Startup BlenderAdam Berrey’s startup blender

What to Tweet

2010-02-11T14:13:48Z

Confession: I’ve had no idea what to tweet.

I’ve struggled to find a way to actually create value for readers. Some people basically tweet their life, and for most people I simply don’t care to know. Others put out what amounts to a form of haiku. Some essentially RT a wide range of stuff that is already posted somewhere else, which quickly becomes noise.

I’ve been at a loss.

But I woke up this morning with an idea. I’m going to try tweeting one useful, relatively timeless tip for entrepreneurs and managers in high-growth companies per day. This reflects the strategy I’ve taken with my blog: one well crafted essay per week.

Tell me what you think. Of course, if you have good ideas for what you want to see or some better way to add real value on Twitter, please comment or drop me a note.

008. The First Signs of Spring

2010-02-10T21:01:24Z

As winter descends on us in full force, I’m already seeing the first signs of spring: MBA students have started reaching out to talk about summer internships. (MBAers are not the only interns itching for work in startups — more on that later in the article.)

For MBAers and startups, the summer internship promises many glories. I’ve definitely caught myself daydreaming about the amazing work my new summer interns will get done at a fraction of the cost of actually hiring someone. Sadly, the reality can easily come up short of the dreams for both the startup and the MBAer.

The challenges are structural, and they’re exacerbated by high-expectations:

1. Not Much Time – 10 weeks in the summer simply isn’t much time. Most startups are in complex new categories, and by the time the intern gets the printer working and learns enough about the business to engage, the internship is over.

2. MBAers Want Impact – Most interns want to “make a difference.” Unfortunately, this is hard. Usually they do work that someone else has to ultimately implement, which is not a great formula for success.

3. Disorganized Managers – The intern manager is generally pretty disorganized. They don’t have time to think through how to structure the work to create a meaningful 10 week project, and they’re very reactive to short-term issues and other priorities.

4. Confidential Information – In the last 10 years I’ve probably trained almost half a dozen summer interns who’ve gone on to work for competitors. That sucks. So now I try to find projects that are strategic, but not mission critical, and shield the intern from the most competitive information. This can result in the intern being a little more isolated from the mainstream of the business and a lot of the most interesting discussions and meetings.

5. Lack of a Program – Most startups don’t run a well thought-out MBA intern program. They don’t start recruiting early enough in the year. They’re not clear on projects. They don’t have an efficient interview and hiring process.

Ok. So there are problems. But there is also motivation. Startups want low cost/free help, and MBAers want experience in the field, which means everyone has incentive to make these summer internships work.

Tips for Startups

Here are some thoughts for the startup (read on if you’re an MBAer):

1. Define a Project – I’ve had the best luck by creating a well defined project with clear goals, a reasonable scope for 10 weeks, enough isolation from the core business to minimize dependencies, but enough value for the long-term business that it’s worth the investment. One of the best projects was an analysis we did of the global advertising market. The deliverable was clear; the data were accessible; and there was a lot of good primary and secondary research the interns could collect, analyze, and present. Also, the results were actionable, and they helped shape our strategy for the next year.

2. Hire 2 Interns – I like to pair interns. This makes it more interesting for them. When everyone is too busy to talk, they can bounce ideas off of each other so they don’t end up feeling isolated sitting alone at the makeshift desk you setup in the hallway.

3. Manage Them like Employees – Manage interns like they are employees. That means all the usual stuff: clear communication, goals, regular check-ins, interim milestones, etc. It also means a real hiring process. Hire well and you can manage easy.

4. Organize Recruiting – I suggest that you make a recruiting run in March. Instead of the typical rolling recruiting process, create a structured process: a) deadline for resumes; b) internal deadline to sort resumes; c) one focused round of interviews with top choices; d) offers and contracts. If you structure the process, it will help you plan and manage your time.

Tips for Interns

MBAers you need to take the ball into your own hands. The biggest challenge you’ll face is that most of the startups you talk to won’t have read and implemented the items above.

1. Target Series A or B Companies – The best companies to go into are ones that have gotten Series A or B venture investments in the last year. These companies have a number of advantages: a) money to spend; b) growth and strategic problems; c) enough scale to incorporate an intern; d) enough structure to actually use the work. Also, these companies are easy to find — just scan the list of investments in your area in the last 12 months.

2. Be a Consultant – Target the company. Talk to the customer (CEO, CTO, CFO or VP of Marketing). Figure out their challenges then pitch a clear focused project with an actionable deliverable that will help drive their business (see above).

3. Ask to Shadow Something – In addition to your main project, you can look for something to “shadow” which will let you see into the workings of another part of the business. This could be a budgeting process, strategic deal, etc.

4. Add Some Extra Value – Once you are in the company, look for something you can do that will go beyond your core project. Something small for another department or manager that needs some help and has something that can you reasonably scope and execute. This will help make you a rock star.

5. Be Ready to Adapt – The best plans in startups change. Or put differently, planning works but plans rarely do. So expect to show up on the first day and need to re-cast or re-organize. Just stick to the principles above: create a clear, well defined, doable project with an actionable deliverable at the end.

6. Network – No better place to network than on the job, so use the time to get to know people in the firm. You’d be surprised. Maybe that junior engineer sitting down the hall is cooking up the next Twitter. Take the time to meet people across the firm.

What if you’re not an MBAer? The good news is that there are usually lots of other internship opportunities, especially if you don’t want much/any pay. Usually, the recruiting for these internships is not very systematic. But whether you want to do graphic design, coding, or sales, all of the items and suggestions above still apply, just in a different context.

As the snow pelts the East Coast and the ocean spray keeps freezing on the bow of my sailboat, we can all look forward to spring. The interns are coming!

I’m Back

2010-02-10T20:57:44Z

Elvis is back in the building after a two month winter hibernation, which included dinning on gourmet ant eggs, renovating a new condo, and lots of work on a new startup I’m hatching.

I plan to start posting essays once a week on Wednesdays or Thursdays. I’ve got a great list of topics for the the rest of this year, and I’m feeling wild and loose on the keyboard. So keep your eyes open for more

007. Do One Thing

2010-02-10T19:41:10Z

This summer I walked into the Tech Stars office in Cambridge greeted by the smells of an older building and an awkwardly empty reception area.

I’m not sure why I expected a scrappy start-up incubator to have a well dressed receptionist chirping hello and offering me filtered water in a paper cup, but I did. So without a guide I wandered around looking for a start-up in need of guidance.

Most start-ups have a similar problem. There is no clear map or guide. So they start wandering. Along the way they quickly begin picking up activities. They get busy — too busy.

I’ve seen it again and again. Too many projects, too many goals, too many action items, and soon your at one of those Easter events, down on your hands and knees trying to roll a hand painted hardboiled egg across a freshly cut lawn with your nose before the person next to you pulls ahead, except you’re pushing twenty eggs and none of them are getting anywhere.

The answer to this problem is simple. It was recently pounded into my head again by a mentor who chose a blunt force instrument to make the point:

Do One Thing.

It’s a good rule at every level. Do one thing right now (stop multi-tasking). Pick one thing to focus on this week. Choose one thing at this stage in your Newco’s lifecycle that is absolutely the most important focus.

Of course, choosing one thing is the mechanics. The art is choosing the right thing, which is almost entirely a function of stage. Here are some examples:

A. No product – When you don’t have a product, the one thing you do is meet customers, so you can figure out what the product should be. One thing: meet customers.

B. Building Product – Now the one thing is to ship the minimal viable version. Everything that is not involved with shipping the right product as fast as possible is a distraction.

C. Launching the Product – Now you shift again. One thing, get everyone on the team focused. Launch. That’s it, just launch.

This goes on and on. But if you know the one thing — reference customers, a key partnership, market share, revenue, closing a financing, etc. — the water goes from muddy to clear and life gets easier. You stop costly context switching, and create positive feedback loops in your work.

I’ve been surprised at how often young entrepreneurs try to do too many things at the same time or the wrong thing at the wrong time: writing code before they’ve figured out their customers’ needs, fundraising without a focus or a plan, jumping from project to project and meeting to meeting.

I’m not suggesting that you completely serialize your work just that you have a North Star and use it as a clear guide at any given stage. Having a primary goal will unify everyone on your team and increase the whole company’s productivity. The same goes for each individual. Everyone is making some contribution to the team’s one thing, and each person should have their own one thing that they are focused on to get to that result.

A way to think about this is to ask your selves: What is the most important thing for us to accomplish this quarter as a company? If that’s winning five reference customers, then it doesn’t mean that you stop engineering, but it may mean that engineering prioritizes their time to support winning the customers. If you’re most important accomplishment is to ship a product release that doesn’t mean the sales team stops selling, but they should understand that engineering is heads down and can’t sit in on as many calls or take in new random feature requests.

When asked “How do you run 100 miles?” endurance running legend Dean Karnazes wrote: “You don’t run 100 miles. You run to the next stop sign.” Getting to the next milestone should be your one thing.

So cut the multi-tasking. Don’t try to solve every problem all at once, and figure out the one thing you should be doing now. Then get your company aligned and focused on the most important accomplishment for this week, month, or quarter.

After wandering around the Tech Stars office a bit I found some start-ups, and a few of them were more lost than I was. Luckily, I’d already driven on the road they were heading down, so I could sound like a visionary:

Entrepreneur: “What’s next?”

Me: “You will find a gas station in two miles.”

Entrepreneur: “Really? How do you know the future?”

Me: “I passed that station about an hour ago, and then drove back. It’s on the left.”

And therein sits the man behind the curtain.

P.S. Most of the Tech Star companies did in fact find their way to the next stage, and are on their way to building innovative new businesses.

006. Build a SaaStastic Business

2010-01-23T20:18:34Z

Until 2005, my career had been in enterprise software. Selling software was simple. We put it in a pretty box and shipped it off with a perpetual license. Then in 2005 I joined Brightcove; we launched a SaaS application for video publishing, and realized marketing SaaS was a whole new game.

We tried a variety of different approaches and learned a bunch through trial and error. Below you’ll find a few insights we picked up.

(This post was inspired by Byron Deeter’s very practical post on the 10 Rules of SaaSy, which has become a classic — also available as slides.)

1. SaaS Products are Easier to Launch and Harder to EOL
In the packaged software world, we spent a lot of time (usually half the release cycle) trying to make sure we wouldn’t have to re-manufacture the CDs or release a patch right after the product was shipped. That made development cycles longer and changed the dynamics of QA.

One of the deceptive things about SaaS systems is that they are relatively easy to launch. Build some software, throw it up a server, and you’re off and running. You don’t have to get it perfect the first time out the door, because you can fix things on the fly. But there’s a rub.

Say the product does ok. You’ve got 5,000 satisfied customers, you’re bringing in single digit millions, but you’re looking at the growth and realizing — this thing is just not going to be as big as you thought, and you have a better idea. If it were packaged software, you wouldn’t care. Adobe still sells HomeSite and the last time anyone touched that code was in 2002.

With SaaS it’s all different. If you decide you don’t want to keep building a product, you still have to maintain the system (and incur those costs), especially if you hope to sell other products to the same customer base. If you discontinue the service, you shut all your customers down disrupting their businesses. More importantly, you violate the unspoken SaaS promise: that you will keep the system running.

Middling SaaS services can become an anchor on your company as you try to figure out how to EOL them without screwing your customer base and brand.

2. SaaS Pricing is Engineered into the Product
As marketer, I care a lot about price, and I’m used to being able to control it independent of the product. If I’m selling my software in box, whenever I want I can change the pricing. But SaaS services have the pricing engineered into the product, since its almost always based on metering usage in some way. That metering and the integration between the metering and your billing system is all engineering work. Marketing is totally dependent on engineering to implement pricing strategies — pricing is a feature of the product.

The fundamental SaaS pricing question is dollar per X, where X (and there could be more than one) is an index of value in the customer’s mind and has some correlation to cost on the vendor side. In some cases this is simple. SalesForce.com is indexed to seats, which works great because every sales rep adds a relatively predictable amount of cost and revenue. What about social media platforms? Where is value being created (surely not per seat on the backend)?

Once you decide how you’re going to index value and how that’s going to translate into pricing, you have an engineering project. When you decide to change it, you have another engineering project that competes with your other priorities. What’s more, if you’ve already signed agreements with customers under the old pricing, you end up maintaining those old pricing models, which adds to engineering and accounting costs.

All this puts more pressure on marketers to get pricing right from the beginning. You have to think ahead more carefully about how to price because once you’ve built it into the project you’ll find your hands tied.

3. Marketing Can’t Just Rely on the Launch
One of the cool things about running a SaaS product line is that you can add new functionality whenever you want. There is a continuous release cycle. But this creates a challenge for the experienced enterprise or packaged software marketer who is used to doing big annual launches.

The traditional marketing cycle is very waterfall. You spend a few months planning, then you spend 8-9 months implementing all your launch activities (new collateral, advertising, etc). Then you do your big launch and put into the market a new “marketing platform” (pricing, messaging, channel strategy, advertising, collateral, etc.) This platform remains largely unchanged; you just build on it for the next year, which frees you to work on the next big launch.

But with a continuous release cycle this approach breaks down. New functionality is getting dribbled out every quarter, so it’s harder to create those big bang product announcements. When should you execute the product review campaign? Do you update all the product collateral every month as a features change? What do you tie announcements too? With everyone going agile you also face the challenge that your competition is constantly changing. Competitive briefs are out of date a few weeks after being published. Slide decks are always being changed and update. It’s easy to feel like you’re stuck on a hamster wheel constantly doing tactical work with no time for strategy.

We never found the perfect solution to this problem at Brightcove, but a few things seemed to work:

a) Disconnect from the Product – There are lots of ways to generate PR and run campaigns that are not tied to product releases. It forces you to think more about stories, trends, and controversy rather than products and features.

b) Stay Digital – Print collateral is dead. Don’t make it. PDFs and web pages get the job done and they are much faster to update. If you have to print, use a service that prints on demand to keep inventory low.

c) Create Your Own Cycle – We built a collateral release cycle that we could manage. At any given time, some stuff is out of date, but the whole team is more efficient with a predictable schedule.

d) Staged Launches – If want to drive product news, pick a launch date, and role up the last 6 months of features into an announcement.

4. The Best Customer Communication Tool is the Product
Marketers are used to depending on email communication to reach their customers, and they miss the new reality that the product user interface is the best way to reach your users. Except in the situations where you price per seat, I believe leaving per seat pricing out encourages individual user registrations and less sharing of login credentials, which gives you much better data about users.

As you design and develop the product think about how it can incorporate a communication system that marketing can manage outside of engineering for delivering everything from notices about new releases, to feature up-sells, to user tutorials that build customer satisfaction and loyalty. Every time a user logs into your product is an opportunity deepen your relationship with them. Start simple, but make sure there is a road map for how communication will work in the product experience.

5. Build for Reliability from Day 1
Reliability is the air that a SaaS company breaths. You take it for granted. But when it’s gone, you suddenly risk death. Agile engineering makes a strong case for only building what you need now. If you don’t need scale, don’t build for it. This is one area I’d challenge.

Engineering teams for SaaS products should be architecting for reliability from day one. Moreover, QA, systems engineering, and operations should have a deep mantra about reliability. There are increasingly well established patterns for building SaaS systems that stay up — don’t ignore them. The coolest features in the world instantly become useless if the system goes down. Business-to-business-to-consumer systems afford very little tolerance for down time because an outage affects your customers’ perception with their customers.

This should caution marketing to balance front end, customer facing features, with time for engineering to work on reliability and performance enhancing features. The cost of SaaS systems going down is very high in terms of customer satisfaction, loyalty, word of mouth, brand reputation, and potentially PR.

6. Analytics Should Power Your Business Decision Making
Why speculate when you can monitor behavior directly in the product? Amazon is legendary for using actual user data about behavior to test and tune their service.

Unfortunately, this is hard to do. Most people underestimate the sophistication, skills and resources you need on your team to make use of data. It’s relatively easy to instrument a SaaS product so you can collect a lot of data. It’s much harder to analyze the data and make it useful.

That means you need to build deep analytical and statistical skills into your team from day one, and make it a fundamental part of how you figure out which features are working and which are not. The data from the product is incredibly powerful if you have the tools and people to turn it into information and insight.

7. Pay Attention to COGS
In packaged software the cost of goods sold (COGS) is very predictable. But in SaaS COGS can quickly get away from you cutting into gross margins. There tends to be a constant battle between keeping COGS low and deploying the hardware and systems engineering you need to maintain your service.

Generally, COGS create an ongoing debate between finance and engineering, but marketing can play a role and should be paying attention because it’s a fundamentally important metric. The entire management team should be involved in decisions that weigh the tradeoffs between costs savings and reliability.

This is the start of a list. I’m sure there will be more. Gartner forecasts that SaaS will reach $11.5 Billion 2011. I’m looking forward to hearing comments and reflections from other executives making sense of how to get SaaS businesses to sing.

005. The Big Break

2009-12-03T22:10:06Z

Your hot startup was bought by MegaCorp and after 18 months of mind numbing meetings to integrate the companies your new, new, new boss drops by with the HR director to suggest you may want to move on. It’s time for a big break.

Doesn’t matter how it happens. The chances are very good that if you join a startup, you will eventually be out of a job. The company may have an exit (good, bad, weird, etc.), or you may decide to make a personal exit because you find a more interesting opportunity or simply decided it’s time for something completely different.

So every professional building a career in the world of startups should be thinking about how they handle the big breaks. Turns out most of the work happens before you leave.

Here are 4 rules of thumb to keep in mind:

1. Make it Memorable
After 250 eighty hour weeks, it’s time to do something different. But I see too many executives who are surprised to find themselves unemployed (commonly referred to as “consulting”). Remember, you’re in a startup, becoming suddenly unemployed should not be a surprise.

These stunned Type-A workaholics quickly pepper their days with networking meetings, busy themselves with long neglected household projects, and generally churn through the hours with lots of stuff that amounts to nothing. Weeks that would have been precious during the startup’s heyday burn away like a cheap cigar.

Don’t make that mistake.

The first thing you should do when you are bestowed with a big break is something amazing. Do something you’ve always dreamed of doing — something that will create a memory for a lifetime. Start that arts center in central Sudan; see the pyramids in Egypt; do a photo tour through Southern China; write a screenplay; spend a month building a log cabin with your dad; take your son to the Australian outback.

Do not schedule any meetings with interested entrepreneurs, recruiters, VC’s, etc. Just stick your iPhone in a drawer, pack your bags, and go. These are rare moments, don’t miss them. If you pause for a second on your way out the door, you’ll get sucked right back into the next project.

The key to this is to plan ahead. Memorable breaks don’t get thrown together in a few days. So make it a little project you work on to plan that amazing trip, or charity work, or book, or whatever it’s going to be you’ll do when you are suddenly blessed with a few months of free time. Then seize the moment when they turn off your email account.

2. Build Relationships before the Break
While you’re working is the best time to be building relationships. Networking events for the unemployed are a waste of time. Every project you have at your current job is an opportunity to establish new relationships — with colleagues, partners, investors, board members, customers, etc. — that extend beyond that project.

The tendency is to leave these people in the bucket where you first found them, but that’s a mistake. The biz dev director you’re doing a deal with might be the VP of product marketing in your next gig. That sharp investor on your board might be the partner that invites you to be an entrepreneur in residence. The geeky engineer in the cube down the hall might be cooking up an amazing new startup. The recruiter you hired to fill positions today could be placing you tomorrow.

So take advantage of being employed and in the game to develop relationships that will help you set up the next game. Take the time to stay in touch with contacts you make. Reach beyond the moment or task at hand to make more lasting connections. Real professional networks are built when people work together, not standing around awkwardly drinking crappy white wine out of a plastic cup in a beige hotel atrium.

3. Plan Financially
If you’re lucky, as in lottery lucky, your startup will have an amazing pay out and your next job will be at the foundation you set up to protect rare and endangered Brazilian tree frogs. But, just in case, save some dough for the big break. Cash in the bank gives you the freedom to be selective.

4. Be a Venture Capitalist with Your Career
Startups are high risk. Whether it’s a new restaurant or a new SaaS application, odds are the company will fail. VCs manage this risk in a number of ways. The default investment thesis is no. They’re very focused on big markets, great teams, and breakthrough innovations. Finally, they diversify their risks across multiple investments.

You should do the same. You have a limited number of years in your career, so you need to invest them carefully. Since entrepreneurs and startup executives don’t have the luxury of investing their time into more than one startup in any given moment, they need to diversify their risk over time.

One way to think about this is to look at your average annual earnings for your entire career. Some years will be good (think liquidity). Some will be bad. In the end, you should see an earnings achievement over the 20 years you spend in startups that at least matches what you could make working at a large established company with a big cushy salary. (Of course, I hope you do much better.)

So as you evaluate what you’ll do next you, be an investor and pick carefully.

Final thoughts
If you plan for the big breaks, they will enrich your life and build your career.

I treat them as a job perk. I’ve gotten to do the grand tour in Italy, backpack through Southeast Asia, live on a Buddhist monastery, and a bunch of other things that would never fit into a vacation.

Have fun with yours.

Those Crazy Kids

2009-11-12T21:31:47Z

Danah Boyd, who rocks (but more on that latter), just posted about a new book she helped to author: Hanging Out, Messing Around, and Geeking Out: Kids Living and Learning with New Media. Looks like a great in depth look at the online lives of young people. Here is the post:

http://www.zephoria.org/thoughts/archives/2009/11/08/hanging_out_mes.html

P.S. The book can be downloaded for free and or paid for in real life.

004. Your Pitch Sucks

2009-12-03T21:29:35Z

I’ve been hanging out at a venture firm this year as an Entrepreneur-in-Residence, and I’ve seen a lot of pitches to small groups and to the partners.

Mostly they suck.

I’m not really sure why people keep making bad pitches. Honestly this isn’t mystical. There are dozens of blog posts on this topic, but still entrepreneurs consistently miss the mark.

So here are a few tips. I’m trying to make the obvious explicit — first on style then on substance.

Style

1. Learn to Present – Public speaking is a skill. Apparently more people are more afraid of public speaking than dying. To paraphrase a comic, they’d rather be in the casket than give the eulogy. Public speaking is a skill worth taking the time to learn with a good coach.

2. Practice – Any good speech requires practice — out loud and for real. There is usually a curve: the first few runs are good; then it sounds canned; then you get great and it becomes natural and fluid.

3. Plan for Questions – Most investors ask questions. I’ve seen entrepreneurs who start getting peppered with questions before they even get to their first slide. You have to anticipate that. A few steps make a big difference:

Create an FAQ – Take the time to brainstorm all the questions you might get, and prepare short, specific answers that don’t ramble. You should never hear a question you’re not ready to answer. Investors rarely ask surprising questions.
Make Time – Expect that at least half the time you have to pitch will get eaten up with questions. Plan for that accordingly by cutting down the formal stuff and leaving time for the constant questioning.
Roll With It – It’s better to just answer questions quickly, clearly and confidently as they come up. Then continue with the presentation as if there was no interruption. Don’t defer questions to a slide you already have, and don’t start going out of order. Stick to your story even if there is a bit of repetition. Half the people probably missed it the first time.

4. You Are More Important than Your Content – Every time someone pitches, the first follow-up topic among the partners is what people thought of the entrepreneur, not the business. If you are clear, confident, relaxed, prepared, smart and articulate, that goes a long way. (Of course, you need a good business too.)

5. Slides are Visuals Not an Outline – PowerPoint has all but destroyed the art of public speaking. Don’t print your speech on your slides and don’t read your slides. You should have a speech memorized, and your slides should be visuals that support your speech. Because slides are what get passed around, I’d suggest interlacing the visual slides you use in your live presentation with the detail slides you expect people to read offline or put the details in an appendix.

6. Don’t Make Ugly Slides – You don’t have to win design awards, but the polish of your slides subtly communicates the competency of your business.

6. Slides should be Readable – If you can’t read the slide from the back of the room, don’t show it. Put up the summary and put the detail in the appendix. The more visual, the better they communicate emotion and content.

7. Bring Hand Outs – Many VCs like to read along and take notes so bring some nice hand outs.

8. Be Quick – The investors you want to work with are smart, and they get it. Don’t waste their time, stick to the point and move at a good pace through your content. If you capture the imagination of an investor, you will get many more chances to go deeper. Also, pay attention to their mood, and speed up when they are getting bored. Generally you don’t need those context slides about why the Internet is mainstream, etc. The investors you want should already have the fundamentals on your space.

9. Get Advice – If you’re presenting to a partner meeting, get some advice from the partner that is bringing you in. They know the landmines, the people who matter, and questions that will come up, so they can help you prep.

10. Eat First – If you’re presenting over lunch, eat before you get there and then order light and skip the food. It’s always awkward when the presenter is trying to wolf down food between sentences or worse when they start gagging in the middle of a key point.

Substance

Assuming you can nail the style points above, then you need decent content. I’m not sure why we see so many decks organized in so many different ways. Obviously, there is no one way to present a business. But looking at it from the perspective of the investor, this pattern generally works well:

1. Intro Company – Give us the bumper sticker. What is this business in a sentence or two. Investors see hundreds of companies, they have ADHD, and they easily get confused. Get us centered on who you are with a few clear sentences that summarize your business. Vague taglines don’t help.

2. Intro – Introduce yourself and your team. Don’t dwell on what you did in high school, but hit some highlights that communicate your strengths, and why you are uniquely suited to lead this particular business. This is a great chance to tell a short story that segues into the next section.

3. Customer – Introduce us to your customer. Not your market, but your actual ideal customer — the person or company + people that will buy your product. Tell us about the people you are actually going to serve.

4. Explain Their Burning Pain – Your product is a solution to some burning problem or need. If it’s not, why bother? It’s something that your customer can’t possibly live without. Before we can grok the brilliance of the product, we need to understand why your customers will give a damn.

5. Product – Blow everyone away with an amazing demo (real or fake). Leave us wow’d by your piercing insights and the remarkable way your product is going to address that burning pain your customers are feeling.

6. Market – Convince us with empirical data that there are a lot of customers that look like the one we met at the beginning of the presentation. But don’t bullshit on this. You need to be able to define the actual addressable market, not the imaginary one. Definitely don’t say “the market is huge and we only need 1% to be a hundred million dollar company.” No company ever wins with 1% market share.

7. Competition – Everyone has competition, or they don’t have a market. Don’t say you won’t have any competition. Instead focus on how you’re creating unique, sustainable differentiation that will let you crush your competitors (the ones today and the ones that will enter the market when you prove it’s giant). This is one of the most important points in the presentation.

8. Go-To-Market – The best carbadingulator will be a business if you don’t have a good way to reach customers and sell it to them. Basically this comes down to what it’s going to cost to acquire customers vs. what you’ll earn from them. Most investors are looking for the big pattern: do you need an expensive sales force or key channel partnerships or an online marketing engine, etc. This very much shapes the way the whole business team needs to be put together.

9. Financials – Now give us the basic numbers: historicals if you have them, four quarters from the financing, plus roughly four years of annual projections. For most companies there is a lot of guessing involved. Everyone knows that. The point is to tell a story about what is possible with awesome execution. Also, summarize this at a high level. We don’t need that budget detail now. Everyone will pay attention to revenue, gross margin, net margin, and cash burn, but they don’t care what you’re paying for pencils.

10. Financing – Summarize how much you are trying to raise and why. It’s very important to explain specifically and concretely (e.g. timeline with milestones) the value that will be created with this round of financing. Investors need to be convinced that if they put money in now, the next time you raise money the company will be worth a lot more, which means something material has to happen with the money you raise now. It’s also very helpful to explain how you see future financing events coming together to get the company to profitability.

11. Why This Investor – Every investor thinks they’re special. They have unique experience, talent and portfolio companies. It is very helpful if you can say specifically why you want to work with a firm or investor. This can’t be fluff. It should show that you’ve done your homework and you understand the value that a particular investor could bring to the company.

I know this content is redundant with a lot of other posts, but I’m also surprised at how often I see pitches that just aren’t that good, even when the business itself holds promise. Hopefully this will help to raise the standard a bit, or at least be useful to people raising money.

Rebooting Your TV

2009-11-09T23:23:43Z

I wrote a guest column for NewTeeVee with some predictions for how Internet video will get to TV sets. Check it out.

003. Going Commando

2009-12-03T21:18:10Z

William H. Sullivan, the U.S. Ambassador to Laos in the 1960’s described commandos: “…you have first of all to be a volunteer; secondly, you have to be prepared to take extraordinary risks, to function outside of the normal chains of command and also to be able to make life and death decisions immediately. It takes a special breed.”

Sullivan should know, since he helped employ hundreds of commandos and special operations forces to organize the CIA’s nine year secrete war in Laos against the communist Pathet Lao and the Vietcong, but more on that latter.

It’s a mistake to actually organize secret wars, especially as a startup. But, the idea of having a few people on your team who are highly versatile and can be dropped into a wide range of situations is a good one.

High-growth startups regularly encounter new challenges and new business needs that they don’t have the people to staff. You launch your amazing product; customers are pounding down the door; and only a few months later, you discover that many of them need consulting help. Who do you send on Monday morning?

Similar situations recur again and again. You’re online community needs community policing. You realize fraud is a big problem in your payment system that needs to be fixed now. You see an opportunity to grow quickly in Europe. A new market segment wants your product but your current sales team isn’t equipped to figure out and implement a new deal structure. The list goes on.

The solution to these problems is to have a few business commandos on your team: multi-functional, versatile, creative problem solvers who are eager to take on problems they’ve never seen before.

This type of a talent usually has a career that shows versatility. For example, they may have engineering training, an MBA, experience in a variety of industries, time spent consulting or as an analyst at a top-tier investment bank, and a history of tacking risks and learning new skills on the fly.

Business commandos give you the flexibility to expand ahead of hiring specialists. When you need to do that new deal in a new market, it may be months before you find, hire, and bring on board someone who will make it repeatable. Business commandos give your company an expansion joint—a way to grow quickly into a new opportunity that you then solidify by backfilling with special purpose talent that can bring consistency and experience to the role.

I grew up doing product marketing, so I tend to hire business commandos into the product marketing team, but that’s not the only place to put them. I’ve seen them in business development, the ranks of executives, and just hanging around the CEO. They are the “A Players” that everyone calls on when you have a problem that needs to get fixed.

Having one or two people who can go start the consulting program, open the office in London, do the unique negotiations with a customer, create the first anti-fraud program, etc. is invaluable.

But you start running into problems if you leave them in one place for too long, which is why this mostly applies to high-growth companies that face one new challenge after another as they grow.

First, the individuals get bored. By their nature they want the excitement of a new challenge. If they don’t feel like they’re stretching, they start talking about moving on.

Second, if one of the new areas turns out to be one you want to continue investing in, you should fill the positions with people who are experienced and committed to that field. Without them, you won’t have the stability that you need, and you’ll find that what started out as a highly effective solution becomes a headache.

It’s also important to put it on the P&L, so to speak, so everyone in the company can see that the new function (consulting, anti-fraud, the London office, etc.) is real and needs everyone’s support.

We didn’t do that in Laos. We left the commandos in for a decade and kept the war secrete. Hundreds of thousands died and ultimately the Pathet Lao won. So the moral is don’t send in commandos if you’re not ready to pull them out or send in troops for the long run.

Actually, that’s stretching the analogy too far.

The moral of the war we fought in Laos during from 1964 – 1973 is that using the CIA to organize secrete wars, prisons, etc. is wrong, and it doesn’t work. Sadly, that lesson is still sinking in.

(Note: See The Ravens by Christopher Robbins for a fascinating account of the war.)