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
Posted in Uncategorized
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
Posted in Compensation, Hiring
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!
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.
Posted in Culture
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).
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.
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.
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.
Posted in Uncategorized
I just got an email about the “Funding The Best In Global Innovation III” event, to be held in New York on May 16. In its third year, this 1-day conference is an initiative of the Worldwide Investor Network, a group that focuses on startups from all over the world (not just US-based) and assists them with mentorship and in raising capital.
As Elizabeth Lopez, their VP of Operations told me, “Our goal is to showcase only the TOP tech global startups and as such our business model is the most friendly for entrepreneurs. There is no fee to present at our events, and our process includes mentorship done by Top NY Investors (virtually), free access to our community event, and a spot to pitch to the most relevant NYC-based investors at our demo day”.
The lineup for their May 16th event include some top investors and experienced entrepreneurs:
If your live outside the US and are looking to get exposure to your startup, make connections with the VC community and get advice and mentorship, then you should check out their website at www.worldwideinvestornetwork.com.
The Worldwide Investor Network has extended a courtesy discount for readers of this blog. Use the code StartupWebGuide to snatch 25% discount off the registration price.
Posted in Events
Tagged conference, event, global innovation, international startups, worldwide investor network
In talking with a startup founder the other day it became clear that there was a problem. He had just lost a sale to a competitor. Not only was that extremely frustrating, he wasn’t sure why he had lost the sale. Losing deals sucks, but it can be a great way to learn so that you don’t make the same mistakes next time.
So I asked him to give me the sales pitch. It went something like this: Our product does A, B, and C. Here you can see what happens when you click this button, which shows this results. Then, when you click on the Reports icon, you can see all of the reports available, etc…
Sounds familiar? What is the problem with this approach? Well, to begin with it is very product focused. Not just features-oriented, but it is all about the product itself.
Marketing Lesson 1: You are not selling a product, you are solving a problem.
Ask yourself this question next time you are preparing to demo or sell your product or service. What is the problem I am trying to solve? How would the customer describe it?
That’s the first step. But it doesn’t stop there. You also have to understand what value you bring to the customer.
Marketing Lesson 2: You are not selling features, you are selling value.
Yup, this makes sense right? But hold on. Do you really understand what value you are providing with the product or service you are offering? Most people only scratch the surface when it comes to value. They say “with our service you don’t have to wait for taxis anymore” or “our new mobile app allows you to access your documents directly from the iPad!”. These are simply bland statements that anyone can make. Go a step further and ask “so what?”. For example, let’s take this hypothetical example of a company that has an iPad app that allows you to access your documents remotely.
The pitch: Our iPad app allows you to access your documents direcly from your iPad so that you will have them wherever you go.
Now let’s look at this and try to dig deeper. Why is this important to the customer? Oh, you see, before having our app they would have to carry their laptop with them, which is a pain. OK, we’re getting closer. What else? Well, we are targetting senior executives that need secure access to their documents and by using our app not only they can access from the iPad, they don’t need to save the files to the mobile device, which increases security. OK, this is good info, but why is this important? Because our competitors require the file to be downloaded first, which means a long wait before the user can actually see the document and it leaves the file on the device which compromises security. OK, but what is exactly the value here? Well, with our app executives can quickly access their extremely confidential documents from their iPads without having to worry about security leaks. Great, now we are in a much better shape. So let’s review our pitch.
New pitch: Executives worried about accessing confidential documents remotely can now do it securely from their iPads with a simple tap, no download necessary.
This is much better, not 100% but way better. You are talking about the customer, relating to their pain and problem, and addressing with a solution. I can see this playing out during a sales situation going something like this: “As an executive you need quick and secure access to confidential files when you’re on the road. Not only that, you want to be able to access files without having to wait for long downloads, and you want to make sure no trace is left behind. This is what we offer on our new iPad app. With our app you can…” and it continues.
The next step would be to really understand the value being provided so that you don’t fall into the features presentation trap. Faster mobile document access, for example, is just a feature. How would it help the customer? Well, they can get more done in short time. OK, this is it! Get things done faster while on the run without worrying about security and with an app that doesn’t get in your way.
As you are pitching / selling your startup idea, peel back the proverbial onion to really understand the benefit and value being provided. Few companies go through the trouble of doing it and that is why most corporate webistes look so bland and you can’t tell one from the other. By really understanding your customer pains, the problems they are trying to solve, and by really going deep into what exact value you bring to the table you will be able to craft a compelling sales pitch and position your startup above the competition.
“It only adds 4 inches to your iPhone and gives you 45 seconds of battery life, but makes coffee” explains Jason Calacanis as he gives an impromptu presentation of iCoffee, a new iPhone app he was asked to pitch by Yossi Vardi, one of the participants in the VC Panel at the Launch Festival yesterday.
The joke is part of what makes the Launch Festival a one of a kind event, where 50 companies pitch their products to a panel of judges and 5 thousand attendees.
First Day Startups
Although the conference started off with a bit of a snafu (45 mins registration line and about 1 hour delay in the program in general), things were quite good once you got inside. This is my third year attending the conference and it has grown both in size and quality.
The event is a great opportunity for startup founders to present their ideas to a panel of judges who will not think twice before coming down hard on you or your idea, and is also a great venue for networking.
Of the statups that presented on stage, the following caught my attention:
Whiplash: Not only this startup is already making money ($500K last year), they are experiencing growth and are providing a much needed service, i.e. the shipping and logistics for eCommerce. This is a huge opportunity that, if done correctly, can transform this company into a major player in the fulfillment business.
CubeSensor: Robert Scobble said that as he was hearing the live feed of the event on his way up to San Francisco, he stopped his car just to buy a couple of units from this startup. Their whole premise is to improve indoor living, and they do that by giving you a ‘cube’ that sits on a table and monitors the air quality, humidity, noise, etc. If you have ever worked in an office with terrible air quality (so called ‘sick buildings’) you wish you had one of those. The key for them will be figuring out a killer distribution strategy and strategic partnerships.
Jawfish: a real-time, multiplayer game on iOS. What’s the big deal? The team behind it seems pretty solid (guys from Full Tilt Poker) and their advantage seems to the the architecture behind the games, delivering an awesome gaming experience. If they are really this technologically advanced and can get the right deals in place, they can become a major force in online gaming.
Triptease: Trip Advisor should have been dead but is still lingering because there is simply not a better option for online travel reviews. Triptease wants to change it with a magazine-like interface that makes reviews easy to create and fun to read. But the most interesting aspect is the leveraging of social networks. As people create beautifully rendered reviews, they will be able to share it with their friends. According to founder Charlie Osmond, hotels have already expressed an interest in using the site and have been emailing customers to place their reviews on Triptease. Going after smart parterships like that is a good move. Now, they have to get critical mass to start moving the needle against Trip Advisor.
Hubskip: A better way to book travel, because it gives you money back. Not only Hubspkip has a slick interface, it centralizes all booking for your trip (hotel, transportation, etc.) so you don’t have to worry about it. We all know that booking travel sucks, no matter what Expedia, Travelocity, and the other players do to their sites, the whole experience is pretty miserable. If Hubskip can break the mold and give us better travel planning at cheaper prices, you’ve got a winner.
Next post I will talk about some of the other startups presenting and also about those in the demo pit.
Posted in Uncategorized
Tagged calacanis, conference, demo, launch festival, pitch, startup, vc panel
Moving to Silicon Valley to start your own company or quitting your day job in hopes of getting that new social-mobile-disruptive-app acquired by Facebook are all good reasons to feel good about your startup. If “they” made it, so can I. Maybe.
Interestingly enough, despite all the fuss the media makes about startups that “made it” quick, there is usually an ugly truth hiding behind the headline: it doesn’t happen overnight. The millions of dollars in VC money given to the team of 3 guys in a dorm room didn’t happen just after a 15 minutes meeting at the local Starbucks. The acquisition by [insert your favorite tech behemoth here] wasn’t just a lucky strike. And the sudden success of over one million downloads didn’t happen just because of the mention on Tech Crunch.
No, my startup founder friend, those things happened after a lot of hard work. A recent case in point is the fate of Zite, as told by Mark Johnson,its CEO, in an article to All Things D titled “How to Get Your Start-Up Acquired in Six Months or Less“.
The story of Zite, according to Johnson, is amazing for the speed with which the app gained traction and attention from CNN who ended up acquiring the company. And all of that in just six months! Or so it may seem at first. Read the article carefully and this interesting piece of information pops up like the missing puzzle piece that you thought lost but was just hiding under the carpet:
“Zite had the advantage of almost six years of R&D (we were formerly called Worio), but until we became Zite, we were a technology company with a product problem. Instead of continuing to use the technology on a failed product, we pivoted to Zite.”
It didn’t take them six months to see success, it took them SIX YEARS. Yes, they were doing R&D, trying different things and pivoted to what eventually became Zite. Once they found the right product and business model (as Steve Blank likes to say, a startup is a company in search of a business model that works), success was easier attained.
Magazines and news sites have to attract readers, so the headlines are catchy. People also like to have someone they can look up to, aspire to become, or learn from and so the stories of quick stardom are naturally attractive. I have nothing against it and I am always eager to read those as well. Just remember that behind each success story lies the hard work that made it happen.
Posted in Founder Stories
Tagged all things digital, mark johnson, startup success, worio, zite
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