For a variety of reasons, the opportunity turned out to be less lucrative than anyone had anticipated. Eventually the company’s entree into the mid-market was abandoned and the company was shut down.

The thing I remember most about this wasn’t the company itself. It was how he responded to its collapse. He didn’t get upset. He didn’t beat himself up about it. The day after he shut the doors he picked up the phone and started getting his old consulting clients back.

His response was to move forward.

The rule of economic well-being

When I asked him about it a few years later, he told me about a rule of thumb that he’s operated by for most of his professional career that helped him recognize the situation for what it was, and helped him move forward with relative ease.

He told me that no one is responsible for his economic well being except for him. And that the key to maintaining your economic well being is to constantly provide immense value.

It might sound simple, and the connection might not be obvious. But understanding this idea can have profound implications in how you view the world.

Understanding this rule is why he didn’t get upset when the company folded – there wasn’t enough value to potential customers, or the value wasn’t communicated effectively. It was a learning opportunity.

It’s why he didn’t lash out at the larger organization they were partnering with. They didn’t “owe” him anything – it wasn’t their job to take care of him.

It’s why he was able to jump right back into consulting so easily. He recognized that his value isn’t a function of a particular company or opportunity – it’s something he has available to him at all times. He can bring people immense value regardless of the situation.

Putting the lesson into practice

Three months ago, the startup I was working for took a dramatic step in a different direction. Matt, my business partner for many years, and I were both let go. It was a sudden change of events, one that coincided with my wife deciding to work part-time, us starting to put our son in daycare, and the decision to buy our condo. When it rains…

When it happened, the temptation was to throw a pity party. A part of me wanted to get the emotional high that can come from feeling you were wronged, the sick pleasure one can get from worrying about something even though there’s nothing you can do about it.

But then I remembered what my step-dad taught me.

Rather than hold a grudge or feel sorry for myself, I decided that what we had worked on, however clever or promising it might have been, simply didn’t create enough value in the minds of the people who mattered. If it had, we’d still be there and the product would be taking off.

Sure, having more time might have helped the situation, but we didn’t have more time. That’s not wrong, that was just the reality of the situation.

So Matt and I decided to put our energies into finding consulting work, while we figured out what to do next. We turned our outsourcing company into a product development shop and started doing what we did at Brill Street for others. Rather than stay indoors with the lights off staring at our computers while eating Cheetos and feeling sorry for ourselves, we hit the streets and started selling.

A couple of opportunities fell into our laps right away thanks to the help of our friends (and I’d like to think a little bit of providence.) We gathered some momentum, picked up some additional business, brought on some new guys. In the last three months, we’ve picked up more business than we were projecting for the year.

It’s been a crazy 90 days. Who knows if we’ll do the consulting thing in the long term – it certainly brings with it its fair share of stress. But for now we’re working hard, having fun, learning a ton and meeting a bunch of great people.

And none of it would have happened if I didn’t remind myself about my step-dad’s rule of economic well being.

Rejecting Entitlement

It’s a lesson that I think we should all keep in mind.

There is a large portion of the population that operates as though they are owed something. Because they got a degree, they deserve a job. Because they logged the hours, they deserve a raise. Because they didn’t screw up, they deserve a promotion.

Your company isn’t obligated to take care of you. They have an obligation to their shareholders and to maximize value. If you provide immense value, they’ll bend over backwards to keep you.

You don’t have to sit and hold a grudge because you got passed over for a raise. You don’t have to do less than your best work because you and your boss don’t get along.

You don’t have to blame the company if they let you go. Instead, you can step back and use it as an opportunity to learn. In what ways were you not providing immense value? What could you have done differently to make yourself indispensable? What lessons can you take with you to your next opportunity?

Most importantly, you can keep moving forward. The world is so full of opportunities if you’re willing to look for them. All you have to do is remind yourself that at the end of the day, no one owes you anything. And then go create value.

In the process, I’ve managed to cobble together a few early lessons that I’ll hopefully have the presence of mind to remember in the future. While certainly not rules, and most likely flawed due to a limited sample size and my own incompetence, I do think they might prove useful to start-ups looking to interact with venture capitalists on their own ventures. As with anything I say, your mileage may vary.

The most important thing is the team

I had heard this maxim frequently in the past, but had considered it hyperbole. It’s not.

Everyone has ideas for a company, and many of them are good. The idea, while important, is not the difference between success and failure. Execution of a mediocre idea is much better than a great idea poorly executed.

It takes a great team to execute on an idea successfully. VCs have learned that a smart, aggressive, flexible team of people can make things happen.

This is why they’ll often hire “entrepreneurs in residence” – someone who they think is talented and can make something happen, but who is between opportunities (most likely following a sale). They’ll pay this person to come into the office, listen to pitches, and think – and when the right opportunity comes up, they back them.

Simply put, they bet on the jockey and not the horse.

Which means when you’re thinking about your pitch, you need to seriously consider the caliber of your team, and if necessary make some upgrades or additions.

If your business is highly analytical and you lack a marketing whiz with expertise in running those kinds of campaigns, you’re in trouble. If you’re a tech company without a technologist, you’re in trouble. If you’re trying to sell an enterprise product and no one has experience dealing with the drawn out, convoluted enterprise sales cycle, you’re in trouble.

It’s also important to be honest with yourself – do you think that a VC would be comfortable putting money into a venture that has you at the helm? There’s a chance that the only thing standing between you and an investment is you.

If your venture could benefit from someone with more expertise or with a personality and disposition more suited to a CEO role, have the humility to find that person, make them a great offer and take on a role that is better suited to your skill set and personality.

The team matters more than anything else.

Listen, and be flexible

Most VCs are very smart people – most have been successful on their own prior to joining the firm, and they have had access to thousands of business plans and first-hand experience with dozens of startups just like yours.

Which means that when you’re pitching a firm, you should treat it as an opportunity to learn and not just a presentation. Most startups rarely end up doing what they originally set out to do, and the smart ones listen and adapt faster than the others.

During the course of your pitch you’re likely to get advice, often in the form of repeated questions around an area of weakness in your plan. Don’t bristle at this – learn to listen to it. It’s likely they’ve seen a similar company fail for precisely that reason. At the very least they’re pointing out the weakness in your pitch, which if corrected could lead to more success in future meetings.

It’s also important to listen during your pitch because they’re paying attention to you as much as they are to the deck. They want to see if you’re flexible. They want to see if you have logically thought through your ideas, and if not, how you react to weaknesses in logic being presented. They want to see that you can take advice without getting upset, since they’ll want to be able to do that as investors should they pull the trigger.

A mediocre business manned by someone who can listen and adapt will become better and can possibly become great. A good business manned by someone who’s inflexible and stubborn will probably never become more than what it already is.

Know your odds, and don’t take it personally

Many entrepreneurs I’ve talked to in the past about failed attempts at raising money had a chip on their shoulder, as though the VCs that turned them down were idiots or were doing it to spite them. In reality, these folks probably just didn’t have a solid grasp of the numbers. If they thought about it at all, they would probably have thoughts that the firm is choosing between them and, say, 10 other ideas.

The firms I’ve seen so far make only a few investments a year. So if you figure on any given day they’ve heard at least one pitch, and if you figure that of all the pitches they hear during the year they’ll make maybe three investments, you quickly see that the odds are not in your favor.

Which means that you should a) do everything you can to understand what those few investments tend to have in common, and b) not take it personally if a firm doesn’t choose your company for an investment. If you were putting several million dollars of capital into a company, you’d be picky as well.

Know your audience

Venture firms, and the partners who make the decisions within them, have certain industries or types of investments that they are drawn to. This could be based on their prior work experience, or a result of previous investments. But before you try to sit down with someone, it’s important to know what they’re investment preferences are – in many cases it’s not a stated purpose of the fund, but simply the personal preferences of the partners.

VCs like to have deep knowledge of the space. Lack of expertise in an area represents a risk – and with all the other things that could go wrong with an investment, it would be foolish to jump into a deal without sufficient knowledge or expertise. So don’t be shocked if a firm tells you that you have what sounds like a great idea, but that it doesn’t excite them – you could just be outside of their comfort zone.

Be likable

People prefer to work with people they like. If you have a great idea and a great team but are arrogant and abrasive, you’re probably going to have a difficult time raising money.

If a VC firm takes on an investment, they will probably take a board seat, and will be actively involved in the business offering advice, making introductions and trying to make the venture succeed. Which means they’ll be spending a lot of time with you. If you’re a jerk, they’ll probably think twice before entering into that kind of relationship.

So be friendly at all times – be humble, be gracious, be thankful that they’ve taken the time to sit down with you.

And remember that they all talk to each other, and that word can spread about your hot temper and derail your efforts at any other VCs you try to sit down with.

You have to be willing to turn some people off. You have to be willing to step out on a ledge and say “I’m sorry, we don’t do that.”

Unfortunately, a lot of companies (and freelancers) seem unwilling to do that, particularly in the tech and design communities. They’ll reach for any opportunity they can get, whether or not they have an ability to execute on it.

Even though the economy is in poor shape, chasing money in areas outside your expertise is often a recipe for bad things – you do a mediocre (or terrible) job on it, and it takes you away from what you’re best at.

It’s tempting to be known as a graphic designer or programmer or consultant or whatever.

But I think it’d be better to focus and leave a lot of money on the table. Become the best display advertising designer in the world. Or logo designer. Or environmental designer. Or “peat moss packaging” designer.

Become known for that – charge a premium for being the best. Pursue only the projects that you’ll knock out of the park consistently. And send any other requests for work to your network of people who are the best at what they do, taking a small cut for sending them the work.

You’ll be walking away from lower margin, higher risk projects and taking a much smaller piece of the pie on work you refer out. But you’ll build goodwill with your partners (and your prospects), receive some revenue without losing your focus on what you do best, and will likely find the favor returned.

Be willing to say “I don’t do that.”

It’s crazy – my first experience with it was actually a couple of days before we had met up in Colorado for lunch a while back. Within a day of putting his first artists up I received an invite from someone completely unrelated to Backstage or Grant – the system did exactly what it advertised. Imagine my surprise when I discovered he was behind it.

Grant understands the concepts of social proof and permission as an asset better than most. More importantly, he’s always operated with a unique mix of purpose, integrity and insane attention to detail, which I’m sure have made the artists he’s working with extremely happy.

It’s really cool to see old friends’ hard work starting to pay off. Congratulations man…you deserve it.

Free wireless, free coffee, free printer, free long distance land line, free XBox, good people, tasty lunch options, eclectic music. If Shoeless Joe were a web worker, freelancer or entrepreneur he’d think it was heaven…

(note: there’s an XBox in the household now for those of you who like that sort of thing…)

Right now there are thousands of the most brilliant people in the world, Twittering their hearts out, reading Techcrunch vociferously, digging more photos of sunsets or new Ubuntu installs or whatever….and all the while a great many of them are wishing, hoping that someday in the not-to-distant future, they’ll create and launch a site that their contemporaries flock to with the same excitement.

And in the interim, they’re wasting their lives.

Everyone wants to be the next Youtube. Everyone wants their new app written up favorably by the Web 2.0 elite. Everyone’s looking to hit a homerun.

But while they’re sitting at their desks daydreaming about Internet riches and the pride that comes with it, they’re working 60 hour weeks at jobs they hate, or they’re out freelancing, begging someone who’s probably a lot dumber than they are for work.

Meanwhile, there are a staggering number of niche markets out there that are being under served. Fact is, while we all think that Virb or Twitter or whatever’s coming out next week is the coolest thing in the world, most people have never heard of them. Most people don’t care.

I installed a Rails content management system for my folks new website last week, and spent 20 minutes walking my mother through it over the phone. She spent years having to deal with clunky CMS systems that were so frustrating to use that the site just didn’t get updated (and if it did, the changes would often magically disappear.)

She’s doing back flips because I took the tools that are at every Techcrunch-junkie’s disposal and made her working life demonstrably better. She’s played with the thing for three straight days and I’ve received three emails about how much fun she’s having.

So you’re a programmer, or a designer or a developer or whatever. And you probably have some brilliant idea that you think would change the online world forever. And all it would take would be a few rounds of venture financing, a few hundred favorable blog posts, maybe a spot on Digg’s homepage, and you’ll be a billionaire.

What if instead you took that idea and made it smaller? What if instead you decided to focus on a smaller group of people? What if you focused on dentists or lawyers or vegan restaurants or yoga studios or churches or nursing homes or real estate agents?

I can say with a fair amount of certainty that no one in their industry has even seen someone like you. They’re used to dealing with salespeople offering software and tools that are confusing, often poorly designed, and usually buggy. Next time you go to the dentist, check out their appointment system. Or give your buddy who owns that restaurant a buzz and talk to him about how he updates his website.

If you were willing to swallow your pride a bit, learn how to sell (or find a partner who does,) and build a working version of your product, I bet you could mop the floor with the competition. Truly.

You wouldn’t have to make it pass muster with the Web 2.0 community, because the Web 2.0 community will most likely think that they could build something just as good. And they’re probably right. Even if they are impressed, they’re rarely impressed enough to pay you for it. You’ll have to resign yourself to either collecting $20 for your software or trying to go huge and get money from investors on the premise that eventually you’ll figure out a business model.

But these people, the folks in the real world, outside of our echo chamber…these folks will be blown away by what you do. They’ll pay you good money to solve their problem. And word will probably spread over time about the new kid on the block that offers them exactly what they needed.

Not something worthy of the cover of Wired magazine. You probably won’t be invited to the sexy Silicon Valley launch parties. It’s not a home run, a billion dollar idea.

But what’s wrong with a million dollar idea? Why not ignore the tech community entirely?

In real estate investing, there are three basic groups of people. The first group tries to buy property for little or no money down, hoping to flip it as quickly as they can to make a quick buck. The second group buys the biggest properties they can qualify for, pulling out equity along the way to reinvest further, controlling a ton of property but being leveraged to the hilt. The final group makes calculated investments, puts more down, plans on holding it for a long period of time, and grows wealth more slowly.

In personal finance, there are three basic groups of people. The first group takes their paycheck and spends it almost immediately on whatever interests them at the time. The second group goes even further, plunging deep into credit card debt to finance their whims and taking on considerable risk. The final group saves at least 10% of their income, lives below their means, and takes a deliberate, patient approach to financing their dreams.

In this wild world of web entrepreneurship, there are three basic groups of people. The first is brimming with ideas, dabbles in many of them, either makes a modest amount of money or gives up within a brief period of time. The second group builds a technology, raises venture capital ramps up very rapidly – often without a business model – in hopes that they either get acquired or figure out how to generate revenue before running out of cash. The third group focuses on an idea with an obvious or proven business model, often in a niche where they can quickly become competitive, slowly building customers and reinvesting profits along the way.

In most areas of life, it seems as though there are three groups of people – the toe-dippers, the speculators, and the bootstrappers. A gross generalization, but in my experience a generally accurate one.

The first group often lacks the focus to be successful. They lack the fortitude to stick things out, the patience to see things through. They often lack the confidence to step into things full-swing. The toe-dippers are the buddies you knew in high school or college who always talk about starting a business but never get around to it. They’re the people who complain about how much they get paid but never think about how carefully they spend the money they do get.

The second group is full of confidence, but often lacks patience. They’re often larger than life people driven more the desire for quick riches, fame, popularity and power. Some of them do reach their goals and become successful – they become a real estate mogul or a Google acquisition. But most don’t – most flame out. The speculators are the ones who lose their shirts on a stock tip. They’re the ones who make personal guarantees on their business and give up all the equity in hopes of a big pay day. They’re the ones who are brash, full of bravado, who dream of being in the “in-crowd.” Some are successful – the Donald Trumps of the world. But many more are not, and many lives are destroyed during the fall.

The third group is willing to be patient. They know that anything truly worth having is worth working hard for, often for long periods of time. They don’t believe in instant gratification. They believe in solid ideas executed well. They believe in humility, looking to find or create value more than riches. Their paths aren’t necessarily more successful (although I imagine they’re statistically more likely to succeed.) But the virtues they possess and develop along the way – perseverance, humility, patience, diligence – are worth more than the money. They’re the Warren Buffets and Seth Godins and Jason Frieds and Danny Meyers of the world. They’re the mom and pop who run the general store everyone loves on the corner or the guy who runs the construction company that has slowly become the premier firm in the area. They’re the ones who are willing to delay financial rewards in order to make success more likely, who invest their time in doing things the right way and reinvest the money they receive to make their companies thrive. They’re the family that regularly saves and invests their income in boring instruments, lives in a smaller house than they qualify for, drive used cars and love it.

Again, I’m generalizing. There are shades of all three of these people in most of us – I know I have all of them. But I believe that one is more fruitful than the others – not just in financial terms, but in terms of family life, security, well-being, happiness, virtue.
Not putting yourself out there is folly – too many people live with envy, bitterness, jealousy because they’re seeing other people succeed and are afraid to take the plunge themselves.

Taking on enormous risk hoping to hit a home run is also folly. It demonstrates greed, a desire for power, and opens the heart up to temptations and vices way too numerous to mention. Even if one succeeds, it can often be at the expense of family life and personal character.

My goal is to live a life of prudence, discipline, patience, humility and self-control. My goal is to take smart risks, to pursue my goals with tenacity, but to do so intelligently and with respect to my family, friends, coworkers, customers, employees, and community. My goal is to achieve success the long, deliberate way, hopefully developing a character worthy of such success along the way.

What about you? What path do you want to traverse down? Which is the most worthwhile?

It’s only been a few months since this group got started, but it’s already gained a ton of momentum. They have another meeting in a few weeks at Google’s New York office, which should be a blast as well. I’ve met a number of really amazing people in the few meetings I’ve been able to attend, and I’ve learned a lot.

If you’re new and in New York, or if you’re looking to get more involved in the NY tech community…you’re probably not reading this, because you’ve never heard of me. But if you’re new in NY or looking to get more invovled and the monkey who you employ to type for you randomly led to you this page, then today is your lucky day. Check out NextNY – I’ll see you there.

But perhaps the most remarkable thing about it is the sense of cooperation. I have never seen anything like it. If you have something you want to do, if you have an inkling of an idea that may have legs, there are dozens of super-intelligent people out there more than willing to help you out. Whether it’s offering advice, sharing wisdom from their own journeys or making introductions, it is astonishing how generous these people are.

I’m preparing to move to Chicago, and there’s been something I’ve been thinking about doing for quite a while (inspired by one of the smartest guys I’ve ever met here in the city.) Yesterday I threw out some feelers to the web community, not really knowing what to expect. The response was swift and overwhelming – people who have enormous responsibilities who have no business wasting their time talking to some idiot whose skill set consists of booger jokes and burning businesses to the ground immediately were offering advice and suggestions, putting me in touch with folks who might be able to help. 24 hours later, I have a much better understanding of what I’d need to do and what I need to think about. And there’s absolutely nothing in it for them – they don’t know me, they’ve never heard of me, and anything I could offer they already have (except they’re probably better.)

It’s at once inspiring and humbling. Imagine if the world operated like this. Imagine what it would be like if everyone were as generous, thoughtful and selfless as these folks are.

What if that were the real lasting impact of this whole Web 2.0 thing?