Silicon Insider: The New World of Startups

Now, late on a night in mid-January, just a week before the formal public announcement of Powersnap Alpha to the world, Santosh hit the wall. He was exhausted, sick and broke. He hadn't slept more than two hours per night since Christmas, and even that sleep was fitful because he was worried about his baby son -- just to put the maximum stress on themselves, both Santosh and Ayush had recently become fathers -- who was also coming down with the same flu bug. Having dug himself in so deep, what happened, Santosh asked himself, if the product failed? It was an entrepreneur's classic 3 a.m. moment.

The answer, Santosh decided, as all true entrepreneurs do, is that it didn't matter. As he said to me the next day on the phone, "I suddenly realized that it wasn't important anymore whether the product succeeded or failed. All that counted was that we completed it, that we got it to market, even if it killed us."

The Rules of the Game Have Changed for Startups

I've always been very conscious as a journalist of making public any conflicts of interest I have with my subjects. In the case of Santosh and Powersnap, that conflict couldn't be deeper. I've advised Santosh all of the way through the creation of both this company and its aborted predecessor, trying to help these young founders make their way through the traps and pitfalls of new company creation.

My connection with Santosh goes back even further. I met Santosh and Dawn through my old assistant at Forbes. In those days Santosh was a tall and irrepressible bundle of energy -- smart, inexhaustible and ready to take on the world. And I recognized early that he was a true entrepreneur: Having twice been turned down by Oxford's Said Business School, he flew his own way over to England to help me with my Silicon Valley program, talked his way into an interview with the dean, and was accepted. He graduated near the top of his class.

But my interest in Santosh and Powersnap is more than personal. Silicon Valley may still be the heartland of high-tech entrepreneurship, but the rules of the game have changed in recent years. I wanted to see just how.

Historically, when you started a new company, you assembled a team that covered all of the components of a full-sized company -- from manufacturing to administration to marketing and sales. You then developed a sophisticated business plan and took it around to investors. If you were lucky, you found an angel or two willing to invest enough funds to get you through prototype development.

Then you made the rounds to venture capitalists and exchanged a sizable percentage of the company's ownership for the money to take your product to production and hire the necessary staff to manage a major company and run a marketing campaign. The goal was to build a company sufficiently successful -- a couple generations of follow-up products, a thousand employees, $100 million in revenues -- to take the firm public and pay back the founders and investors for their years of support.

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