3 Things We Can Learn from the HOT or NOT Founders
HOT or NOT, as I’m sure that you can guess, is that site that allows you to rate people by their hotness. It’s simple: if someone is hot, you rate them high and if they are butt ugly, you give ‘em a low rating.
The founders of this company have scaled it to a level where they are pulling 4 million + a year in revenue; not bad for such a simple site that, believe it or not, many people have never even heard of.
I was reading James Hong’s blog, one of the founders, and have focused in on a couple key points that may inspire you as an entrepreneur.
1.)
This doesn’t directly relate to the founder, but his friend, Albert did something that most entrepreneurs wouldn’t do in a lifetime. He sold his company, bubbleshare, and gave the proceeds to his parents so he would stay hungry.
Albert mentioned that he gave most of the money he made from selling his first company to his parents.. A noble thing to do, but then he surprised me by adding “I gave them the money because it was of course enough for me to never work again, but you know.. i wanted to stay hungry”.
Now that takes balls! Talk about staying hungry. This just goes to show you that not all entrepreneurs are in it for the money. The rush! The rush is what’s really exciting and keeps most of us in the game.
2.)
It’s going to take more than money to get motivated people to be devoted to your business. You have to provide a company culture that is really going to entice and keep your team enthusiastic about the company.
It never works. At least not here in Silicon Valley. Engineers at HOTorNOT last year were making 2-3x normal salaries, yet they were not happy… and we really couldn’t expect them to be. After all, the only people we trusted with our baby were people like us.. and god knows I wouldn’t have stayed here for a high salary. At their age (23), I wanted risk and potential reward, not a steady job. I make a big deal of telling people that when I finished my MBA at 25, I turned down a job that was gonna pay me about $180k in the first year.. despite the fact that I was $50k in debt.. to instead earn no paycheck and give entrepreneurship a go. These are the type of people you trust to continue running your site in “high profit margin” mode. Big company types won’t do.
Bottom line, if you have entrepreneurial-minded people working for your company, they aren’t going to be satisfied with the traditional “paycheck to paycheck.” They’ll need more than that to stick around. Offering them a piece of the pie — a stake in the company — is usually the best route.
3.)
Ok, so maybe your company is making some money. Sit back and relax now, right? Wrong! Never get complacent just because you “feel” secure with the current status of your company. You MUST continue to innovate, improve, modify, and perfect. Don’t let money make you lazy. Do whatever you have to do in order to keep that drive to excel. These guys took some serious measures to ensure that they wouldn’t get lazy:
The downside of running a cashcow is that you don’t want to do anything substantially different to make it better. The idea is that you milk the cow until it is dead, and hopefully invest that money into new things. Changing anything could screw the money machine up, so you tend not to take any risks. But it almost physically hurts to see the thing you worked so hard on be put into this mode, because you know that in this mode, death is inevitable. Nothing last forever without changing with the times. (Actually, nothing last forever, period. But doing nothing surely accelerates that process.)
So late last year, Jim and I took a look at our situation:
Converted the company from an S corporation to a C corporation. This is not reversible any time in the near future, and changes the dynamics of how willing we are to spend the money we are making.
We stopped all dividending of profits. This money is now better used being reinvested into the company. What this basically means is that my income for the year just dropped from “x million” to “ZERO”. Talk about taking a paycut! Additionally, since I am working here again, I took a salary of $24 a year. (I wanted it to be $1, but apparently that created a problem for our payroll vendor, so it became $1 per pay period)
We created a stock option plan and have started giving options to employees.. to make THEM hungry too. As part of this, our engineers took a paycut back to market rates. The fascinating thing about this is that THEY ASKED FOR THE PAY CUT. They understood that in order to deserve the reward, and in order for them to feel the need to work smarter/harder, they needed to take some risk. For guys that just turned 23, I found this to be incredibly mature.
I admire the actions that these founders are taking to ensure a future for their company. They are continuing to take risks, improve the business model, and implementing ways to turn employees into partners. These initiatives are things that all entrepreneurs should take into consideration when running a company. Stay hungry, and keep the ball rolling!
2 Comments
lawrence
May 24th, 2007 at 2:10 pm
this site is amazing, atleast in regards to how simple and novel the concept is…yet it’s remarkably successful
as for giving employees ownership, equity ’steak’ to feed their hunger, lol…if they’re that hungry, i say start their own company then. otherwise be content with your salary
David Askaripour
May 24th, 2007 at 2:27 pm
yeah, I was definitely amazed at their success. just goes to show you that simple ideas can go really far in business — they’re probably the “best” ideas. Ha, I’ll take a steak! Sike… I’ll take some tofu
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