Figuring Out How To Make It Work

There isn’t a startup that became successful overnight. It typically takes years of trial and error, tons of money down the drain, wrong bets and wrong hires, and the ever eluding light at the end of the tunnel.

If you are in the middle of the battle of making your startup work, which according to Steve Blank means figuring out a business model that works, then hearing from other entrepreneurs and learning about their miseries can sometimes be helpful. You are not alone, after all!

Check out for example Jason Goldberg’s rant about how he is finally going to take it seriously and really start paying attention to business 101 and turn his startup, Fab.com, around. A good read is Simon Dumenco’s criticism of Goldberg’s post in a recent AdAge article.

Enjoy!

A Startup Show Worth Watching?

HBO recently released a new series, Silicon Valley, that does a pretty good job at capturing the startup environment in the SF Bay Area. It’s funny while not being overboard and makes fun of iconic people and companies in the Valley (Google, Peter Thiel, Paul Graham, and others).

If you are like me and doesn’t have HBO, you can still catch the first episode for free.

Silicon Valley HBO Show

Click to watch the first episode

Fundraising for Startups

MoneyLooking 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

Understanding Stock Options

Alex MacCaw has a great post in his blog titled An Engineer’s guide to Stock Options that describes in plain English all you need to know about stock options as a member of a startup team. It’s pretty well explained going from shares versus options, exercising your options, what questions you should ask before joining a company offering stock to employees, and more. 

Check the full post here: http://blog.alexmaccaw.com/an-engineers-guide-to-stock-options

Grab Your Seat at Launch 2014

LAUNCH Festival, an event where startup founders can pitch their ideas to investors, network with other startup enthusiasts and rub elbows with those who “made it” will be FREE in 2014.

The event was created by Jason Calacanis, who explained in an email why he is giving away tickets:

When I started in the industry in my 20s, I didn’t have a pot to piss in and was a ‘little rough around the edges’ – I was so lucky to have folks like Esther Dyson, Kara Swisher, John Battelle, Tim O’Reilly and (most of all) John Brockman include me in their events.

These events led to me rubbing elbows with Evan Williams, Yossi Vardi, Larry Page, Jeff Bezos, Ted Leonsis, Steve Case, Mark Cuban and countless other luminaries. Some of them became good friends and/or critical business contacts.

Now I’m trying to pay it forward for the 40+ startups that will launch onstage, the 150 that will be at demo tables, and the thousands of founders and technologists who maybe don’t have the budget yet to come to a world-class conference.

LAUNCH Festival is my legacy and I want as many folks to experience it as possible.

We had 6,000 people sign up last year and this year we hope to have 8,000 (stretch goal FTW!). This makes us the largest startup conference in the world – by far.

Grab your tickets here: http://launch.ticketleap.com/launch-festival-builder/dates

Thank you Jason!

 

 

What Transparency is Like

I’ve seen many entrepreneurs and company CEOs talking about ‘transparency’. They say that they want a transparent culture, where people know what is happening with the company. They say that direct, honest communication is part of their values. They even say they want every employee to feel like they are part owners of the company or startup.

But where do they fail? In actually showing the numbers.

Great Examples

Look at SeoMOZ for example, that posted their metrics and funding deck. Or Balsamiq, that did an interesting public post about the company’s growth when it hit $100,000 in revenue.

It takes courage to post stuff like that internally, much more courage to actually make it public outside the company. But it shows not only where the company is, financially, but also gives you a glimpse at the corporate culture in general.

Which Numbers Are Important

To really be transparent, however, means showing all the numbers. The good, the bad, and the ugly. Unless you show how much money the company is making, how much money the company is losing, and what is happening that is driving such growth/no growth you can’t say you are transparent.

I’m not advocating opening the kimono to the public, but rather to your employees. Case in point is Axcient, a high-growth company in Mountain View (full disclosure, I currently work for Axcient) that holds monthly “all hands” meetings. During these meetings all employees get a peak inside the company’s business metrics. The VP of Sales talks about sales numbers, quotas, and whether the sales team is reaching their targets. The VP Marketing talks about the lead generation programs and key metrics as well. But when the CFO takes the stage is when true transparency really shines.

You see, when you are attending an all-hands meeting at Axcient you are sure to get not only a good look at the financial metrics of the company, you also get schooled.The CFO shows you the total costs that month and for the previous year, shows you revenue numbers and discusses all the details that go into each bucket. You also learn about what constitutes cost and what are expenses, why some numbers are increasing while others are decreasing, and most importantly, what it means for the business.

At the end of that session you don’t just come out knowing the financial state of the company, you also know what it means and whether is good or bad. For employees this is gold. No more guessing if the fact that the VP of Sales bought a new car means the company is doing well or whether the CEO shouting during an executive meeting is cause for concern. You actually know where things are and you can be certain that next month, at the next all-hands meeting, you will be able to see exactly where the company stands financially.

Why Hide The Numbers

But what if all this confidential information leaks? People, after all, are typically the weakest link in any confidential or secret matter (just look at the notoriously bad rep that HP employees and even their board have when it comes to keeping secrets). Well, there are two ways to look at it.

First, you could argue that if those extremely confidential numbers got out the company would be in a bad situation and competitors will eat it live. That the reason for hiding such numbers is to protect employees and the company’s future.

On the other hand, if you are worried that you will be in competitive disadvantage simply by telling others how much revenue you have or what is the exact ratio of certain cost metrics, then you have a bigger problem at hand. If you are worried that employees are not capable of safeguarding confidential information, then you are hiring the wrong people.

Sales: The Entrepreneur’s Toughest Job

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 image

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.