships to go all out on marketing, I'm beginning to test the waters with various ads and see what performs best. I have learned for example that: You need to run Google AdWords for at least 30 days for their algorithm to work to your advantage. Most people don't know that your cost-per-click will decrease as Google AdWords learns more about your account. So you should get started early with a budget of at least $5/day to begin feeding data into your account.

Accounting

I know a lot of startups spend very little time on their own accounting. Although we could just hand over our statements for every quarter to our amazing accounting firm, I prefer to input everything into Excel myself. (I don't like any of the recent accounting programs out there. There are just too many unneeded features.)

Every Monday I take a few hours to input all of our expenses and revenue from the previous week into an Excel template I created a few years back. This way I can easily do our budgeting and cash flow. People think I'm crazy to bother with this, but I think they're crazy not to. I have a clear picture of every dollar and cent going in and out of our company from day to day, and this really helps me plan our road map.

Legal

Working with lawyers is not an inborn talent. If you don't know what your needs are in advance, you can spend a lot of money needlessly. If you don't do your preparation and carefully outline everything you think you need before going into a meeting, you'll lose time, which is in turn billable hours.

Luckily, Carbonmade is my 5th LLC, so I have a lot of experience dealing with lawyers. I don't go down side alleys and don't need a lot of explanation from our lawyers, because I've done it all before. For those of you who lack this experience, it's just a necessary business growing pain, and I promise you it gets easier.

One of the main things you'll learn is that there are many legal things that you can take care of yourself, hence don't need to get your lawyer involved. I'm fortunate that my law firm Hodgson Russ taught me early on “how to use a lawyer,” explaining what's worth calling them about and what I can do myself.

But you can't operate without your lawyers. First and foremost you need to set up an Operating Agreement between you and your partners. This is often overlooked early on, but it is the single most important document you can have your lawyers draft. I mean good, experienced lawyers: I nearly got burned in one of my early startups as a result of having a Yale law school student draft my Operating Agreement rather than a real law firm.

Next, there will be lots of miscellaneous paperwork: filing your company with the state, writing Terms of Service, perfecting your Privacy Policy, having your lawyer look over key contracts, writing up templates for contractors and personnel, submitting your trademark, etc. Whenever you think you've got a breather from writing checks to your lawyer, another stray item turns up. But these are necessary evils.

Networking Events

One of the major responsibilities of the “business guy” (or girl) is to get the word out about your company by meeting people in your community. This is especially important early on. Usually you can coast after you've met the right people because they'll introduce you to new people and you won't have to be quite as active discovering a community. It's kind of like the investor thing: once you have a good core group of friends around you, people will want to be introduced to you rather than the other way around.

I moved to New York City in September, 2006, not knowing a soul in the entrepreneurial and tech communities. For an entire year and a half I attended as many events as I could, including the NY Tech Meetup, which was a lot more tight-knit back in the day, and any other event I could find on GarysGuide.

It took about six months to become confident in myself and my pitch, and to figure out how to best interact with the people I wanted to know. It then took another six months to a year to find my way into what you might call the inner circle. Now I know everyone in NYC, or if I don't know them I know at least one person who does.

It's a time thing and something that your business guy needs to go to work on early. It would be nice to think that we could all be lone wolves, superior to the occasional indignities of networking, but the fact is, most of us need to reach as many important people as we can.

Blogging

While I don't update our blog as often as I'd like to, it gets quite a lot of traffic — especially when we post an interview with a top designer. Companies handle blogs differently. Some write a lot about the nuts and bolts of their current operations and others simply post company updates. I take the second approach with Carbonmade, because I don't have time to do anything more with the blog at this point. I do send out interviews every so often, so that makes up for it somewhat.

I won't linger over the importance of blogging. It's fairly obvious these days that writing blog posts gets people talking about your company and brings them to your website. Keep in mind, though, that there are now more and more avenues for achieving these goals.

Market Research

You have to stay up-to-date with what your competitors are doing. Carbonmade has a lot of them. Make sure you sign up for all of their services, keep their RSS feeds in your blog, and subscribe to all of their newsletters. It's easy work, honestly, because mainly you just want to keep tabs on them. If you're doing a good job yourself you won't have to worry about spoiling your day feeling envious or resentful.

Since Carbonmade was the first online portfolio around — and is now the largest as of Monday, October 19, 2009 — we've got a nice head start over our competition. We've never had to look to others for ideas. We generate plenty of those on our own. However, it's important to be able — as quickly as possible — to spot anything your competitors are doing that's attracting customers away from you. Is there a small feature or a way they do something that's giving them an edge somehow? You've got to find those.

Writing The Copy

While Dave wrote the initial copy for all of Carbonmade, I've since gone in and added a Frequently Asked Questions, taken over the blogging, re-written our About area, and put in other stuff. It's important to keep the site fresh and add to your support documentation as things change. Even though Carbonmade is three years old, I still find myself adding a new question every few weeks.

You don't have to be an expert writer to keep your startup's copy updated and fresh. Just write clean sentences that make sense and aren't too wordy. One of my rules is not to over-think anything. Just write it how you'd say it and then go back and revise later. Some of our FAQs are one-line answers and that's fine if one line does the trick.

Dave and I still collaborate on the bigger pieces, as he's an excellent writer. Recently, Carbonmade was featured as a case study by Microsoft and Dave and I worked together to piece together the final copy. This was after Jason and I were phone interviewed by Microsoft for the rough copy they put together.

Advertising Requests

While Carbonmade doesn't accept advertising any more, there was about a one-year period during 2008 where we sold a small ad on the right side of our portfolio listing for supplemental income. We've never put advertisements on the actual portfolio pages, but our search seemed appropriate enough.

We'd get inquiries from lots of different brands looking to buy out this space, so I'd keep a simple Excel file organized with their name, length of the campaign, and the price. Since we only sold one ad at a time, it wasn't difficult to keep track of. The difficult bit was sorting out the real advertisers from the pretenders. Nearly half of all the inquiries were a total waste of time.

Merchants

If you accept credit cards or PayPal for your web service, you know the headache of dealing with merchants. It's probably the least satisfying part of the job. We're fortunate to have worked with Chase Paymentech since our beginning, which has been a breath of fresh air for me after having worked with Authorize.net and others.

What I do in this area is to handle all the communication between our company and our merchants. There was a lot of paperwork when we switched LLC names last year, and then last month we changed our business address, so I had to update that and get things squared away there. I also get monthly statements from them that I read over, input into Excel, and file away.

With PayPal, it's mainly logging in, generating monthly statements and making daily withdrawals into our checking account. PayPal doesn't have an option to do this automatically, so it's just an annoying task that I have to do daily so that our money doesn't pile up in our PayPal account. Their savings account is rubbish. We use ING Direct for that.

Phone Calls: Incoming and Outgoing

While we chose early on not to provide phone support for our customers due to the time drain, our phone number appears on credit card statements. I'll get about a phone call a week from a customer who goes to my cell phone routed through Google Voice. It's typically a parent asking about the charge, me asking whether they have a son or daughter who's an artist, them saying they do and then being pleased that we're helping their kid show off their work.

I also like the idea of CEO Office Hours that Jason Fried introduced over at 37signals. It's definitely something I'd like to do at some point in Carbonmade's future. It's just tough to lock myself into a set of hours each week to take calls.

I find myself having to place phone calls on behalf of our company for the most random things. Just the other day I was talking with our health insurance provider to change some routing numbers. It's random, but I'm on the phone a few times a week.

We share offices with Harvest and often rib each other when our competitors come out with something new. With the release of Haystack last week by 37signals, who have only produced small business software until now, it was my turn to take a few in the ribs. Haystack is self-proclaimed to "find the right Web Designer for your next project" and has a bit of a portfolio twist to it, but it really doesn't worry me.

The More Competitors The Merrier

There's a lot to worry about when running a startup, but worrying about your competition is one of your least concerns. Competition means your market is big enough to support multiple companies. If you find yourself with a new competitor — or hopefully multiple competitors — it's time to rejoice, especially if they're venture-backed.

If a Venture Capitalist is backing a competitor of yours, you know you're working in a large market with a lot of upside. VCs generally give their first consideration to the quality of the team, but they also take market potential very seriously. A bootstrapped startup on the other hand may not worry about market potential as much, they just see a niche and hope to create a market as they go along. (That's true to a certain extent, anyway.) But VCs always worry about the market, hence VC backing for a competitor proves the market is out there.

I'm not advocating that you completely ignore your competitors. We don't. But if you're looking to them for key ideas and not focusing on your own product and your own users, then you're going to be a step behind. Typical things I look for in a new competitor are: who is behind it and what have they done before? Here are a few more things to keep in mind:

1. Teams of two or fewer who are moonlighting aren't a cause for concern initially — until they start bootstrapping for real. A team working in their off-hours won't be able to compete with you if you're working full-time. If they do come out with something innovative, you'll have enough time to react.
2. If the competitor's product is simply a carbon copy of ours, then I'm delighted, not worried. I can name a couple dozen Carbonmade copycats off the top of my head — teams that even copy our layout options and color schemes. They'll always be playing catch-up and are hundreds of thousands of users behind us. They tend to grab a few thousand users and then give up. You rarely see a second version from these people.
3. Has this new competitor been successful with something else? This can be cause for minor concern. At Carbonmade, I was initially concerned when Krop released their portfolio tool after doing such a good job with their creative job market, but then again that was just a validation of our market size. (Side note: Krop was actually an early advertiser on Carbonmade before they launched their portfolio tool.) Haystack falls into the same category as Krop as it too was launched as another product by a successful team.

Close But No Cigar

So as I say, Haystack falls into my to-be-concerned-about category because of who is behind it. But at the same time it's different enough so that I can brush it off after a brief look-through. Haystack so far is simply a means of finding a new web designer, and that's not too worrying. They have implemented limited portfolio-like features and could, if they chose to, spend some time building out an online portfolio system, but I don't think that's the direction they'll take.

As Jason Fried wrote when introducing the product, “So there's another question we've been hearing a lot: ‘Can you recommend a web designer to help us with a project?' Now we'll have an answer to that question as well: Haystack.” They built Haystack to divert all the requests they were getting for web designer recommendations. I don't think he envisions the product being any more than a tool for offloading those requests. It also serves as a supplement to their job board.

Apart from that, in the end I think Haystack fails to produce real value for the job seeker and is more of a giant advertising billboard. My evidence to support this claim is that at the moment there are several companies listed there that have no intention of taking on designers work. They simply want their brand shown off. Many of these companies aren't even doing consulting work any more; like us, they did that in the past before releasing their own products.

Haystack is also choosing to charge web designers instead of charging the people who are hiring. And, as anyone who works in the creative arena knows: The best designers aren't going to pay for references because they have jobs coming in all of the time while the poorly-established people don't have the money to spend, hence you'll be left with the designers of middling quality. For this product to be truly successful, you need to be able to attract the best creative people. But don't get me wrong: they're still going to make a killing on this product.

Is Carbonmade Going to Compete With Haystack?

In my earlier article, 100,000 Users And So Can You, I mention in the second to last section that we spent all of 2008 working on a second product that we ended up scrapping. We even had a successful private beta. Well, that product would in fact have been a direct competitor for Haystack. So at least behind the scenes Carbonmade is a closer competitor to Haystack than it seems to be.

It's been very interesting for to me to see how 37signals chose to tackle the same problem that we came up against: it's just not that easy to find a web designer out there. Like 37signals, even now we get a dozen e-mails a week from people hoping we can recommend a designer to them even though we stopped doing consulting nearly two years ago. Their solution is a lot different from how we chose to tackle the problem. A lot different. I don't think there's necessarily one right or a wrong way to approach this challenge, but I don't think either that they've taken the best approach by any means.

I won't comment on the solution we came up with, but I will wrap up this article by reiterating my earlier point. Having competition is a good thing. Besides its validation of market potential, it allows you to see how other people tackle the problems you face yourself. This is not threatening, it's informative.

Customer service is often an after-thought, but not for guys like Craig Newmark (craigslist) and Tony Hsieh (Zappos) who built their businesses around it. At Carbonmade, we deeply care about all of our customers and helping them the best we can, regardless whether they're paying or not. Here are three unrelated stories, involving a Carbonmade customer, a competitor's customer, and a guy who just happened across our service.

Story: Emily Hanhan, "Overbilled"

Emily Hanhan got in touch with us on January 22, 2009 because she was mistakenly being double-billed. Emily first paid for her Whoo! account through PayPal, then switched to credit card. Somehow PayPal — but we take full responsibility — failed to cancel her PayPal subscription when she switched payments.

She wrote us at 12:54 PM on that Thursday, and I quickly responded with an "I'll look into this for you" at 1:13 PM and contacted Jason over Campfire to help me look into the problem. We found the root cause, and Jason got back to Emily at 3:34 PM after handling the refund and manually cancelling her subscription. He wrote: "I also looked up all the transactions made via PayPal. Believe it or not, we actually incorrectly charged you $96! Practically a crisp $100 bill."

Instead of refunding the $96, we rounded up the refund to $100. It was our mistake and even though $100 is only $4 more than she was "owed" we felt like it was a better gesture to round up rather than nickel and dime the refund. Again, it was our fault and she was kind enough to contact us directly rather than submit a chargeback request through PayPal.

We thought that was all we'd hear from Emily.

Jason and I both have Google Alerts set up for any blog or website mention of Carbonmade and the next day we stumbled upon this article in Consumerist entitled Carbonmade Quickly Responds To Error, Fixes It In Less Than 4 Hours. Emily had written to Consumerist about her billing fiasco, but thankfully only had amazing things to say. Here's a snippet:

Having had a fast response from Carbonmade when I had an unrelated question a few months ago and not having much hope in Paypal, I emailed the main Carbonmade contact email at 12:30pm today. Not only did I get an email back 20 min later saying "Hey, we're looking into it," but by 3:30pm, they emailed me with an apology, explanation, and a Paypal refund was processed through. Not only that, they found that the mistake had occured not six but eight times, a $96 refund. Except they rounded it up to an even $100 for my troubles!

While we know $4 is not much, considering the state of the economy, I was not only impressed by the small act of generosity, but the quick response of this company.

I remember blushing when reading through the Consumerist post (and the comments). Here's one comment: "My heart goes pitter-patter when I hear of good companies like this. Yay, Carbonmade!" I remember being so proud.

She also wrote us privately: "Hey, I should be thanking you! Seriously, the way you handled the issue was fantastic, more than I could ask for. Even before today, I've recommended your site to many of my fellow design folks. But today just solidified what a great site/company Carbonmade is! :)"

What a fantastic moment.

Story: Ruth Kalinka, "Tea With the Competition"

On September 15th just after we moved into our new office, I tweeted out from the @carbonmade account asking if anyone was in the area and wanted to grab coffee or tea and chat Carbonmade. Ruth Kalinka lives in Philadelphia, but happens to find her way to New York City every so often, so she favorited the tweet to respond to when she was next in town.

On October 7th I received an e-mail from her asking if the offer to meet up was still on the table. Of course. Not thinking twice, I went to check her portfolio only to find that she wasn't a Carbonmade customer, but in fact was using a competitor of ours, ViewBook, for her portfolio. A little shocked, I asked her why she was using ViewBook and she responded: "Perhaps you can show me how I can do the same even better with Carbonmade?"

I was up for the challenge. Although I felt a bit odd meeting with someone I had expected to be a customer of Carbonmade, I went into our chat over tea at Oro Bakery ready to make my pitch. Also, simply to hear why she found ViewBook useful would be valuable to me.

I came away understanding why she was using ViewBook, and thinking maybe I had secured a new customer. She wrote me after our meeting: "Thanks so much for meeting up on Thursday. It was great chatting with you and finding out who's behind Carbonmade. I'm excited to see what's next for your company (and my portfolio)!" I didn't try to push Carbonmade on her. We just chatted our way through a bunch of different topics: her career as a freelancer, Carbonmade, ViewBook briefly, her experiences with clients, and other things.

All in all, I was able to make a connection with Ruth, share my experiences, and (hopefully) gently convince her of the benefits of using Carbonmade. She now often interacts with our @carbonmade account and is a friend of Carbonmade in more ways than one.

Story: Stewart Mackenzie, "Fire Drill Service Test"

Stewart Mackenzie's story is funny, because he's not a customer and I don't think has any intention of being one. However, "I wont forget you cause of it ;) my best wishes to you guys!" was the conclusion of an e-mail correspondence with him.

Stewart read my piece two weeks ago entitled What's a Non Programmer To Do? and wanted to test my customer service response time: did I really practice what I preach? That evening at 9:50 PM Stewart wrote an e-mail to support@carbonmade.com with the subject line "firedrill service test" and the body: "This is a fire drill for the customer service of carbonmade."

Now I happened to have my e-mail open at the time — as I often do — clicked the reply button as quickly as possible and in under a minute wrote back: "Hi Stewart. :) Told yah I'm fast." Then for fun I told Jason in Campfire to respond too. He added two minutes later: "Spencer told me some alarms went off. Do we need to call the fire department?"

He naturally got a kick out of it and responded three minutes later with: "awesome, really really awesome." This was a riot and Jason and I had a lot of fun with it. We continued to toss e-mails back and forth with Stewart. Asked him about how he'd heard about us, what he was working on, etc., and ended the correspondence as friends. I gave him my personal e-mail address and told him to contact me any time with any entrepreneurial questions as he's a fellow entrepreneur working on a startup with his wife. We didn't gain a customer, but we gained a friend and now have a great story to share.

Nivi and Naval of Venture Hacks wrote an article last Thursday entitled "How to Pick a Co-Founder" that provides lots of useful advice and also argues that two co-founders is better than three. Having founded startups in all three ways — solo, with one co-founder, and with two co-founders — I'm going to provide my take on things and argue that three co-founders complementing each other's skill sets is ideal for today's Web startup.

Triumvirate: The Power of Three

The word "triumvirate" is Latin for "of three people" and historically a triumvirate was a political system led by three powerful individuals. In Roman times triumvirates always led to civil wars, but Antony and Caesar did even worse after they got rid of Pompey, and for me three has been the ideal group size. In a three person founding team you've preferably got (1) a person to write backend code and do system administrative tasks, (2) a person to design and write frontend code, and (3) a person to handle the day-to-day operations of the business (see "What's a Non-Programmer To Do?").

There's a lot to do in a startup, so having three people rather than two or one should make things go more quickly. If you designate specific tasks, then you'll get better results across the board, too. Neil Patel talks about "dividing and conquering," which perfectly fits in with my triumvirate analogy. With three people you've got more things that you can divide and focus on.

One of the most difficult transitions is going from the founding team to your first hires. I experienced this with TypeFrag when we hired two full-time programmers, and it's something I'm about to go through with Carbonmade as we begin the hiring process for our first full-time employee. Hiring is not an easy process. Having three people can buy you more time, as three people can share the workload for longer.

Along those lines, two people can only put in, say, 12 hours a day for a total of 24 whereas three people can put in a total of 36 hours. These simple figures don't lie, and may help your team avoid being burned out too early on.

Too Many Chiefs, Not Enough Indians?

A common argument against having three or more co-founders is that with three there are too many people making decisions. "It's hard enough to get two people to agree, let alone three," many people argue. Having worked for nearly five years with one co-founder on TypeFrag and now three years and counting with two co-founders on Carbonmade, I think the "too many chiefs" argument is easily refuted in many co-founder situations.

Here's how I see it: If you and your single co-founder don't agree on something, there's no third party to mediate. You're left in a deadlock with nowhere to turn. Having only one other partner with TypeFrag often led to good ideas being left on the table, because neither of us would budge on some important decisions. We were both stubborn. We'd even try and pull friends into the mix to help us settle disputes, but friends are never impartial. Anyone I'd bring in would argue my position and anyone he'd bring in would argue his.

Having a third co-founder to mediate any important decisions is crucial for ending deadlocks and allowing your startup to move forward. Major decisions don't come up every day, fortunately, but it's important to have that third person there when they do. True, with one co-founder you could have an advisor trusted by both parties to help mediate decisions, but without a salary, or large equity stake, most advisors don't live the day-to-day part of the business and won't really be up to speed on things.

Neil Patel argues that with more than two co-founders you'll "notice that you will waste too much time making decisions and bickering over small things." That has certainly not been my experience. With Carbonmade, all small things are left to their department (Dave on user experience, branding and design; Jason on server infrastructure and code; and myself on everything outlined in "What's a Non-Programmer To Do?"). So small things are never an issue.

When anything game-changing comes along, I want time to be set aside for decision-making, and I don't see any advantage in keeping that time to a minimum. When there are three people involved it's easier to get through any deadlocks, so I'm not sure time is even lost. But no matter what, I wouldn't call spending time on big decisions a waste of time. Dave, Jason and I may be more fortunate than most people because Carbonmade is profitable and has no investors to date, hence we are free to take our time making careful decisions; but maybe if we hadn't taken that time we wouldn't be here today.

The Equity Dilemma

There are a few small disadvantages to having three co-founders instead of two. The main one is that your equity distribution is 33.33% each rather than 50% each. But the thing to remember here is that equity is meaningless unless you're bought out or you parcel out year-end distributions to shareholders.

As I argue above, I think that with three co-founders you're more likely succeed long-term, so I'd rather have 33.33% equity in a company that's going to see a buy out or be profitable enough to give distributions than 50% in a company that's less valuable. It's the same dilemma you have to think through when you're giving away 20% of your company to investors: will my smaller equity share yield me a bigger return in the end? You can never say for sure, but after all people take on investors because they believe the short-term personal sacrifice is worth it.

Whatever Floats Your Boat

The problem is that it's impossible to know whether things will work out between the two (or three) of you without trying it. That's why once you've found a group of people you're successful with, you're more likely to start up your next company with a similar co-founding/management team, or even the same one. You've successfully gone through it before and there are no more learning curves: you already know each other inside and out.

Whatever size team you choose, you've got to be fully comfortable with your co-founders. It doesn't matter whether it's with one other person or with two, if the vibe of the group is off then you're not going to go far. It's foolish to think that a complementary skill set and shared ambition is enough to get you through. It may get you past the early stages, but when times get tough — and they will — you need to know that the two (or three) of you can stick it out together. Revenue and user growth will help reconcile you at first to almost any bad chemistry, but in the long term there will be trouble.

If you're starting a new company with one or more other people for the first time and you see any personality conflicts or even divergence of vision developing, you need to break ties early. Anything small early on will fester and turn into something huge down the line. Small disagreements can be smoothed over for a while, but major differences in opinion or drastically different work styles may stand behind even the early signs, and should not be ignored.

So I'm not saying that having three co-founders will resolve chemistry problems. You can only mediate so far, so make sure you feel comfortable in your new partnership. Don't catch yourself feeling that you have to hold back your emotions, thoughts, or creative ideas. Leaving something you care about unspoken will typically lead to blow-ups down the line.

It's the week of Thanksgiving, so I thought I'd keep things light — you'll be full of turkey, mashed potatoes and stuffing, so nothing too heavy. Here are five traits that I think are the most important an entrepreneur can have. Not saying you don't need others, but I do think you need these. Please suggest your five in the comments.

Self-Motivation

Those without self-motivation need not apply. You won't have a boss or be on a strict 9 to 5 schedule when running your own startup, so you'll need to be able to get out of bed even when you don't feel like it. A lot of the time working for myself is motivation enough, but there are days when I hate my alarm clock and don't want to work. Still, I jump out of bed knowing I've got things to do. You have to push yourself.

There's an upside, though. The more work you put in, the more successful you'll be and the more money you'll make, all other things being equal. Instead of spending those extra hours putting in more work for your boss, every extra effort you make directly benefits you and your company.

Having a self-imposed regimen is difficult for a lot of people. It's a drastic change from a 9 to 5. I know people in New York who moved from finance jobs into their own startups and ended up in the soup. The difference between the most inflexible jobs in Corporate America and a free choice of working hours was just too much. They thought Goldman Sachs was a pressure cooker, but found out that holding yourself accountable is even tougher than being held accountable by others.

Persistence

You're going to hear "no" a lot when running a startup. But successful entrepreneurs are persistent people and hardly ever think the word "no" is the last word. What they hear instead when somebody says no is "get back to me again shortly." They readjust in response to events and keep as many doors open as possible.

There's a great story that Fred Wilson tells about how Avner Ronen of Boxee got funding from Union Square Ventures. Avner met with USV for funding and was turned down. He started sending them status updates every month, and finally showed them a realigned product with 100,000 users. USV was investing in Boxee a month later.

Many applicants lacking in persistence would have heard USV's critiques and their refusal to invest and gone a different route or given up altogether. Avner was persistent and realigned his product. He had heard "get back to me again shortly" from USV instead of "no." Entrepreneurs have a knack for making good use of bad news.

Plays Well With Others

An entrepreneur is self-employed but not a "lone wolf." I think working well with others is one of the most undervalued skills of any successful entrepreneur. Way too often I see hotheaded founders thinking they know best in every situation. That's just not possible. And even when they do know best, they need to introduce their thoughts tactfully and not run a train over other peoples' thinking.

If you want to build something large and successful, you'll need to know how to delegate tasks, step aside for others that know more than you, and generally be more of a leader and less of a know-it-all. Nobody likes the kid whose hand is up to answer every question the teacher asks. The kid who only raises a hand with something worthwhile to share and lets others have a turn is making a better impression — especially on the teacher.

I think being sociable in daily life translates well – in most cases – into being able to work well with others. Most successful entrepreneurs can handle themselves well in public, have lots of friends, and generally don't mind taking an active role around people. They relish social situations, make people laugh, and generally people like their company.

Attention To Detail

I don't just mean spotting the ambiguous phrase in your copy. That's part of it, but entrepreneurs need to be constantly paying attention to everything going on around them. You need to be able to take in heaps of information, sift through it, and come out with a better understanding of the whole picture.

This begins with experience. If you don't know what to look for, then it's hard to be attentive to detail. I've outlined what I do in What's a Non-Programmer To Do? but it goes well beyond that. I'm talking about thinking from a macro perspective and then seeing how detail can be brought to bear on it. A few examples of what I'm talking about:

• You need to be able to spot sentiment among your users. What's the underlying consensus about your product? How are the people feeling who may not be telling you their feelings in so many words? What does this mean for where you should take your product?
• When you speak to experienced entrepreneurs, how do they feel about your product? Most everyone is nice to your face, but are they really impressed by what you're doing? Do they think it can succeed? Why or why not? What can you learn from your peers? Or are you just going to take they have to say at face value?
• You receive a complaint from a user. Is there a pattern here? Can you hear something in what they're saying that may not just be specific to them? Is there something in the overall reception of your product that needs fixing, something that may have been unwittingly implied in the complaint?

I think a lot of running a startup requires a grasp of psychology — reading the nuances of what people say and do. I'm not saying that because I have a Psychology degree. You just need some skill in figuring out what other people are thinking, and why, and a lot of that skill comes from experience, not from classroom generalizations about how people think. Pay attention to everything that's in the air.

Quick Thinking

You'll get derailed if you can't think on your feet. A lot is going to be thrown your way and again and again you'll need to be able to turn thinking into action quickly. You rarely have time to run an A/B test or a model in Excel. You need to be able to make decisions with your gut.

Stephen Colbert exaggerates to make a point when he says he thinks with his gut and not his brain; and while I don't advocate ignoring your brain, there's something in what he says. You'll come to plenty of forks in the road where you just need to go with what feels better. (Isn't that what Yogi Berra meant when he said "When you come to a fork in the road, take it"?)

I was at the Master of Fine Arts talk at SVA with the Founder of WordPress Matt Mullenweg last Thursday, and he talked about how WordPress doesn't have a five year roadmap. There's just a feeling they get in their gut that naturally moves the product forward to a new stage whenever they've completed a segment of what they want to do.

Until September 2009 I spent my entire entrepreneurial career — dating back to 1995 — working out of my house, apartment, or dorm room. My life changed entirely when I started working out of our office in New York. Then Dave joined me in the new office a month later, with Jason to follow in May 2010. Here's why I'll never go back to working alone in a cramped apartment, hundreds of miles away from my business partners.

Working Out Of My Apartment

I graduated from college in May 2006, and at the time I was working on my startup TypeFrag (founded in 2003; sold in January 2007) full-time with my partner David Grampa. We also had two full-time employees working on our development team. It was a busy time in our lives. David was in Cleveland, I was in Connecticut but moving to New York in October, while the other two guys were both remote: one in Philadelphia and one in Louisville.

The four of us were all working in isolation. David wanted to set up shop in Cleveland, but I was convinced we could continue to work at a distance and see how things progressed. I was dead set on moving to New York City, which I felt was the Silicon Valley of the East. I figured I could make all the right connections there — which turned out to be true — and I also thought it made more sense to build our company there.

I moved on October, 2006 and began working out of my apartment in midtown Manhattan. Everything was great. This was my first apartment and I was away from home for the first time — my dorm room in college was actually only a five minute walk from home — and I felt free and productive working in New York.

I made good use of the opportunity and went to a lot of New York networking events, but I made my first mistake by having my "office" (i.e. a large desk and computer chair) in my bedroom. This continued for nearly a year and a half. I'd wake up, roll out of bed in my boxers and t-shirt, collapse onto my desk chair, and get to work. I'd forget to shower, brush my teeth, or eat anything until late in the afternoon. Then I'd usually head out to some sort of event, come home, and sit back down at my desk.

Life was passing me by awfully quickly. I didn't really start exploring New York and everything it had to offer until about sixteen months later, when it began to dawn on me that I was spending 90% of my waking hours in my bedroom.

So I moved my desk into the living room. At least then I'd have a 25-foot walk to my desk and I'd be forced to walk by the bathroom and kitchen, where I might take notice of the opportunities they afforded. This was a big improvement, but I had further distractions: my roommate or any guests he had over would come through the door right by my desk. The television was also in the living room and I couldn't very well keep him from watching.

I experimented with going to JELLY! and working out of New Work City, but it just wasn't for me. When I'm working around people, they need to be working on projects like mine (mainly web apps) or I get distracted quickly. Too many people were working on too many different sorts of project and I just couldn't focus.

I needed a change.

Moving To Our Office

I met Danny Wen and Shawn Liu when they presented Co-Op back in November, 2008 at the New York Tech Meetup. I was actually sitting next to my friend Dylan Fareed of ArtLog when I saw them present Co-Op. I told Dylan I thought it was a neat project, he agreed, and said he'd introduce me to Danny and Shawn after the Meetup, as Dylan had met them before.

Danny, Shawn and I grabbed Japanese curry at Curry-Ya — a terrific little spot in the East Village — and became instant friends. Fast-forward to around May, 2009: Danny mentioned that Harvest was thinking about getting their own office (instead of a shared space) and wanted to know if Carbonmade was interested in sub-leasing under them.

Obviously I was very interested. Working out of my apartment was really starting to get to me and I was getting less productive — it was taking me twice as long as before to get things done. I needed a change of scenery and the chance to work alongside people. I'm a "people person," so to speak, and isolating myself in my apartment was taking its toll.

We worked out the details, Danny and Shawn got a beautiful space in SoHo, and we were slated to move in July. Of course, construction delays cropped up and we didn't actually get to move in until September, but c'est la vie. I was content to wait until September, but still champing at the bit. It's really all I thought about this past summer. I think I must have bugged Danny about it so much that he was regretting having Carbonmade share the space. ;)

Face-to-Face

The first week I was in our new office, I was more productive than the previous month altogether (time:work ratio). That's not to say I didn't do the same amount of work, I just did it a lot faster. I'd get to the office around 9 and I'd get down to work. I'd then leave at a reasonable hour like 7, having worked a full 10 hours. In my apartment, I'd maybe have worked from morning until midnight to get the same amount done. But now when I left work I wouldn't touch Carbonmade stuff except for e-mails. It'd allow me to recharge and feel fresh for the next day.

Dave then arrived in New York around mid-October and we started working across from each other. The first day we went over things in our conference room — what a great room to think it! — and we accomplished more while brainstorming in there for one hour than we had during our typical three hour phone conversations a few times a week before we had the office.

It really helps to be face to face with a person: reading someone's body language and knowing you have their full attention just can't be done over the phone. When you're thinking over complex situations, your mind easily wanders and it helps to have that other person there to pull you back into focus.

We live together when Dave is in New York, so in the apartment we'd also chitchat once in a while about Carbonmade stuff, which you can't even think of doing when it's just phoning. We also continue to meet in the conference room whenever either of us has something important to discuss. What a change!

We drastically altered the nature of our new product (soon to be released) for the better in every way, and this was only because we were able to work things out face to face. It was a big transition for us to be able to do this, but we're both really happy we did. We've nixed a lot of bad ideas and are now focusing on what we think will work out best.

More to Come

I don't think you need everyone in the team to work out of the same office. Obviously, companies like 37signals and Harvest do very well working half their team remote, but I think you need that home base, and the founders need to be there. I don't think either company I just mentioned would argue with that. 37signals' Jason Fried and David Heinemeier Hansson are both in Chicago, and Harvest's Danny Wen and Shawn Liu are both in New York City.

Our third partner Jason Nelson is moving to New York this coming May when his Chicago lease runs out. And Dave will likely switch from his Chicago commute to living in NYC full-time starting next summer. Once we have our core in NYC, I think we won't necessarily need others to be here with us, although it would obviously have its advantages.

I'm just happy that I'll never have to go back to working out of my apartment again.

This is the story of how we went about hiring Grant Blakeman (portfolio) for Carbonmade. Grant is the first person we'll be working with, apart from an intern we had this past summer. (To be precise: Grant is working for us under retainer for January and February. And while he will not be officially employed full-time, he'll be putting in an average of thirty hours a week, spending the rest of the time on his own projects.)

Getting to Know Grant

If it weren't for Twitter, we would never have gotten to know Grant. Dave is part of a joke community on Twitter called Favrd (recently shutdown) where people post jokes and others star them if they like the joke. You rise through the ranks if you receive more stars than other people for a given day.

One day Grant came across Dave's jokes and began following Dave — because Dave is a very funny guy — and Dave followed him back because he liked Grant's work and thought he was an interesting character. This happened back around June, 2009. At that time, Dave posted Grant's portfolio into Campfire as someone we might be interested in working with down the road.

Dave and Grant continued keeping in touch over Twitter during the past six months. Grant started following Jason and me on Twitter more recently. We exchanged friendly @replies and started interacting over Twitter. Grant began reading my blog and I began reading his too. But Twitter started it all.

Reaching Out

Dave, Jason and I discussed bringing a fourth person on as early as eighteen months ago. Back then it wasn't financially possible for us to do so. And then, even when the money was there, we decided we wanted to release our new version before we brought someone else on. However, over the past month we came to the realization that there's never a right time to hire, you just have to pull the trigger and go for it.

On Monday, November 23rd, Dave and I met in our conference room and went over how things were progressing. Everything was really going well, but there's just so much to do that I brought up hiring someone now instead of waiting until our updated app was out. We chatted about it for a while and tossed a few names back and forth. After a few hours we decided we'd reach out to Grant first.

Here's the e-mail Dave and I crafted in the conference room:

And then of course we just waited to hear back.

A Short Phone Call

Grant responded later that evening after we had left the office. He was interested, but wanted to hear more. He wasn't sure if he could commit to a full-time gig right now because he's working on his own projects. Grant is a very driven guy, interested in entrepreneurship and building web apps — like us — and that's one of the reasons we liked him from the beginning.

The next day was Tuesday, November 24th, and at this point I felt like it'd be best to give Grant a call, tell him a bit more about Carbonmade, and walk him through what we were looking for. I filled him in on how the company was founded, what we're working on behind the scenes, and a few long-term ideas we have.

I also told him that we didn't have any specific deliverables in mind. We were looking for someone who could work alongside Dave to tackle a slew of different things every week. When you're building a web app, it's difficult to contract out chunks, because everything flows together. It was never a question of a narrowly task-specific job description.

Grant seemed very upbeat and enthusiastic about working with us. He and I also discovered that we had a mutual friend, Andrew Hyde, and shared the same views on a lot of things. It was really great talking to Grant on the phone. We clicked immediately.

Contract Negotiation

We didn't talk at all about compensation during our conversation over the phone. But at the end, I casually asked him if he could send me a ballpark figure of what he hoped to make and send it to me over e-mail sometime later that day. He said that'd be fine. A few nerve-racking hours passed by and then I heard back.

We exchanged a couple more e-mails. We agreed that he'd start working on January 1st — enough time for him to wrap up the projects he was currently working on — and we also agreed on the compensation. He'd spend January and February working with us and then at the end of February we'd see how everyone felt and go from there. We certainly hope to work with Grant for a long time!

Signing

I mentioned at the very beginning that we had hired an intern back in June. At that time we had our law firm write us up a contract. Thankfully, they wrote it in template form so that we could re-use it. I located it on my computer, read over it again, and thought of a few changes that I wanted to make specific to the type of employee Grant would be.

I fired an e-mail off to our lawyers on Wednesday, November 24th -- the day before Thanksgiving, knowing that I wouldn't get a reply, but hoping they'd see it Friday or the following Monday. I heard back from them on Monday. We talked through the changes and the next day I had a copy of the revised contract for Grant all ready in my e-mail box.

I sent two signed copies to Grant that evening.

See You in New York

Grant will officially be a part of Carbonmade on January 1st and we couldn't be more excited. This is another major milestone for us: previous ones this year having been Dave moving to New York — with Jason to follow in May — and us working out of an office in New York rather than our apartments.

We're flying Grant out to New York sometime in mid-January to spend a week with us. I'm really looking forward to meeting him in person, hanging out, and getting a lot of work done. Hopefully he falls in love with the city and never wants to go home.

That's the story of how we hired Grant Blakeman — and another chapter closed for Carbonmade. Next up: Launching our new app — now sooner rather than later.

The other day I had lunch with my friend Phineas Barnes and we chatted about Carbonmade, startups, and other things. One topic that got us excited was the idea of building a service that captures users for one thing then to build out multiple verticals for those same users. Therefore — regardless of initial exponential growth — when you combine the verticals down the road, all the layers stacked on top of each other stimulate exponential growth. (Note: Phineas wrote a follow up piece entitled "Building Blocks (and customer love)".)

Getting Out The Door

If you try and do too much and extend your service across all its potential verticals from the start, then you're going to be mediocre at a lot of what you're doing and best at none. That's a bad way to get your foot in the door. It's a lot harder to market a suite of services than it is to market one. With Carbonmade we're able to tout ourselves as the best (and recently biggest) online portfolio service for creatives. That's a simple and sweet message that is aligned with our slogan: "Show off your work." If we tried to tackle, say, building five things for creatives from the start, then our message would get jumbled, our service would be confusing, and marketing would be a lot more difficult.

When you have a successful product to springboard from, you can then start to explore other verticals around the same market where your users (most likely) have multiple interests. GoDaddy exemplifies this, with their aggressive up sell process. They've used this springboard approach to make them astonishingly successful. While GoDaddy started off being simply a domain registrar, you can now buy web hosting, SSL certificates, domain monitoring, DNS management, etc. Those are all products that complement the domain you initially set out to buy.

Expanding to Multiple Verticals

To be successful, you should take the approach of building a basic product, but with multiple verticals in mind as you go along. I'd be lying if I said that Carbonmade was started with anything but building a kickass portfolio in mind. However, as you begin to develop out the product, you can see other places to take it and other up sells your users may be interested in. You only have to look at a few of our competitors to see where they took things.

If I were starting a company from scratch, I'd try and come up with an interesting service that could successfully offer other things to its users as soon as possible after the initial build. It's tough, I know, because you want to be focused on building a great product, but at the same time there's only so much you can do around that product to continue to improve it. A vertical that Flickr got into after launching their initial product was offering a printing service — a perfect complement to their photo-sharing app.

Together We've Got Killer Exponential Growth

Now that we've got multiple verticals to build out, creating a simple service such as Carbonmade is even more attractive. If you can somehow successfully execute a handful of verticals that your users are interested in, you can build an amazingly successful company. Added together, you'll be growing at exponential growth rather than linear growth. You've got, say, 100,000 users using your main product, then say 25,000 using each of the five verticals you've built out, then you've got 225,000 users instead of 100,000. If you're growing at 10,000 new users a month and if you count each vertical a user dabbles in as a new user, you can look at it as growing at 22,500 users a month and not just 10,000.

Of course it's better yet if each of your verticals has a fee attached. Users that pay you for one thing are less likely to shop elsewhere if they already trust you and your brand. That's why I get my SSL certificates from GoDaddy along with my domains. You can really start making some serious money if you funnel your paying users into other for-a-fee parts of your app.

Oh, the opportunities!

A friend of mine who'll remain anonymous is battling the demons of having a less than stellar co-founder. This person isn't sure what to do at this point: should they ride it out or part ways? They've asked me to write my thoughts on picking co-founders based on my experience. I've started half a dozen successful startups dating back to 1995, but will share stories of only my two most successful here.

Co-Founders of Convenience

I don't have any math to support my assumption, but based on my experience and the experience of many people I talk to, first time entrepreneurs tend to find themselves thrown together with co-founders of convenience. Meaning, they didn't go person-to-person with a specific checklist of co-founder requirements, expecting that somebody would turn out to be just the ticket. They simply stumbled upon one or more people — read Three's Company for why I think three co-founders is better than two — who were willing to try the experiment with them.

The same thing happens in love: You're not likely to marry your absolute dream girl or guy. Those paragons just don't happen to go to the parties you go to. You simply meet someone you connect with on a few basic levels and then as you get to know the person better you either stay with them for the long haul or you don't. Co-founders might as well be married, considering the amount of time we spend together arguing, planning, laughing, and staying awake nights, staring at the glow of our monitors.

Blind Luck

So that's what it's like when you're starting out. But after you've started your second or third or fourth startup, you may now have a pool of people that you know and trust to start your next startup with. Until then it's simply blind luck. When you're on your first startup, you're untested and your network is small and anyone willing to take the chance of co-founding with you is probably in the same boat. Therefore, you're basically going into it with no idea whether your chemistry and complementary skills will align properly down the road. How well will you work together? Do you have all the skills between you to get things done? Time will tell.

I want to tell my friend, who is on his first startup, that there are guidelines for picking a good co-founder, that it's not simply luck. But, sadly, I believe that as with anything you do for the first time there's a lot of luck involved in the outcome. Sure, "beginner's luck" exists, but it's still luck. I don't know the success of online dating, but I have to imagine the odds are scarily low. What's really scary, though, is that it's undoubtedly better with online dating, where you're being presented with more information: photograph, description, likes, dislikes, work, characteristics, and even psychology test results if, for example, you're on OkCupid. I wish I had all that information when finding a co-founder for the first time.

Story: TypeFrag

During my freshman year of college (2002-2003), I was a computer science student at Case Western Reserve before transferring to Yale. During the end of my first semester I founded a company called NetFusion (still around today) that provided web hosting, game server hosting, and Ventrilo hosting for computer game players. I "met" both of my partners online in a game of Counter-Strike. The three of us founded a Counter-Strike team together before founding NetFusion.

This partnership didn't last long, mainly because of huge arguments we'd have during our Counter-Strike matches that would carry over to the business. Amazing, huh? We let a computer game dictate our business decisions. About six to nine months later our company (and Counter-Strike team) split in three, each of us taking a third of the company. My part was our web-hosting clients.

The three of us meeting was pure luck and we never vetted each other's skills before founding the company, but we were all ambitious and wanted to start something.

Anyway, I was kind of upset that I gave the Ventrilo hosting business to my partner and kept the slower growing web host. (Ventrilo is a VoIP service primarily used by computer gamers.) I soon sold that off to Atlantic Metro and looked for a partner to help found a new Ventrilo host.

I was now a sophomore at Yale, and still a computer science student, but I didn't really know many programmers there. I remembered that I had met a guy named David Grampa in my C++ Database class who I use to play Counter-Strike with. I had his AIM name lying around and reached out to him. I had no idea about his computer programming talents, but I knew he (1) liked computer games, (2) had used Ventrilo and (3) had to be at least a decent programmer.

I reached out in December, 2003 over AIM and was quickly able to convince him to start the company with me. I literally had met David twice or three times during our lecture class, but had never hung out with him outside of class and had no clue about what he was like as a person or his experience with web development.

Reaching out to David was like going on a blind date with a girl that you knew absolutely nothing about except that she was indeed a girl. This was the second time in my life where I'd gone into a co-founder relationship without vetting the other person beyond "Are you interested in doing this? Yes? OK, let's do it then." This relationship did last nearly five years, though.

Story: Carbonmade

Carbonmade was the first time in my life as an entrepreneur that luck wasn't 100% involved in picking my co-founders. It was still completely random that I met them, but we did at least build up a six-month working relationship before we agreed on becoming partners. However, we never saw each other face-to-face until after signing the papers.

I hired Jason and Dave, who were running a web design firm, to do a large project for me right after I sold TypeFrag. I actually reached out to Dave back when I was still working at TypeFrag and asked him to design some business cards for us — a job he rightly declined — through a mutual friend of ours, Matt Brett.

Luckily when I approached Dave and Jason again six months later, they had just wrapped up a project and were looking to sink their teeth into something big. I pitched them my idea and we ran with it for six months. During those six months we got to know each other rather well over e-mail and phone. We also chatted a lot about my past experiences as an entrepreneur and what I had accomplished.

Both of them were thinking about how to take their two-person design firm to the next level. They also had this little side project called Carbonmade that was rather neat, and asked for my thoughts about that. Then one day Dave approached me about being a one-third partner in nterface (their old design firm) and Carbonmade. We still hadn't met each other in person, but I accepted.

The circumstances of my ending up with these two co-founders were still pretty hit-or-miss, but even so, this was far and away the most vetted out of all of my relationships. We worked together for six months on a project, got along well, and we complemented each other's skill sets. I know that this relationship will last a long time, and maybe even result in another startup down the road.

If The Shoe Doesn't Fit

The good thing about starting an Internet company is that things happen at a relatively quick pace. You'll know within a few months — maybe even weeks — if the two or three of you aren't getting along. If things aren't going the way you hoped they would, you can always part ways, move on, and start something else. You may find yourself distraught and discouraged, but it's better to end things early and try again than to waste years of your life trying to patch things up.

I really lucked out with all of my co-founders at TypeFrag and Carbonmade. You may not be so lucky. However, it only gets easier with time and experience like so many things entrepreneurial. Just keep at it, try to meet as many people as you can, and in the long run, even though luck never stops playing a role, you'll be in a better and better position to combine luck with experience.

I've had a life plan thought out for a while now, and with 2010 only two days away, I thought I'd let everyone know about it. This is what I plan on doing over the next fifty years of my life — basically, until I retire. I like thinking about the big picture because it gives me a horizon to drive towards even if in all probability I'll fall a goal or two short.

25-32: Carbonmade

Most startups have a short shelf life. I've been fortunate enough to be a part of two with atypical life spans. TypeFrag was founded by me in 2003, later sold in 2007, but it's still alive and kicking and doing well after over seven years. Carbonmade was started in December 2005 and is now four years old and counting. Realistically, however, only the last two years belong to Carbonmade because before that it was only a side project.

In venture capital circles, most successful businesses that receive funding have a seven to ten year life cycle before they either have to go public or be sold off. While I'm not anticipating Carbonmade going public, and while we haven't raised any capital, which might make these numbers seem irrelevant, I do foresee something major happening at some point over the course of the next seven years, which brings me to 32 years of age.

What will happen? Who knows? But I truly believe that we are capable of building a one hundred million dollar business in our market. We've got the talent, the user base, the growth and the game changing ideas to make that happen. So realistically I can see myself completing the Carbonmade chapter of my life by 2017, or at least having a reduced role at that point.

32-33: Chef School

I've always had an interest in cooking — and eating — since I was a little child. There's also obvious synergy between entrepreneurship, startups, and cooking. You'd be surprised to know how many of my colleagues appreciate the art of cooking and eating well. Maybe it's because cooking is part formulaic, part creative in the same proportions that the startup mentality requires.

Something I've always wanted to do is spend a year in France at cooking school. I've done a lot of traveling but can't say I've lived in another country long enough to really get the feel of the place. I didn't do junior year abroad or take a year off for travel after college. It's something that I feel is missing from my life. How can I be so sure that America is the country for me if I don't have the experience of living somewhere else?

33-40: Unknown Startup

While you could say I've "played it safe" with both TypeFrag and Carbonmade, I'd like to shake things up a bit and come up with a game changing technology startup like Jack Dorsey's Square. It wouldn't necessarily have to be a hardware startup, but something where I flip the script on how business is being done, or maybe something in consumer technology. I haven't thought long or hard about any anything definite yet, but I've involved myself with a network of highly intelligent and successful entrepreneurs in New York whom I would hope to work with on this startup. Let's hope at least a few of them are free around the same time and have similar ambitions.

On a more personal note, it seems likely that I'll get married and have kids during this time of my life. While you can't anticipate those things or really plan them out, I anticipate that this'll be the time for me. Can't wait to take the little one into the office and teach him/her about startups. :)

40-50: Apple's CEO

Being the CEO of Apple is my oldest and wildest dream. Since I started using computers I've always been an Apple user, and then my love of technology, entrepreneurship, management, and developing cool products has made me a huge fan of Steve Jobs and everything he's accomplished.

I hope that having three startups under my belt — especially my "Unknown Startup" that will change the game — will put me on radar for running a large company. Why would I want to run a large company, you may ask? Well, I'm one of those people who like to put a check next to life's accomplishments and don't like to repeat things more than twice. I'll have done the small <1,000 employee startup and I'll be hungry for more. You've got to set goals and push yourself to realize all that you can achieve.

50-Retirement: Venture Capital and Investing

While I plan to do angel investing throughout the rest of my life, starting as soon as the present day, I would like to try my hand at really getting into the venture capital business. I think my experience being around Internet startups my entire life — seeing lots succeed and even more fail — will help me spot early stage startups.

I'd like to give back to young and hungry entrepreneurs who share my passion for startups. I also think it'll help me stay young and active to be around the spirit of these young people. I'll open my venture capital business in New York City, which will certainly be the nation's capital for investing in internet entrepreneurship by the time I'm 50 — which is 25 years from now, 2035.

Prominent startups such as Balsamiq and others like Squarespace and 37signals (to some extent) have been open about disclosing their revenue — and in Balsamiq's case also their profit. I'm not sure whether that's such a good long-term strategy and I'll argue why below. You've got to be careful that you're in the right position to share these confidential numbers, and I think that for anyone else the disadvantages outweigh the advantages.

What's the Advantage?

The obvious advantage for anyone is that as long as your numbers are large enough to talk about then you're going to generate buzz when you release them. You'll in fact get a lot of good press and praise for being so open. On Sunday, January 2nd Peldi Guilizzoni (Founder of Balsamiq) posted his company's 2009 revenue ($1.6 million), profits ($1.1 million), number of transactions per month, average revenue per transaction, and cash flow. You can't get more detailed than that. In under 24 hours his blog post received over 200 re-tweets, there were over 140 comments spanned across his blog and Hacker News, and over 250 up votes on Hacker News. That's a lot of attention.

Balsamiq isn't the only startup to share their finances. Squarespace shocked people when they released their figures earlier this year in Inc Magazine, reporting revenue of $269,545 in 2005 and $2.2 million in 2008 — a 723.3% increase. Nobody knew the jump was so big, and now it's known that they are running away with their market. Even 37signals, who as far as I know had never disclosed their revenue, mentioned kind of nonchalantly in their third podcast what they were generating with their new Haystack service (now known as Sortfolio).

But who are the people who care about this information? Only two sorts of people really care about these figures: (1) other entrepreneurs who want an inspiring story to motivate them, and (2) potential acquirers whom you could interest by other means. Who doesn't care? Most of your customers or potential customers, who don't fall into either of those categories.

Suffice it to say that I don't think that the press you're going to receive outside the entrepreneurial community is enough to justify exposing your finances to the public. There are just too many disadvantages in doing so. I don't think it's going to significantly move your bottom line. I'd actually like to see how many referrals Peldi Guilizzoni generated from his post. I doubt too many.

What are the Disadvantages?

What do these three companies have in common? They're all self-funded startups that are all leading their respective markets with no immediate competitive threats. There's no better small business software company than 37signals, Balsamiq is clearly leading the wire-framing and mockups business, and Squarespace has a chokehold on providing managed website building tools. They have nothing to lose. But suppose they had major competition?

One disadvantage of disclosing assets would be if you're a startup hoping to raise money; even bootstrapped startups consider fund-raising after they get their feet wet. I can assure you that openly talking about your revenue if it's not mind-blowing is going to turn off investors. If you show that your company did $100,000 a year in revenue last year and increased to $150,000 this year, then fewer investors are going to be interested in chatting with you. That's just not enough growth. As soon as you publicly reveal your finances you're looked at differently than you were before.

Jason Fried and many others have argued that many startups don't try to generate revenue from the beginning because that prejudices their valuation when they do try to raise money. The investor can look at your numbers when the time comes and get a true valuation of the company rather than making up ballpark figures based on speculation and spreadsheets. I completely agree.

Another disadvantage is that your competitors know exactly how much you're making. If I know that one of my competitors is making $2.5 mil a year I can work out a lot of information from those figures. In Balsamiq's case they included everything but the kitchen sink, so I can see nearly everything I need to know.

You might say: "Well, how is that information going to help you surpass them?" For one thing, you may be seen as less as of a threat if your competitor doesn't know how much revenue you're generating. I'd bet that most companies undervalue their competition, so they may not try as hard in certain areas to combat them. Why give them the motivation of knowing how much you make? Additionally, it may spawn new competitors who see how well you're doing.

The third disadvantage is that it may be off-putting to your customers. In the case of Carbonmade specifically, our customers are mainly creative people who don't make a lot of money (for the most part), and shoving our finances in their face isn't the most neighborly act. It can also make you seem impersonal and corporate — which is why so many bank ads say they're small and user-friendly. Yes, publishing our revenue could show that we're a healthy and thriving company that's not going away any time soon, but I think there are more subtle ways to express this.

Don't Do it

I am all for being open about your business. You only have to read through my essays to see that. Carbonmade even boldly shares our user count on our homepage (many won't even do this), but I don't think the advantages outweigh the disadvantages when it comes to sharing financial information.

If you do decide to publish your revenue, only do it if you're well established and far beyond the startup stage, like Balsamiq, 37signals and Squarespace. Don't do it if you're hoping to raise money or if you're not (or not certain that you are) the leader in your market. These three companies are the exception to the rule.

My most popular essay to date, with over 12,500 pageviews, was What's A Non-Programmer To Do? which outlined my day-to-day activities. As my job is always changing, I thought I'd add some of the new responsibilities that have further expanded my role in 2010. It looks to be a huge year for Carbonmade and with it new tasks for me to take on.

Hiring

As I announced on December 9th, 2009 in Carbonmade's First Hire, we've hired a new guy named Grant Blakeman to help us out full-time over the next few months. It's starting as a contract job, and we'll discuss further along whether or not he'll lengthen his stay with us or move on to other things at the end of this first term.

The hiring process is something I'm familiar with, as I did all the hiring for my last company: one designer and two software engineers. I think I take a far different approach to it than most. Most companies announce their job availabilities on their blog or Jobs page. I usually just reach out to people I know and see if they'd be interested in working with my company. So far I've been four for four in hiring, so naturally I still believe in my approach.

I start by sending out a short e-mail to gauge the interest of the person I have in mind. Because I know these people in some capacity I usually know beforehand whether they'd be interested. Dropping hints helps. I then talk about what we're looking for to see if we're on the same page. Then we discuss numbers, and we're done.

I understand that as we begin hiring more and more people, this process probably won't work forever. We'll run out of people in our network who happen to be looking for jobs. For the time being, though, I hope to be able to continue to hire through our network. I already have a rapport with these people, so things tend to go more smoothly.

People Management

While Grant is the first person we've worked with on Carbonmade, we plan to hire more people in 2010. With that comes new responsibilities — the biggest one being aware of everybody involved and keeping the team moving forward. I don't mean holding their hand or coddling them, but making sure that we're on the same page and that everything goes smoothly.

Dave is mainly directing Grant, as Dave is our Creative Director and Grant is a designer and therefore falls under his auspices. However, there are other sides of management that are more behind-the-scenes. For example, Dave and I had long discussions about what exactly we'd have Grant work on and how best to handle things.

Other more specific things for me to do are: (1) making sure employees are happy day-to-day, (2) getting them paid, (3) handling their accounting with the accountant, (4) dealing with the contract and negotiations, (5) making sure they understand the overall vision of the company, (6) getting them healthcare, and (7) helping them acclimate themselves to our work patterns and our culture. You want everyone to be comfortable and make transitions as smooth as possible.

Office Management

With Jason moving here in May and at the rate Harvest and we plan to hire in 2010, we are going to outgrow the office space we share with them sometime this year — sadly enough, considering we just moved here in September 2009. I've begun working out the details of finding us an office of our own, and it's much more of a time sink than you'd think.

Not only will finding a new office take a lot of time, but I'm anticipating all of the details surrounding the lease and maintaining the office to take up a big chunk of my time during 2010. There will be buying furniture, paying the lease, hiring the cleaning service, paying the electricity bill, handling any legal work, working out sublease contracts, buying food and drink, and the general maintenance of things that will inevitably crop up. Danny Wen has clued me in to most of these headaches.

Meetings

It's just the nature of the beast that as your company grows, more and more people want to talk to you and meet with you. Meeting new people is something I always find value in — and I'm a sucker for saying yes to nearly any meeting. While I took a lot of meetings in 2009, in January alone I'm finding myself taking 2-3x more meetings a week than before. Just this week alone I'll have nine scheduled meetings (three lunches, one dinner and five coffees).

I don't regret having any of these meetings at all, because it's part of my role as Carbonmade's CEO to meet as many people as I can, within reason. It's actually one of my favorite parts of the job, but it is definitely time consuming. I love talking about Carbonmade, spreading our brand, and meeting amazing people. 2010 is definitely our year for making major moves, and the more people I can meet, the better.

Partnerships

Along with the increase in meetings due to our company's increased exposure, I'm getting more and more partnership requests. I actually had a really interesting meeting with a company a few days ago about the possibility of working with them. Things are certainly heating up, as our userbase continues to grow substantially month after month.

It's nice being the company being pitched to rather than having to go out and pitch to other companies for partnerships: being the largest online portfolio website certainly has its advantages. I've always been a proponent of doing things in-house for as long as you can, but as we grow I need to come to terms with the idea that we may need to work with other companies, because we simply won't be able to do everything ourselves.

Investors

While it's up in the air whether or not we take on any funding, I'm beginning to meet with more investors. And if we do, it'd be a large round — we're well beyond any type of angel or seed funding. I'm beginning to have more meetings of the “getting to know you” variety with investors rather than the pitch variety. I've met with four of the best-known venture capital companies in New York on that basis over the course of the past month.

I usually go into these meetings laying out what we've accomplished, what we're currently working on, what we plan to work on, and — if we were to take money — what we might do with it. I don't give details about our revenue or anything too specific, but I do paint a nice picture of everything. They come back at me with a lot of great advice and “let's talk specifics down the road when/if you plan to take on investment.”

We're focused on getting our new portfolio application out and have everything we need to do that, so we don't need their help right now. We plan to rethink the wisdom of bringing in investors once we see the numbers that come back after our new launch. The best-case scenario is that we can do everything we want to do without taking a penny.

Newsletters

It's been over four years, and we've never sent out a single newsletter to our customers, whether updating them on our progress or simply to engage them. I plan to change that in 2010, beginning with a newsletter I'm sending out to our Whoo! members sometime in the upcoming week or two.

I'm actually ashamed that we haven't taken a more proactive stance toward engaging with our customers with newsletters or surveys. We do engage them over e-mail, but I think we can do a much better job of informing them about what we're working on and keeping them up-to-date. This newsletter will be the beginning to something I hope to do more frequently (opt-in, of course).

Press

We've generally avoided talking to the press, because we didn't think we were ready for that kind of attention quite yet. Things are definitely changing in that area for 2010. I've already done a few interviews this month that should be appearing online shortly.

I'm no longer trying to keep us hidden from the press. I'm now fully supportive of whoever wants to interview us, write about us, etc., whereas before I generally said that we weren't quite ready to be under the microscope, please check back later. Please e-mail me directly if you want to write about Carbonmade.

Lately I've been really stressed out with work. The last two weeks have been the busiest I can recall. Last week was especially strenuous, with over ten business meetings and Grant in New York for the week to work with us here. I'm trying to maintain a balanced life, but it's difficult right before a release, and some Carbonmade stuff is getting close. Here's what I've been doing to try and stay sane.

Eating Healthier

I've never been a habitually unhealthy eater, but I sometimes have given in to temptation and convenience. Not eating healthy is one of the worst things you can do if you're trying to maintain your energy levels. If you eat too many fatty foods, carbohydrates and sugars, the quick energy boost you get will quickly fade and you'll be worse off than before. You've got to maintain a balanced diet of fruits, vegetables, and healthy proteins. Easier said than done.

For most of the month of January I've eaten vegetarian, with the occasional piece of chicken or turkey. It's not hard for me to eat vegetarian in my office, as Dave, Sahadeva, Matt, Shawn, Karen, and most everybody in our office shies away from meat. What's hard has been making sure I get enough protein, so I've been trying to eat a decent amount of tofu and I've been nibbling on healthy protein bars after the gym.

Working Out

This past week I only made it to the gym twice, but the week before I was able to escape from the office around six times. Going to the gym has always helped me reduce stress and kept my body in tune. I sleep better at night. I feel better about how I look. Best of all, it's one of the only places where I don't think about work at all.

About half the times I go to the gym it'll be for a squash game followed by some light lifting. The others times I'm either running on the treadmill or using the elliptical machine. I'm not really into lifting weights — it bores me and I don't want to bulk up — so I prefer to do some core exercises after the cardio. I follow that up with a five to ten minute steam and a cold shower. Nothing is more relaxing than the steam room.

No Alcohol During January

A group of six us (Mike, Phineas, Naveen, and others) put alcohol on hold for the month of January. The main reason was that my friend Jake has to be on medication for three weeks and can't drink alcohol because of his prescription. We joined him as a gesture of support. Well, that decision has turned out to add to my stress levels, but overall it's been better for me.

I've never been a huge drinker, but typically I'd drink a couple of beers about four times a week — and more heavily on the weekends. Not having a drink has added to my stress level in some respects, as it's hard getting used to being at a bar or a music show with everyone around you drinking but sticking to water yourself. Overall, though, I've been sleeping better at night, getting just about eight hours, which I need. Also, I'm waking up more refreshed and ready to go. Both sleeping more and waking up fresh all the time are welcome changes.

Unplugging

One thing I need to work on is unplugging myself now and then. Having an iPhone the last few years hasn't helped. At least before then I wasn't constantly bombarded with e-mails and only a touch away from an Internet browser. Who really wants push notifications incessantly?

The advantages of unplugging once in a while are obvious, but for me it's very difficult to do because I handle all the e-mail that Carbonmade receives, and part of our pledge is to deliver the best and quickest customer service we can. However, it's been nearly a year since I've taken any kind of vacation. I've got to figure out some sort of compromise to relax, but there isn't a lot I can do until we hire more people to help out. That's running a startup for you.

I initially thought about writing this piece for our company blog, but as that's mainly for product news, announcements, and marketing, I've decided to write it for the more entrepreneur-oriented audience that reads this blog. A lot happened behind the scenes for us in 2009, and I want to share it with you.

First Quarter

At the start of 2009 we had just around 85,000 members and were turning to Carbonmade full-time. As outlined in 100,000 Users And So Can You, while we were working on our company full-time by the beginning of 2008, we were also working on a separate product that we later abandoned in order to work on Carbonmade full-time.

We mainly spent that first quarter brain-storming and prototyping what we planned to do for the next iteration of Carbonmade. A lot of time was spent brainstorming and less time was spent actually building. But things would change drastically on the product front by the end of the first quarter. Dave began working on design comps and Jason began building out the code to support Dave's creations.

It was also around this time when we started to get involved in social media. We built out our Twitter and Facebook accounts. We started getting in touch with bloggers, holding contests for free upgrades, and generally getting more involved with our community.

Second Quarter

The biggest thing we did product-wise, which really only took a day, was introducing domain binding. That meant that customers could use their own domain to display their portfolio rather than username.carbonmade.com. The simplest of features, but fantastic for growth. We had an amazing quarter financially and continued to grow.

In May, Dave came to New York City to visit me and brainstorm. We went through a lot of the decisions we had made in the previous months and set aside a lot of them. We were over-complicating the entire process and coming up with too big of a vision for our next iterative release. We needed to bring something phenomenal, but a few features would be better set for the follow-up release.

Dave and I also did our first public demo by participating in the New York Tech Meetup Demo Pit. It was a fabulous experience. I think we talked to a couple hundred people, handed out an equal number of business cards, and got a few dozen e-mail follow ups. People were unbelievably impressed with Carbonmade, and it seemed like everyone in the room wanted to use the product or had a friend or family member could use it.

We were stoked.

Third Quarter

The third quarter involved a lot more development and design. There was constant brainstorming and back-and-forth about what to do, how to approach things, and where to take the company next. We were starting to see some massive growth both on the free and paid accounts, and things were really starting to come together. We had to make some serious company decisions.

I floated the idea of having our office in New York City and having Dave and Jason move out here. As I had spent the past three years building a substantial network in the New York City entrepreneur and investor circles, it made sense. They seemed open to the idea, so I asked Danny and Shawn if we could sub-lease under their office space opening up in September. They loved the idea.

In late September we moved in.

Fourth Quarter

Moving to a new office meant that Dave and Jason would have to move to New York City. Dave began coming here two weeks out of every month, beginning in early October. It was an interesting transition. Dave had been without a real office for many months at that point, and found working in one a big improvement. But there was getting used to the busy-ness of NYC and the shock of transition that we hadn't completely taken into account.

The first visit was mainly a wash work-wise, but during the next one we were working harder and better than ever before. Dave and I were able to go over everything in person, and it was an amazingly time-saving experience. Our conversations lasted half an hour, and we got more accomplished than we used to manage in our regular four-hour phone conversations.

We stripped back a lot of the features that were holding us back and generally got everything down to a more manageable amount of work and complexity. But it was still more than we could handle. Then one day in November, Dave and I talked about hiring someone to help us take on that task. Within 48 hours we had everything wrapped up and agreed that our new employee, Grant, would start on January 1, 2010.

Our next big decision came when we decided to put our new version on hold to re-design our marketing site. We started the re-design in the beginning of December and plan to release it any day now. The reason that we decided to put the app design on hold and work on the marketing site was that Dave was getting burned out on that, we wouldn't have Grant until January, and Grant's job is to work on completing our app with Dave. So everything just made sense. So now we'll soon have a fresh new marketing site and be able to devote the rest of the first quarter of 2010 to wrapping up our new app.

P.S. We also turned four years old in December!

On Saturday, January 30th, Wired ran an article entitled "Google's ‘Don't Be Evil' Mantra is ‘Bullshit,' Adobe Is Lazy" — reportedly words from Steve Jobs' mouth at an Apple Town Hall meeting that same day. Meant for Apple employees' ears only, his words leaked to the press rather quickly.* This got me thinking about talking smack in business.

Pros

Everyone loves controversy. People will listen to your every word as long as you're berating someone or something. This nonsense doesn't end in high school or college. Our society's obsession for bad mouthing other people is sickening, but is nevertheless part of human nature. Right or wrong.

This behavior leads to a polarization around a topic and a deep-seated love of your side and hate for the other (Democrat vs. Republican, Microsoft vs. Apple, etc.). People become emotionally invested. And if management is leading the charge then this often leads to your employees' having a deeper commitment to crushing your competition. Steve Jobs obviously said what he said in an effort to motivate his troops for battle.

Motivation is one thing that can come out of smack talk; another one is transference onto your customers. Your customers are your front lines — they're the people in the trenches supporting you and the more loyal the customer the harder they'll fight for you. In Apple's case, these are termed "Apple Fanboys". Being an Apple Fanboy myself, I certainly sided with Jobs and began defending him as soon as I heard him call Google's mantra "bullshit" and Adobe "lazy". "Go Steve!" I shouted.

The most obvious part of any controversy is all the press you'll receive. All press — good or bad — is still press and the press is having a field day with Steve Jobs' comments. Now you've got Adobe defending themselves publicly on their blog and articles flying this way and that. Well done, Apple. The iPad will sell more units now.

Cons

The obvious con is that nobody wants to come out looking like an asshole. That's why most smack talk is behind closed doors. You don't want to be that guy or that company that takes the low road. Unless you're as established as Apple, Google or Microsoft, those kinds of words can bite you in the ass down the road.

Whenever I'm asked about Carbonmade's competition I simply point out our differences — some in their favor, some in ours — and let you decide. I've been explicitly asked in interviews "But how do you really feel?" but I've never sunk that low. I'll let our product and our 200,000 customers do the talking.

Other than coming off as an asshole, I don't think there are any other clear disadvantages. Well, maybe if you end up wrong. Then you look like even more of an asshole. But with three advantages and only one disadvantage, why not start slinging mud? I'm going to continue to be the bigger man, but I can see why Apple, Microsoft, Adobe, Google, AT&T, Verizon and others are quick to point out their competitors' faults — there seems to be something there.

*Reading Material

This is what Steve Jobs reportedly said about Adobe:

About Adobe: They are lazy, Jobs says. They have all this potential to do interesting things but they just refuse to do it. They don't do anything with the approaches that Apple is taking, like Carbon. Apple does not support Flash because it is so buggy, he says. Whenever a Mac crashes more often than not it's because of Flash. No one will be using Flash, he says. The world is moving to HTML5.

On Google:

On Google: We did not enter the search business, Jobs said. They entered the phone business. Make no mistake they want to kill the iPhone. We won't let them, he says. Someone else asks something on a different topic, but there's no getting Jobs off this rant. I want to go back to that other question first and say one more thing, he says. This don't be evil mantra: "It's bullshit." Audience roars.

Adobe's CTO Kevin Lynch responded:

Adobe supports HTML and its evolution and we look forward to adding more capabilities to our software around HTML as it evolves. If HTML could reliably do everything Flash does that would certainly save us a lot of effort, but that does not appear to be coming to pass. Even in the case of video, where Flash is enabling over 75% of video on the Web today, the coming HTML video implementations cannot agree on a common format across browsers, so users and content creators would be thrown back to the dark ages of video on the Web with incompatibility issues.

On the first of every month I spend much of the day updating Carbonmade's finances with last month's data. I've got what I think is a good process down after years of doing it, so I thought I'd share it with you.

Get the Data / Back up the Data

The first task — and by far the least fun — is logging into all of our payment services to download last month's data. All either come in a PDF or Excel format and all are difficult to locate. Why do payment services make it so difficult to download statements?

These are the five services we use:

• American Express — Credit Card
• American Express — Merchant Account
• Paymentech
• PayPal Merchant Services
• Bank of America Small Business

All of them allow you to more or less easily download a copy of your statement except for PayPal. PayPal makes you log in to their website, browse to the history tab, select the dates, select the format, and then wait for them to generate and e-mail you a statement. It never takes more than ten minutes, but it's a pain. Why not simply generate the monthly statement automatically?

I then rename all five documents — because they download with weird names like "MSAF_1.pdf" — to easier-to-read names like "AmEx-CC-2010-01.pdf" for January 2010's American Express Credit Card statement. I then back up everything offline and with Dropbox.

Update The Books

The geeky accounting do-everything-myself side of me has always loved Excel. And while a company of our size should probably — although that's up for debate — use something like QuickBooks, I stick to what I know and love.

A friend of mine who is a bit older and runs a rather large group at Ernst & Young spent a very long weekend with me a little over a year ago to help get Carbonmade's finances in order. We went back to almost the first day we began accepting payments — nearly four years ago — and got everything in order.

Together we built an Excel file to handle Carbonmade's finances. It now automatically calculates an Income Statement, a Balance Sheet, and a Trial Balance all based on the monthly data I input. We separated all the different expenses into their own sheets (e.g. Software, Web Hosting, Revenue, Merchant Fees, etc.) and created a Cash sheet to project our cash flow.

I now simply have to take the charges from our American Express Credit Card statement and fill them in on the corresponding sheets. I then take those and copy them over to the Cash sheet to get an idea of our cash flow for the month, which also takes into account the concluding cash balances from the previous month.

Update the Total Signups Projections

My friend Vadim Tsipenyuk — formerly of Goldman Sachs — and I crafted a fairly simple spreadsheet to calculate our Last Twelve Months (LTM) growth. You input the new signups for the month and it projects out your LTM Growth (Compiled), Monthly Growth (Compiled), LTM Growth (Signups), and Monthly Growth (Signups).

It's not all that sophisticated, so it doesn't take into account future marketing launches or new releases to your website, but it does handle the basics fairly well. You can also adjust the percentages if you know in advance that you're going to be releasing a new version of your product in two months and you anticipate gaining an additional 10% in customer volume that month.

Update the Paid Signups Projections

Our paid signups projections spreadsheet is a bit more sophisticated than its total signsups projections counter-part. Vadim also helped me set up this additional spreadsheet, on which I input our Subscriptions (New), Subscriptions (Cancelled), Invoices (Billed), and Invoices (Paid) at the end of every month.

With those four pieces of data, it projects:

• Net Subs
• Total Subscribers (Cumulative Net Subs)
• Implied Growth in Total Subs
• New Subs / Last Month's Total Subs
• Churn Rate (Sub Loss / Last Month's Total Subs)
• Total Invoices / Cumulative Subs
• Paid Invoices / Total Invoices

Update the 6 Month Budget

The kingpin of them all, the 6 Month Budget, helps us plan our hiring and marketing. As I've always said, "cash flow is king" and once we've got an idea of our revenue from our Paid Signups Projections, I input that and our various expenses to get a sense of our cash flow.

Revenue I project out:

• Service Fees
• Consulting (we still have a number of web hosting clients from our consulting days)

These are the expenses I detail out:

• Merchant Fees
• Web Hosting
• Office Supplies
• Software
• Telephone
• Fax
• Internet
• Marketing
• Mailing
• Lawyer
• Accountant
• Healthcare
• Office Rent
• Apartment Rent
• Food & Drink
• Other Expenses
• Payroll

Taking all this together, I can project our cash flow over the next six months and see when and where we might hire new people or spend extra money on marketing. I'll also go in and add certain expenses at future dates. For example, I know I'll spend $1,500 for SXSW in March, and then our bill with our accountant will come due in May.

Off to the Accountant

I'm not a certified CPA, so at the end of the day I send everything off to our accountant to do things right. I mainly do the stuff I've discussed above to get a better sense of what we're spending our money on and how much we're making. Consulting that information and doing simple projections with it gives me a much better ability to make day-to-day decisions and long-term decisions.

I had lunch last week with Dave, Danny, Shawn, and Andrew (who was graciously visiting us from Canada) and the topic of passive income came up. All of our startups grew out of running consulting companies — Andrew is still in the midst of one — and all agreed that passive income beats the ad sales and consulting world a hundred times over. Below are a few of the topics we talked about.

What are the advantages?

Although running a subscription based startup has its own share of stress — and it doesn't necessarily get any easier as the business reaches profitability — it's a different kind of stress from the worry about where the next dollar is coming from and whether or not you can make payroll. Ad firms and consulting companies are constantly fighting for rich contracts to keep them in operation. It's a real stomach churner.

The financial crisis of 2008 and 2009 led to a lot of consulting and ad revenue based companies having to cut their employees, because they wouldn't be able to make payroll otherwise. I have personal ties to a few consulting firms that dropped nearly 75% of their staff. They're all in the midst of re-hiring now, but 2009 was a real scare to their business model. When the financial times are good, they're great, but when they're not, they're a little sketchy for anybody depending on them.

The advantage of passive income from a subscription model is clear: Once you've been in operation for a while, you can accurately predict where you're going to be over the next six months, year, two years, etc. You don't want to rest on your laurels, but it's likely that you're never going to take in less revenue next month than you did the previous one. There's typically an upward trend, no matter how slight, as long as you calculated correctly in the first place and your market is out there.

The knowledge that, say, you made $50,000 in subscription revenue last month lets you sleep at night. As long as you keep your server infrastructure up and your product alive and kicking, you'll hit new revenue highs every subsequent month. That's totally unlike the consulting business or ad sales business where every month is a gamble. Talk about being Stressed Out.

What are the disadvantages?

The only disadvantage I can really see in creating a subscription-based model that brings in passive income is when you want to scale to something huge like Google. Recently Aviary, for example, did away with their paid subscription plan in order to reach more people.

It's true that putting in a pay wall means that fewer people will use your product, because there are a lot of cheapskates out there who won't pay for Internet goods. I'll refer you to David McClure's article The Internet does NOT want to be FREE... It wants to GET PAID on Fucking Friday. A brilliant piece by the former Director of Marketing at PayPal.

But there are other ways to reach scale. You can have a free version that brings in the masses and just upsell the unique features to paying customers. You can explore other verticals, as I suggested in Building Blocks. Whatever you do, as long as you have passive income you can buy time to build out the scalable pieces of your business and live with fewer stress related "where's the revenue going to come from?" nightmares.

How can you start getting passive income?

To get passive income, you need to build a subscription-based business or sell some type of Internet good — maybe it would be themes, like WooThemes, or virtual goods, like Zynga. Something that's tangible, something you can create once and then perpetually sell. You need to create a product that doesn't require you to feed it resources (e.g., written articles) or increase your pageviews to make more money. It's as simple as that.

Dave, Jason and I have released our new Carbonmade marketing site. You can take a look at it here. On it you'll see a Progress page that we've created for people to follow our journey creating the new version of Carbonmade. Here's how we came up with the original idea and some thoughts on it.

What is it?

Before I get into how we came up with it. Here's little brief bit about what exactly it is. The idea is that we're a team of brave explorers traveling up a mountain face (i.e. the new version of our app). During our journey to the top, we'll be documenting our trip by providing everyone following along with journal entries on the new features of Carbonmade. You can subscribe to our journey by four different means: Twitter, Facebook, RSS, and through a Progress specific newsletter. It'll be light-hearted and fun to follow along to.

How'd you come up with it?

While Jason has been working on the new version of our app with Grant during the past few months, Dave and I have been spending time working on planning and redesigning our marketing site. For those of you not familiar with that term, we use "marketing site" to refer to everything outside of our portfolio app. Meaning, the Homepage, Examples page, Progress page, Sign Up page, etc.

The main reason we wanted to spend some time redesigning our marketing site is that it's been a while since we refreshed our brand — over fifty months to be exact — and we thought a little spring-cleaning was in order. Dave and I brainstormed a bunch on what we wanted to do and Dave began designing some beautiful mockups beginning in December.

However, January went by and while a lot of progress had been made, we came to an agreement that we weren't thrilled with the idea of just refreshing our brand. It's necessary, but it's not something we felt would really excite our current Carbonmade members and we wanted to do something for them too. Yes, we now accept yearly billing — an often-requested feature — but we wanted to give them a little taste of what's to come.

About three Wednesdays ago at around 2 AM, Dave and I were on the phone talking about how to market this thing. What exactly was our new marketing site? Just a brand refresh? Ugh. Let's try and come up with something a bit better we thought. I was even struggling to write the newsletter that we were going to send out, because there just weren't any guts to it. We also concluded that if we were to get an email from a company to check out their new marketing website and all it did was look different then we'd shrug our shoulders and say "cool, but who really cares?" We didn't want this to happen with Carbonmade.

It was at this point at around 2 AM that in the midst of things I came up with the idea of creating an Advent calendar like system for Carbonmade to show off what's coming in our new version. I described something to Dave that was a cross between these holiday calendars I use to receive as a child and the popular MacHeist system. Although we'd later scrap the MacHeist elements of the Progress page, we ran with the Advent calendar idea and a twist on that is what you see today.

To my knowledge, no other web app has ever used a Progress page to trickle out upcoming features to their members as a way to promote their new app. Will it be successful and generate buzz around our new app by continually attracting people every new update? I hope so, but only time will tell. I'll certainly write a follow up post when the Progress page is complete and your explorers have reached the top of the mountain.

Do you think this'll work? Can it backfire?

It's too early to tell if our Progress page will be successful in drumming up buzz around our new version, but I have to believe that it'll do more help than harm. From the moment the idea was hatched, the one thing that we've been wary of is to not confuse new users to Carbonmade who hit the Progress page before the Sign Up page.

Dave spent a lot of time designing our new marketing site to funnel new visitors to the Sign Up page rather than the Progress page. We don't want these new people to see the Progress page and think "I'll just wait to sign up when the new Carbonmade app is out." That'd be bad. Really bad.

We're currently running Crazy Egg on our marketing site, so this should give us a sense of things as we collect more data. As long as our new marketing site brings in the same amount of new sign ups as the old site (hopefully more) then I'll deem it a success. Again, as we just released it, it's still too early to tell.

The other worry is that our competitors will now be fully aware that we're working on something new and will have a heads up on all of the new features. While this may be a small cause for concern, I've always felt that it's in the execution and not the ideas themselves.