There are many obstacles when you start up a business. When you start up an online-business your domain name is crucial. Imagine starting a store in some distant industrial area far away from downtown. Sure, you will probably get a couple of customers, but you’ll have to work hard on promoting yourself. You cannot really expect people to just walk into you store because they see you from the sidewalk.

The same thing goes with a domain name. If you have a really long and hard-to-spell domain name, you cannot expect people to just stumble into your website. Sure, some people might know about it through advertisement, and bookmark it, but your customers will be quite limited. In addition to this, it is not very likely that people will remember you address, and promote it by word of mouth.

So what is the catch? Why is it so hard for an Internet-startup to just get a really short and catchy domain name like google.com, myspace.com or facebook.com? Is it really that hard to come up with a catchy name like that?

The answer is no. Coming up with a name is the easy part. A half year ago when Alex and I were starting to make plans for starting up a company we started to brainstorm for a cool and catchy name. This was when we discovered the real catch – finding an available domain name.

I don’t know how many hours we spent on instantdomainsearch to find a both available and catchy domain name. This is when we realized something: the biggest parasites on the Internet are the domain-traders. Sure, you can probably find an available .org, .us or something like that, but if you’re a company you want both the .com and .net.

Why? It’s simple. What these companies do for a living is just to buy up random domain names that someone or some company will be desperate enough to buy for the insane price they are asking for. Sure, this doesn’t sound like a big problem, but I can assure you that it is. Just go to instantdomainsearch and try to type in any letter combination of less than 5 characters, it doesn’t even need to be a word. Is it taken? Sure. Just try to come up with some catchy name of less than 10 characters, and I can almost guarantee you that it is taken.

Well, you might think, maybe it is just some company that bought this domain, because the were about to launch a product by that name. Not very likely. If you look at most of the results you are likely to find either an empty page, a page full with banners or a redirection to a domain-trader.

This is the reason why I argue the domain-traders as the biggest parasites on the Internet. I would not say that they’re worse than pedophiles and that kind of parasites, but from a business point of view, these are the worst. Imagine how more useful these domains could be used if it wasn’t for the domain-traders. Personally I think that the domain-registration should be more conservative.

I know until a few years ago, you needed to have a company or product connected to the domain you applied for in order to get a .se-domain. I still don’t know why they took this limitation away. I think .com should have been restricted for companies, and nothing else. However, that’s a bit too late to change now.

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I just got off the phone with the Secretary of State to see how our LLC-application is coming along. We filed the application about a month and a half ago, and still not a word, so I was starting to get worried. Sure, it’s a government agency, but still.

When I finally got through after about 15 minutes, it turned out that everything was OK. The guy I talked to said that we probably will receive our paperwork by the end of this week.

Now I’m really relieved.

As I mentioned in my article ‘Save $1,285 per Computer and Still Remain Business-ready,’ I’ve been a long-time user of Open Office, and I really like it. However, there are a few drawbacks that have been bothering me lately. Then again, if you add the price of Microsoft Office into the equation, the choice becomes more complex. Sure, hands down, Microsoft Office is more powerful (even though it has several ‘features’ I’d rather be without).

Until recently, I haven’t found any features that Open Office lacks that I really need. However, lately I’ve been doing a lot of statistics, and within this field Open Office does lack some features that Microsoft Office comes with. There is a set of macros called ‘OOoStat’ which make Open Office a better tool for statistics, but it still doesn’t beat Microsoft Office.

Open Office lacks native support in Mac OS X. Since I switched to Mac, this is something that really has been bothering me. Sure, you can still run Open Office using X11, but it comes with some drawbacks such as long startup-times, low performance, and issues with the clipboard (cut and paste). I know the Open Office team is working on a native-version right now, but no stable release is available. At this time, the only workaround as I know of is NeoOffice, which is a Java-based ‘native’ OpenOffice. I was running this for a while, but went back to the X11-version due to NeoOffice’s low performance and high memory-usage.

Open Office is clean, neat and you know what it is doing. Being open source, you potentially have full control of the software. You also know exactly what information is being sent away from your computer (even though tools like Little Snitch can solve this for other softwares). Another benefit with this is that it is much more likely to be secure. So far I’ve never heard of any macro virus targeting Open Office. Sure, part of the explanation for this is the fact that the number of users is lower, but the code is also more well-written.

Open Office also supports export to PDF, Microsoft Office-files and most other common file-formats. Microsoft’s Office on the other hand only support their own formats. If you want export to PDF-files in Windows using Microsoft Office, you need to purchase Adobe Acrobat (or a similar product). I should probably add that if you’re running Mac OS X, you have the built in PDF-exporter, so this doesn’t apply.

To wrap up, Open Office is a great piece of software, but it comes with some drawbacks such as no native support in Mac OS X, and some lack of features. But still, if I were to choose between paying $400-some dollars for a license of Microsoft Office or live with the drawbacks of Open Office, the choice is quite simple. In my honest opinion, Microsoft Office is far too over-priced and the cost is certainly not justified. If you’re working with regular spread-sheets and text-documents, Open Office is enough. Also, if you’re running windows, Open Office runs natively, so you don’t need X11.

Open Office 2.0.4 running in X11 on Mac OS X.

Microsoft Office 2004 running on Mac OS X.

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We had a couple of hours of downtime last night due to a server failure. Sorry about that guys. I know that the timing was bad just after we put up out great hedge funds article.

We’ll invest in redundant servers as soon as we launch our product. It’s hard to justify that kind of expense before our release though.

Before getting down to business I would like to introduce myself. My name is Andreas Lindblom and I’m invited as a guest writer to share with you the interesting world of Hedge Funds and how their presence might be applied to start-ups.

Starting off, defining Hedge Funds might be a good idea as many still don’t really know what constitutes a Hedge Fund.
Hedge Funds “are not regulated by the SEC, meaning that they are not required to disclose all financial statements and are allowed to engage in selling short” (Lindblom, pg. 1). This is, of course, an oversimplified statement that would cause many Hedge Fund experts so shiver, but for this article, Hedge Funds are like Mutual Funds, apart from the mentioned fact that they are not regulated by the SEC and that they can be involved in selling short. These differences are immense as they cause potential gains to sky rocket. With this, the volatility of the investment also rises, thus potential losses could be devastating for a start-up. There are additional criteria related to Hedge Funds, but those will be discussed later on.

When researching risk-adjusted returns, one should use use several models so that all factors are accounted for and also focus on models that use multiple factors to calculate returns. Such factors could be ‘Fama and French’ or Carhart’s four-factor model, compared to CAPM which assumes perfect market efficiency and also restricts you with certain limitations.

Using these models to analyze risk-adjusted return, my research found that Hedge Funds outperform the market almost exclusively (as seen on the efficient frontier below) which implies that the choice of investing in Hedge Funds should be an easy choice? Well, here’s comes the additional criterion to investing in Hedge Funds. “In order to invest in a Hedge Fund [the investor needs] $5 million in capital to invest, and…a sophisticated understanding of the financial markets. [Hedge Funds] also accept funds from institutions such as pension funds that have at least $25 million in capital available” (Lindblom, pg. 5). ‘The cream of the crop’ may claim that this is good because it creates an exclusive investment market or a ‘playground’ rather where they are not restricted by the SEC. Given that Hedge Funds can sell short, many of them are levered, thus potential losses could shake the financial waters of the US significantly and affect other, rather than just those investing in that particular fund. Due to this, many ‘regular’ investors and analysts oppose Hedge Funds because as seen at the end of the 1990’s where the LTCM (Long-term Capital Management) Fund crashed, requiring all major Investment Banks to bail them out.

Well, maybe it’s time to start applying what we know to start-ups. Management of a start-up could have many difference mentalities. Maybe they are risk aversive or risk-takers. The size of capital available to invest may differ, and so on.
Investing in Hedge Funds could provide a company with major returns but, of course, also higher volatility. The size of a start-up is significant due to the $5 mn. investment requirement. For a start-up, where the first year determines the future of the entire business, investing in Hedge Funds provides volatility you’d much rather avoid and investing in Mutual Funds or simple CDs may be a better choice due to its lower volatility (note: investing in CDs requires you to ‘lock’ your funds which decreases the liquidity of your funds significantly).
Personally, I would invest extra capital in R&D for a start-up due to the importance of keeping your customer base after, if surviving, the first year.

For further information, read my research on “Risk-adjusted return of Hedge Funds.”

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