Torque
How to turn a good idea into a great business
Michael Ashley
Copyright © 2012 Michael Ashley
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior consent of the publisher.
The Publisher makes no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. Neither the publisher nor author shall be liable for any loss of profit or any commercial damages.
2012-07-25
Dedication
To my Mom
who does everything with a full heart
and kindles my passion
for entrepreneurship
with her love
and endless
encouragement
Preface
A few years ago I was asked to speak with a class of MBA students at Santa Clara University about my experience creating FastPencil. I immediately accepted and felt some pride about sharing my startup adventure. Then it hit me, “What the heck should I talk about?”
Over the last several years I have gone from high-hopes to utter depression and back again. I’ve tried strategy after strategy and shifted our vision many times. I’ve hired great employees and fired undermining pessimists. I don’t think there is one thing I haven’t changed or shifted since we founded FastPencil in 2008. How do you share that with a class of hopeful entrepreneurs, without sending them running for the doors?
Well, I sat with it for a few days and let it settle in my mind. Then it came to me, there really are only four key concepts that form the pillars of our business. How we work within those concepts continues to change, the people change, the vision shifts, but the four key concepts remain the same. That’s what I’ll talk about: Building a great team; Using technology to gain advantage; Understanding the market; Keeping the cash flowing.
This book is the culmination of many, many classroom discussions and talks I’ve delivered on these four pillars since then. Over the years I’ve refined the message a bit but it’s still essentially the same. Focus on these four key concepts and you’ll gain an advantage over most startups, an advantage that just might be enough to help you win.
I’ve tried to take the same, relaxed approach to delivering this message as I would in a classroom discussion, so don’t expect a highly-technical college textbook. There are many great books about business and I suggest you read them as well. But the one thing you’ll get in this book that you won’t in any other business textbook is the real experience of a Silicon Valley Entrepreneur applying the concepts of Team, Technology, Target and Torque! I hope you enjoy the book and share it with others.
Introduction
Did you read the directions? Me neither.
Many people will tell you the secret to a successful startup is leverage—using other peoples money and resources to produce something you can sell. The problem is millions of startups will fail every year because they lack the real secret: TORQUE. You can have all the leverage in the world, but if you don’t apply the right force and torque the shit out of it, you’ll burn through your cash like WD-40 on a rusty nut. If you want to crack the nut you’ll need the right tools and lots of torque.
What are the right tools?
TEAM
TECHNOLOGY
TARGET
TORQUE
These four concepts form the foundation of a successful startup and without any one of them your chances of survival are slim. Together they are the pillars that can bring your idea to life. In this book I will go through each concept individually and help you uncover them in your own unique business.
In 2008 I founded a company called FastPencil. The idea was to create an online book-writing web site where anyone could write, collaborate, publish and sell books. It was the beginning of the self-publishing revolution and print-on-demand technology made it cheap and easy to become a published author. It was also the collapse of traditional publishing and the emergence of the eBook. So my timing was perfect. I found a partner, we raised money and started to build an amazing business. We had the right technology and we were relentless. But after the first year we only had a few thousand authors publishing and selling books. We were running out of cash fast, and VC’s weren’t interested.
Then we made some critical changes.
One year later we had a multi-million dollar licensing deal with a major book retailer. Two years later we were licensing our platform to publishers and printers world-wide. Offers to buy our little startup were coming our way and we had to make a decision, sell or keep growing. Fortunately for us, the future looked bright either way.
The critical changes we made paid off. We took a long look at our team, technology, target and torque. We gained key focus in each of these areas that I want to share with you in this book—how we revised our team, technology, target and torque—and how that turned the business around.
Sounds pretty simple, but it’s not. Before I started FastPencil I had no idea how to build a great team, I only vaguely knew our target market, and I thought technology alone would make us a great company. My partner knew people with money and he was able to get us through our first round with Angel Investors who trusted him and believed in our vision. But we were at the same point most entrepreneurs are, and where you might be right now: Passionate but delusional.
It’s not that we didn’t have the experience or the education to pull it off. We both had an MBA, my business partner held VP positions at companies like Genentech, Yahoo and Verisign. I had almost 12 years experience running my own business and consulting with some of the leading companies in Silicon Valley like eBay, Paypal, Seagate and Proofpoint. We wrote a 50-page business plan where we outlined our strategy, market, technology and opportunity. We even had a few hundred customers who signed up on the writing tool alone… before we even finished building out the platform.
But even that wasn’t enough. Within one year we had burned through our cash and the assumptions we made about our customers were wrong. Our technology was fantastic but it was so comprehensive it seemed overwhelming to our users. The idea that we could take a complex publishing workflow and turn it into a few simple steps was such a foreign idea that self-publishers didn’t want to believe it. And we discovered the people who needed FastPencil the most didn’t want to spend much money. We needed to do some soul-searching fast, and that’s when we made four critical changes and had the huge shift. It worked for us, and it can work for you, too.
-=-=-=-=-=-=-
TorqueTip: Listen, learn and leave the rest behind
-=-=-=-=-=-=-
Over the last few years I’ve had the pleasure of visiting many MBA classrooms and sharing my experience with students and future entrepreneurs. I used to give the same talk every time: The four pillars of a startup: Team, Technology, Target and Cash. One evening a young woman named Lauren came up to me after class and said she had been thinking for the last hour about that word, Cash. It bothered her that it didn’t start with a T, like the other three pillars. Then she had an epiphany, “Torque! That’s what it’s all about, isn’t it?” She was right. Torque is taking all the tools you are given, applying leverage and cranking! You can’t rely on just one pillar, you need them all. And you can’t rely on just a good idea, you need