antonybrydon

Why Roger Federer should run your start-up

2010-02-04T17:53:15-08:00

I had dinner list week with Sean Ellis. I wanted to talk to him about an advisory role at ShopWell, and we spent most of the dinner talking about metrics-driven marketing. It was interesting enough to prompt the first post here in a few months.

I've spent a fair bit time recently thinking about the point where a start-up can and should stop focusing exclusively on the product and spread its energy across marketing and other efforts. My analogy is tennis - there's a strong natural impulse to look past the ball and across the court (towards the opponent, and the spot you want to hit) before you make impact, but its critical to look at the ball all the way through impact to truly crush it. Federer is a great example. In the photo below, you can see he's left looking at where the ball used to be well after the stroke.

Similarly, I think its critical to follow-through in a start up, focusing manically on the product until the company finds product market fit.

The conversation with Sean was interesting because he's developed a simple survey to assess whether to whether the product is successful enough to start to market it, essentially whether its found product market fit. Since LogMeIn's IPO, demand for his metrics-driven marketing has exceeded the limited supply of his hours, and he's had to pick the right products and the companies that are ready to divide their focus.

The survey has eight questions, but two stand-out as particularly interesting because they speak directly to whether the company is ready to go to market:

How would you feel if you could no longer use the product?
What would you likely use as an alternative if the product were no longer available?

The survey is typically sent to a subset of users that have used the product enough to see the core value prop, and Sean's is specifically looking for the percentage that would describe themselves as "very disappointed" if they could no longer use the service. Bottom line: if these users wouldn't be disappointed to lose the service, it's time to go back into the garage and build a better product. If they would be disappointed but can easily name an alternative, you've got a utility, and it's time to differentiate. If your users would be disappointed and don't have a alternative ready, you're ready to go to market. Beyond this, there are two other questions I love:

What's the primary benefit you receive from the product?
What type of person do you think would benefit most from the product?

I love these questions because they speak to the fact that the value that you envision when you build the product is not necessarily the value the users perceive, and the user you envisioned may not be the best target. For example:

You built a mobile social network but folks are using it as an address book
You built a backup service but folks are using it for synchronization
You build a collaboration portal but kids are using it to trade music

Fred Wilson's talked about the majority of his successful exits coming from companies with the agility to pursue products and business models markedly different than the original vision, and there's often gold in these hills if the company is keen enough to spot it and agile enough to pursue it.

My bottom line takeaway: Follow through until you find product market fit before dividing your resources and attention, use metrics and surveys to objectively when you are there, maintain a keen eye for the opportunities you haven't envisioned.

Self-study

2010-01-15T18:01:00-08:00

At ShopWell, we're in the midst of ethnography and focus groups on shopping and how different audiences think about food. It's great to watch, a product of IDEO and user-centric design. I'm curious how I fit in to these segments, so I took a camera and jotted down a few notes on what I was thinking on my last trip.

"What should I do for dinner? Could pick up a taco...but had one yesterday. Could get take out at Pomodoro...but not very healthy. Maybe pick up groceries. Which supermarket? Trader Joe's is too far. Whole foods is right on 24th, near home. But the parking lot will be totally full. Maybe I'll go out after all. Nah, I'll just go."

"Start with Strawberries, as usual. These look kinda random. They're going to fall out all over the basket."

"I'll get these. Nice boxes, will fit in the basket nicely."

"And raspberries, for cereal."

"Not sure if I have blueberries at home, should I get more?"

"One soft avocado, one hard avocado. Am I eating too many of these?"

"One lemon, for broiling fish."

"Limes? No, I'm sick of Corona."

"I wish there was a way to keep these fresh. Seems I always cook half, and the other half goes bad."

"I'll get two this time, try to waste less."

"Need to figure out more ways to cook potatos."

"Wow, haven't seen corn here in a long time. Guess it's in season. I'll grab two."

"Think I have a butternut squash at home, will grab a couple of apples to make a mash."

"Need plain yogurt for granola, a standard."

" Need yogurt drink, as usual."

"This looks less expensive than the granola I usually buy. But a pain to scoop it out. I'll skip it."

"Haven't bought tortillas in a while. Need to find one in a resealable bag."

"This should do me for the week."

"Not sure what's down this aisle. Should I go? Nah, too far."

"Here's my regular granola. Turns out it's cheaper than the loose stuff. Weird."

"Where's that rice you don't have to cook?"

"Not sure if I can even eat Tortilla Chips without beer, but here goes/"

"I have a ton of fish at home, but I don't want to thaw it. I'll grab a fresh one with spices."

"I'm always starving when the fish runs out, maybe a pizza this time."

"Or two..."

"And some Indian food, these are always good to have around."

"This cheese is so fricking expensive. And so small. Actually, it feels nice to buy something so small and expensive, like a delicacy."

"I wish this bread could keep for more than 2 days. Should I freeze it?"

"I never have enough snacks, maybe some dried fruit this time?"

"Always need some chocolate. Can't remember if this one tastes good or bad."

"Feeling a bit under the weather. Allergic to OJ, maybe grab grapefruit juice?"

$122 for two bags. Ridiculous. I've got to go to Trader Joe's next time"

A Few Other Observations

As usual, I carried a basket and shopped quickly for what I could fit in the basket
I bought the usuals, 90% of what I bought are my standard items
I didn't look at a food label on a package or at any ingredients in detail
I looked at individual prices regularly but never closely, they never really factored in

ShopWell

2009-07-24T21:34:00-07:00

I've made a small investment in ShopWell, joined the board, and will be working with the team to help launch the company over the next several months. The company is a spin-off of IDEO, backed by New Venture Partners, and is developing a new service around food and nutrition.

The company is in quiet mode right now, but without describing too much, there were a few things that intrigued me...

First, the growing attention and anxiety around food and nutrition suggests a wave of interest in the topic that bodes well for a start up, and I look for these waves (see Greg McAdoo of Sequoia describe these waves at Startup School 2008, starts at slide 11 or 4:46). Whether it's books like Omnivore's Dilemma, movies like Food Inc and Supersize Me, or a high profile debate about sodas in schools, it's hard to turn anywhere without finding the topic. I was in Borders Books in Palo Alto yesterday, where they were expanding the food and nutrition shelves into a broader section. When it comes to start ups, I like the ones that are working to ride an existing wave to shore, rather than the ones that are stuck trying to generate their own momentum, and this fits the bill.

Second, the top-box consumer demand test I ran was exceptionally compelling, one of the strongest I've run in the last several years, top 10% to be specific. Across almost every demographic, income level, geography, there was a high interest in a simple service that would help optimize health and nutrition. Beyond general interest and awareness, one aspect that seemed to drive this demand was a a growing part of the population that has some food related health condition. Only a fraction of the population may be overweight, or have high cholesterol, or have a food allergy, or be lactose intolerant, etc, but when you combine these factors, over 90% of those surveyed had at least one "condition." Unsurprisingly, one of the significant demographic differences included a markedly higher interest from women, especially those with children, and a lower interest from younger, single, men.

Third, the founding team is from IDEO and highly focused on user-centric design, and I haven't had the opportunity to work with many startups where product design was the core competency, and I'm eager to work with the team to find product market fit. Seeing demand for your concept is one thing, delivering a product that meets and unlocks that demand is another. I like to use the teleporter as an example: if I surveyed demand for a device that instantly transported you to your destination and saved a half-day of cross-country schlepping, demand would be extraordinarily high, but building that product would be a bit of a challenge. Mint's delivering the demand that Quicken and discontinued MSFT Money haven't been able to via a better product. In any case, building a engaging product that unlocks demand is a critical challenge for any startup, and the chance to work with IDEO on the challenge was too interesting to pass up.

Last but not least, I've got a personal interest in health and nutrition that's been growing over the last few years. At 37, I've jumped from the Masters A category in rowing the the Masters B category, where aerobic capacity starts dropping as much as 1% per year. I'm also finding that dropping weight to get to the 155 lb lightweight mark in the spring is a bit tougher each year; where I used to be able to drop the weight strictly by increasing exercise, I now have to incorporate diet.

So that's it. We'll be building the teamover the next several months, focusing heavily on products, user experience, engineering, and operations. Other roles will include metrics-driven marketing (seo, sem, etc), Drop me a line if you'ld like to learn more.

Privacy is still a Problem (we're not over it)

2009-06-12T16:24:11-07:00

Back in 1999, Scott McNealy of Sun famously told a group of reporters and analysts "You have zero privacy. Get over it."

At the same time Josh Harris launched his human fishbowl experiment "We Live in Public," which eerily anticipated today's era of Twitter and Facebook. The story has recently been made into a movie I'm hoping to see.

When Jeff Patterson and I started Visible Path (now Hoovers Connect) in 2003, privacy concerns often dominated in personal and professional circles, and we built more and more features in the software to safeguard privacy.

Today, as folks broadcast more and more of their lives publicly, I've wondered if attitudes and concerns about privacy had markedly shifted. To check, I ran a quick market survey and was surprised by some of the results:

People are still very concerned about privacy
Across the board - gender, marital status, geographic location, and occupation, people were very concerned about privacy. The bullets below refer to the percentage of folks that ranked themselves as "very concerned" about a topic, the highest level on a 5 point scale:

34.9% of all parents were “very concerned” (top box) about “inappropriate info about my child appearing online”

31.7% of all respondents were “very concerned” about “Inappropriate info about me appearing online”

42.6% of all respondents were “very concerned” about “My personal information being collected and sold”

33.7% of all respondents were “very concerned” about “Undesirable info about me appearing in search results”

Younger people are as concerned as older people
prevailing wisdom seems to be that younger generations are not only more comfortable with new technologies, but less concerned about privacy, but this wasn't supported by the data. Although concern did increase modestly in older demographics, concern in the 17-24 year old group was still high:

There is high demand for privacy services
Around the same time I was thinking about this topic, I discovered into a company called ReputationDefender advertising for a VP Marketing. The company offers privacy services (roughly $9.95 to $14.95 per month) called MyChild, MyReputation, MyPrivacy, MyEdge that aim to address each of the concerns I described above. I asked the same survey set whether or not they would subscribe to these services, and found that the demand correlated well to the concerns described above:

11.6% of parents would “definitely” sign up for a service that would scan the web for references to children and package it for parents:
12.9% of respondents would “definitely” sign up for a service that would scan the web for references to them and provide help and assistance on how to remove unwanted content
19.8% of respondents would definitely sign up for a service that searched online databases and helped them remove their personal information

* Important to note that my description of the service did not include price; demand for services at any price point is likely to be lower.

As a side note, a few funny facts emerged

Large gender discrepancies existed in the demand for services that protected a child's privacy. 21.7% of parents with one female child would “definitely” sign up, while virtually no parents with one male child would “definitely” sign up

Demand for services that protect a child's privacy go down steadily and rapidly among parents with more children. For parents with 3+ children, demand was very low

Bottom Line: Wrapping up, I think there is a strong argument that an increasing comfort with the technologies that allow us to live, connect and share publicly is coupled with an increasing concern about the long term implications. It's a big problem that still needs to be solved.

Last but not least, if you would like a copy of the survey summary and analysis, please let me know in the comments and I will email you a copy.

Due diligence on demand

2009-04-29T13:02:15-07:00

There's a very good post on venture hacks today on how to close a term sheet quickly. I agree with two-and-a-half of the three hacks¹ and want to add a fourth that I think deserves a spot on the summary list:

4. Have all due diligence ready to go on demand

Due diligence on demand means that the company's due diligence is always current, up-to-date, and ready to be delivered to a potential partner, investor or acquiror at a moment's notice.

Given that financing and acquisitions are rare (once a year), this may seem like overkill. But it actually demands that the company keep its books current and in perfect order, which has a number of other associated and equally important benefits.

At Visible Path, we documented our business operations from day one around a typical due diligence checklist that a public company might use when acquiring another public company. The index has 14 sections and 100+ subsections that include corporate governance, stockholder information, securities agreements, material contracts, product and mfg information, government regulations, litigation and audit information, employee information, employee benefit information, financial information, marketing information, property, employee benefit plan matters, facilities. With thanks to Peter Astiz of DLA Piper (who helped me create the original document) and Neal Williams of Carr & Ferrell (who used it to manage our financings and transactions), I've appended the actual document below:

The week we incorporated, we only had a handful of documents in these binders: our Certificate of Incorporation, our Bylaws, our founders Employment Agreements, and a cap table describing the ownership of the company. A few documents and about 100 empty tabs. These empty binders seemed a bit silly when we started but as we ran the business - hired employees, filed trademarks, signed up partners, each relevant document was filed in the appropriate section as it occurred, and the binders quickly filled out.

When we signed a term sheet for our series A roughly a year into the business, we were able to simply hit "print" and send our prospective investors the index above and about 4 linear feet of binders that included every necessary document.

This level of preparation can give a big confidence boost to a prospective investor and the law firm handling their due diligence. In the end, diligence is about confidence. It's extremely rare that a firm will go through every document. The diligence that they do is less about checking every single document and more about getting an overall confidence level that the company is competently handling it's legal, financial and governance issues.

Twenty bounds of binders meticulously arranged around an index make a good thud on a desk, and the sound is deep and hearty - and gives a good boost of confidence to the folks on the other side of the desk. Even if you never send the complete binders - simply sending the index, explaining what's behind it, and offering to send select sections as needed, can be a great boost.

Not having diligence ready can have the opposite effect. I've seen financings delayed weeks because the company's documentation is not up to date and the company scrambles to get them in order. Worse, the first diligence package send to the investor's firm arrives late and incomplete, or contains dated documents with errors. Instead of increasing confident and decreasing the risk around the deal, the exact opposite happens, and the attorneys feel bound to dig in deeper.

Finally, there's a side benefit to having due diligence on demand that relates to Nivi's BATNA point: it subtly conveys, without you saying it, that the company is seriously pursuing its round and engaged with other investors.

¹Agree wholeheartedly with point one and point three. I agree with substance of the point two - "set a firm closing date for your lawyers and justify it with something like, 'I’m leaving the country on that date'", but not with the tone implied by the point. A firm target closing date is important, but I think an entrepreneur's relationship with the company's law firm should to be strong enough that fabricated reasons aren't needed. The real truth is pretty compelling - you are a start up and any delay in the deal creates risk that you can't afford. If your counsel doesn't understand that and demonstrate that, you've picked the wrong partner. I avoid prioritizing the pedigree when selecting a firm; instead pick the firm and the partner that understands that you've got one company in your 'portfolio' that you care about, and will sprint like mad when the company needs it.