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Looking for a primer on fundraising for startups? You are in luck, because Paul Graham, of Y Combinator fame, has an incredibly comprehensive and no BS essay that tells all you need to know about raising money.

This is required reading for startup founders. Read “How to Raise Money” here: http://www.paulgraham.com/fr.html

The May edition of Harvard Business Review magazine is full of articles focused on startups. Steve Blank is featured there talking about the Lean Startup method, which is required reading for all startup founders (grab a free reprint of that article titled “Why The Lean Startup Changes Everything“) and there are other interesting pieces related to dealing with VCs, an interview with Marc Andreseen and also an article about creating a company culture. But one of my favorites was “What Entrepreneurs Get Wrong” (note: requires HBR subscription to see more than a preview).

It’s all about sales

Always Be Closing!

The article is spot on when it says “Salesmanship is central to the success of any young company, and entrepreneurs ignore this at their peril“. Time and again I’ve spoken to startup founders at events, pitch competitions, and informal gatherings who not only think the benefits of their new idea are obvious, they also haven’t put much thought into how they are going to sell.

Sure, reading it and agreeing that sales is an essential part of a founder’s job is easy, much more difficult is actually doing anything about it. The HBR article, though, presents a nice framework that I think is in line with what needs to be done: get customer feedback as early and frequently as possible.

Incorporate sales into your development process

Typically you will see people wanting to build things before they start selling. If you are an established company with enough cash reserves to allow you to do that then go for it, but small businesses and startups are not that lucky even if they have V C backing. Instead, incorporate “sales” as early in your development process as possible. How? Get potential customers involved in giving feedback at your prototype, then get them to use an alpha or beta version, use them as sounding boards for all the nice features you think the product needs.

This is really just adapting the Lean Startup method and Customer Development framework you already know and love (right?) which calls for early and constant customer feedback, but with an emphasis on selling. The difference is that you are not only asking for feedback, you are trying to close sales as well.

Always Be Closing

The incorporation of “sales” into your processes as I said is not just to gather feedback, it is to really test your sales approach, your pricing, and the market fit for your product. You can get 100 people to tell you they like what you are building, but getting them to actually commit to buying it is another story.

I’ve been through this myself a number of times. In showing an early prototype to a company I asked them if they would like to be notified when it went live, to which they responded yes. So when we went live and called them to see if they would pay, they said no. See the difference? Instead of asking “will you pay $X” I had asked “can I notify you when we launch?”. Rookie mistake that you shouldn’t make.

When talking to potential customers and asking for their input, you will only get valuable information once you start treating them as prospects. Things like “So, having seen what we are doing are you interested enough to commit to X units?” or “Our price will be $x per month, so can I sign you up to start using it in May when we launch?”. Don’t be afraid of asking for money, after all this is what you have been working towards, to make a sustainable business right? And every “no” you get is gold because it  gives you the opportunity to dig deeper and understand what about your product or service the prospect doesn’t like.

So if there is one thing you should do right away and that will have tremendous impact in your startup, is start selling.

Startup founders know that every time they pitch their startup is an opportunity to either a) get funded; b) get press; or c) hire someone great. What if you could do all three at the same time? Well, the upcoming Launch Conference might  be the place to be.

Funding for Winners

Jason Calacanis recently announced that the LAUNCH Festival has just raised $269 thousand dollars in prizes. During the conference about 40 companies will have only a few minutes to present their ideas and wow the crowd and the judges. This is how it will work:

1.  Companies present in one of two competitions (new product or improved/new release)
2. A total of 10 companies are awarded winners
3. TechStars will accept one of the companies into its next semester (valued at $118K)
4. Venture51 will provide $51L to the winner of the 1.0 competition (new product launch)
5. CRV will select one company to invest $100K

If CRV were to select the winner of the 1.0 competition, and that company joined TechStars, it would have $269k in total investment.

I’m blown away by the graciousness and support of our partners. This event would not exist without the huge support of a collection of people who believe startups should have a free, merit-based event to LAUNCH their innovations to the world. – Jason Calacanis

But, even if only one (or a couple) are the chosen ones for TechStars, Venture51, and CRV, based on last years event other startups are likely to get attention from eager investors (GreenGoose closed $500K, right after the event, for example).

This is Just Getting Better

The conference should be interesting not only for the startups attending, but also because of the man behind it. Calacanis is known for being outspoken and getting into heated arguments. Lawsuits, name-calling, nothing seemed to be off-limits to the founder of Mahalo in his dispute with Michael Arrington. But, things have cooled off a bit lately and some might say that “love is in the air“. Who knows?

In any case, attending the conference should be an interesting experience.

LAUNCH FESTIVAL 2012

• When: March 7 and 8, 2012
• Where: San Francisco Design Center
• What: Launch 1.0 (new product), Launch 2.0 (existing companies with new products or new releases), and Demo Pit

The Almost Certain Death of a Startup

It was the winter of 2006, three years after its founding and Rovio had already cut the staff from 50 to only 12 people and was running out of cash. Despite of doing work for gaming giants EA, Namco, and Real Networks, the company hasn’t had a big hit with any of the dozens of games they had produced.

Then, a last attempt was made to create what is now Angry Birds. It took them three years and over EU$100K and hundreds of sketches but they finally got something that felt like a winner and released it in late 2009. The 2009 holiday season came and went without even registering for Rovio. Another idea, another flop.

But then, in February of 2010 Apple agreed to feature Angry Birds on the Apple Store. It became an instant hit, reaching the number one downloaded app in only three days.

A Startup Story

The story of how Rovio almost died and was saved by Angry Birds is told by Forbes Magazine in a recent article, Audacious Birds,  discussing the company’s ambitions to become bigger than Disney.

For those of us outside the day-to-day operations of Rovio, their blockbuster success and subsequent $42 million dollar windfall look like lucky strikes. Sure, being featured on the Apple Store helped. Coming up with a great design helped. Even the fact that their games are simple, yet addictive, is an obvious path to garnering legions of fans.

The back-story though, and what I find interesting, is that they are very similar to a bunch of other startups out there and also the proof that the majority of startups don’t survive long enough to get their breakthrough idea distributed.

It took Rovio over 50 games to come up with their Angry Birds concept. Hundreds of designs, and three years in development. Lucky break? Sure, but you can’t have a lucky break without failing a few times first.

I have not failed.  I’ve just found 10,000 ways that won’t work.  ~Thomas Edison

You Have to Fail to Succeed

Despite what most people think, success takes more than luck. It’s hard work. And is trying until you get it right.

AirBnb is a case in point. They had a great idea but it didn’t catch on the first time. They “launched” the service four times until it finally took off.

Groupon is another startup that almost didn’t work, now being one of the most anticipated IPOs in recent history, having even turned down a $6 billion offer from Google.

And I’m sure you can come up with a couple more examples, at least, of other startups that had a tough time making it. And I doubt that any founder will tell you it’s easy to have a big break. Sometimes you have to fail to succeed.

UPDATE: Another interesting case of almost death is Cvent, told by its founder on TechCrunch.

There has been a lot of articles written about the advantages and disadvantages of amassing a portfolio of failed startups and how it helps you succeed, eventually. And there are those, like Jason Fried, who irrevocably abhor spending time thinking about anything but successful outcomes.

According to a recent Harvard Business Review article, Why Leaders Don’t Learn From Success, Jason should rethink his stance. The article talks about why just focusing on success won’t make you a better entrepreneur. They cite three main causes:

1. Fundamental attribution errors
2. Overconfidence bias
   
3. Failure-to-ask-why syndrome
   

The first item, fundamental attribution of errors, refers to crediting the successful outcome to only our talents and our current model or strategy and ignoring any environmental factors and random events that may have had a role in the success.

The overconfidence bias relates to giving too much credit to ourselves and our capacity and thinking we don’t need to change anything.

And finally, focusing on success can also lead to not asking the right questions about why we succeeded, and not investigating why there was such good performance.

How success hinders learning

In a recent study we conducted in a controlled laboratory setting, students from U.S. universities were asked to work on two decision-making problems. Learning from experience on the first problem could help them perform well on the second. After submitting their solutions to the first problem, the participants were told whether or not they had succeeded. They were then given time to reflect before starting the second problem. Compared with the people who failed at the first problem, those who succeeded spent significantly less time reflecting on the strategies they’d used. This had a cost: Those who succeeded on the first task were more likely to fail on the second. They had neglected to ask why.

It’s a compelling argument for focusing on failures when trying to learn how to become a better entrepreneur. Sure, just because you failed doesn’t mean you will do better next time, but it seems that betting on those who were successful is also not foolproof.

Are YOU learning from your failures?

Ignite San Francisco is one of the best venues for fine tuning your presentation skills. You have to present 20 slides that advance automatically every 15 seconds, no more no less.

It’s not a pitch competition or demo day, so topics are really varied from “how to have a hot body” to “if we could build the matrix should we?”. So why is this a good venue for startup founders? If you cannot present something in 5 minutes and keep people interested in what you have to say, how can you present to a) raise money; b) sell your product; c) hire talent; d) all of the above! ?

I’ve done one a ignite-type talk (they are also called Pecha Kucha, and some call them ‘lightning talks’), back in 2009 at the Business of Software conference and it’s not easy. It requires you to rehearse a lot and really know the topic. But more importantly, is fun!

Check out the upcoming Ignite events in your area and attend one to see what it’s like. If you’re going to the next one in San Francisco, a few tips:

1. Get there early. The doors open at 6pm and by 5:50pm there were already 30 people ahead of me in line. By 6:15pm the line was going around the corner.

2. Eat first, network later. With over 400 people attending the event, the line next to the food tables (you buy your own food, which was excellent by the way) was loooong, so those who lined up early were able to eat sooner. Then you’re ready for a beer and networking.

3. Network a bit first, but grab a seat fast. There aren’t enough seats for everyone, so network a bit but grab a seat fast or you’ll be standing up for the next couple hours. There’s more networking opportunities during the break and right after the talks.

Welcome to the Startup Web Guide. The all encompassing site for all things startup. It’s my collection of blogs, podcasts, books, and more for those interested in software startups and are wondering where to get good information.

Enjoy!