Digging Joe Stump's simple business truisms

Joe Stump has every reason to be happy. A month ago he concluded negotiations with venture capitalists that will see his recently founded SimpleGeo get a second round of funding of $8.1 million. The first round of seed or angel funding netted SimpleGeo $1.5 million last November.

A company essentially comprised of ex-Digg employees, SimpleGeo is a groundbreaking location-based services company that offers easy-to-execute infrastructure for geodata applications.

“The biggest lesson I learned is that raising money is excruciatingly distracting. Fortunately, Matt (Galligan - SimpleGeo's CEO) and I had the opportunity to raise more money on good terms from people we really liked working with. We wanted a clear runway where we didn't have to constantly worry about raising money for growth. This investment will enable us to build the team out and run on all cylinders for two years before we have to raise money again,” says Stump.

Location-based technology is incredibly hot right now in the States and Europe, where people in the prime 18 to 35-year-old 'mover and shaker' demographic own an Android or iPhone or both. “For the first time the physical technology has met up with what software can do. If you were building location apps 10 years ago, it would require carrier deals and all sorts of other bullshit. Now because smartphones are in the hands of what is considered to be the Internet's movers and shakers, GPS has combined with a few other factors to lower the barriers to entry in terms of creating applications to leverage location services for this demographic,” says Stump.

A couple of years ago this was virtually impossible because of the need to negotiate four or five carrier deals in order to make location-based applications work. With the new generation smartphones and other changes in the mobile sector, this has fallen away, creating huge potential for services and applications in the location-based services sector.

Growth shouldn't be a problem for Stump, given his expertise in scaling huge Web sites, and for managing technology teams that have grown at a compound rate. Stump has talked about these experiences in Asia and Europe, and will be coming to South African to present at the Tech4Africa Conference in August.

Stump first became interested in computers and coding when he was about 15. “I bought my first computer and pretty soon after that was coding Web sites on the Internet. I decided that this would become my path, so I got a degree and randomly applied for a job for a start-up in the Bay area of San Francisco.”

Stump got his first job in the heady days of the dot com boom and worked with a now dot-com-dead outfit called Care2.com. “At the time it was the largest production installation of PHP - Yahoo.com hadn't committed to PHP yet. The site was doing 30 million to 40 million page views a month, which for the early days of the Internet in 2000, was massive,” says Stump. This is where he learned to build and scale big Web sites, experience that would stand Stump in good stead for his time with Enotes.com, in Seattle, and later with Digg - the grand daddy of mega trafficked sites.

“When I first started at Digg it was getting 10 million to 12 million unique page views a month. When I left it was getting north of 35 million uniques a month. Trying to get the infrastructure to go big was an interesting challenge, because at the same time the team quadrupled in size,” he says.

One of the key lessons learned at Digg was how to hire top talent. “We had a real difficult time getting engineers on board at Digg. Our hiring process took a long time and recruiting was difficult at times. We probably passed on some good engineers and dragged our feet on others. The lesson during that was that the on-boarding process was way too long. From the time that I submitted my resume to the time I was given my offer letter at Digg was six or seven months. If you find someone you want to make a part of your team, move quickly and aggressively.”

If you find someone you want to make a part of your team, move quickly and aggressively

Joe Stump, founder, SimpleGeo

Another key lesson that evaded many Internet start-ups is the need to charge for what is built or offered online. “I really don't appreciate the thinking 'just build it and they will come'. That's generally not how business works. You should build something that other people need and that they are willing to pay for. You should build things that are worth charging for and you should charge for them,” says Stump.

Because of its academic roots, the Internet has a culturally ingrained notion that things online should be free. “There are proven online business models, but most people haven't hit their stride on every business model that is going to work. What annoys me, and I have seen this at a lot of start-ups I worked with, is the focus on growth to the exclusion of leaving money on the table. My take is 'Woah! Why are we leaving money on the table? We might need that money as we grow.' There is also the pervasive thought that you can't get big if you are charging for things. I don't think that is necessarily the case either.”

Stump's advice to budding start-ups and emerging Internet businesses that are trying to land seed capital or raise a first round of investment?

“The initial amount of money probably won't be based exclusively on your product, so you don't have to have this perfect prototype in place to raise funds. The investors should be smart enough to figure your offering out and to see value. If they can't understand your offering I wouldn't waste too much more time with that person. And don't be discouraged or take things personally when an investor passes. There are usually a lot of things at play that can influence this, which may not have anything to do with you or your product.”

Stump says it is a truism that funders and companies invest in talent. “It is important to remember that viable exits for start-ups exist in mergers and acquisitions. There are very few companies that haven't outsourced tech R&D to start-ups. My main advice is to focus on the very best engineering team you can possibly get your hands on. Even if this means taking on less engineers,” he says, adding that when the likes of Facebook and Google consider buying or working with start-ups, they strongly take into account the number and quality of engineers on the team.

“The second bit of advice is no matter what you are building, build some piece of technology that is new, interesting and defensible.” Stump says start-ups should create pieces of technology in their stack that make people say “Wow!” because this is what companies look for when they are looking to acquire. “They look for top talent and they look for defensible technology that they can integrate into their stack.”

Stump's word to techies who are holding down well-paying jobs with good companies, who dream of starting their own business, is to take the plunge.

“If you try the whole start-up thing and fail miserably, your worst case scenario is better than 99% of the people of the world. You will just go back, work for another good company and earn good money. There's no harm, no foul there. Failure's a good thing. It is not something that you actively seek out, but that you learn from. You just need to recognise when you are failing or you have failed, move aggressively to learn from it and then move on.”