For someone who lives in the startup world, this looks pretty silly.  But I’m sure I’d say a lot of silly things if I were getting in to the taxi business, too.  So I figured I’d point him to a simple explanation of why taxi companies (actually, services companies in general) aren’t appropriate for VC.  I did the Google thing for a bit to find a good article.  And no luck.

There are a lot of posts out there about identifying and hiring 10x engineers. And a lot of discussion about whether or not these people even exist. At Spool, we’ve taken a very different approach. We focused on building a 10x team.

The only time when Free can really work for you is if you set your sights on having a specific outcome: acquisition. If you’re building technology, or a team, that is valuable to somebody else than you can afford to provide a free service and raise finance to fund that service until you’re in a position to be acquired.

We invest in smart people solving difficult problems, often difficult scientific or engineering problems. Here’s why:

If getting venture capital is now optional for making a big, successful business, and lots of entrepreneurs might want to avoid it anyway, what are the other options? I've outlined a few other common options, including examples of companies that have made these options work, and some of the cons of each method that might explain why don't we hear about them as much as we hear about venture capital.

Now, you’ve probably figured out I’m not actually talking about mining or farming: this is a metaphor for running a software company. You can either see founding a company as something you’re doing because you want to produce good software, or you can see it as something you do so you can sell your stock and make a killing and move on.

Today, the low-level layers of our communications networks are ideally designed to see breakage as damage and route around it. But perhaps the social layers of our networks should see breakage as opportunity, and build revenue models around it.

The secondary problem that all three encounter (right under building something useful) is generating some sort of scale. The chicken-and-egg situation is a central topic of many, many talks (it certainly was at Startup School) and for good reason: almost everyone has to deal with it at some extent.

Notes from creators of products that don't exist anymore reflecting on the problems they had.

1. Determination

This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. That's the myth in the Valley. And certainly you don't want founders to be stupid. But as long as you're over a certain threshold of intelligence, what matters most is determination. You're going to hit a lot of obstacles. You can't be the sort of person who gets demoralized easily.

So the lesson of Dropbox is this: your existing, passionate customers (the people who have gone through the usage lifecycle) are the most powerful asset you have. They know why your product is great and they can communicate that to their social network better than you can. They can sell it better because they’re experiencing it every day and they’re not biased in the way you are. In short: they tend to be much more influential than you. 

It’s not enough that Warren Buffett has become one of the richest men in the world. He’s also a world-class storyteller – and nowhere does this gift go on public display more than in his annual letter to shareholders.

His latest  letter on the Berkshire Hathaway Web site offers terrific lessons for startup ventures in shaping their communications.

You know that old saw about a plane flying from California to Hawaii being off course 99% of the time—but constantly correcting? The same is true of successful startups—except they may start out heading toward Alaska.