1776

• Thomas Circle/McPherson Square, 1133 15th St NW
• Website

AOL Fishbowl Labs

• AOL Corporate campus in Ashburn, VA
• Website
• AOL’s effort to incubate and give back to the DC Tech commmunity, this free space is loaded up with perks, chief among them being able to get mentorship from a deep bench of AOL corporate talent.
• Fletcher Jones (fletcher.jones@teamaol.com) — he’s very busy, so you’re best off getting an intro from one of the startups in the space already (e.g. Speek)

Canvas Co/work

• Dupont Circle
• 1203 19th Street NW, Third Floor, Washington, DC 20036
• Flexible desk options from the daily drop-ins to the casual drop-bys to the everyday, from less then $20/day.
• That only thing that beats the location are the people; a community for the creatives with an environment to match.
• Kallie (202-556-1203 / kallie@canvas.co) or http://canvas.co/work

Silver Spring Innovaton Center

• Downtown Silver Spring - 8070 Georgia Avenue
• Website
• Contact: Steve Kapani, 301-589-2034

Teqcorner

• Tysons Corner
• 1616 Anderson Rd, McLean, VA 22102
• Lots of private offices ranging from $600 – $2400 and 2-20 person companies.
• iLabs (coworking space): $150/month/company, up to 3 days a week
• iLabs (coworking space): $300/month/company, 24/7 access
• Shared kitchens, free coffee, conference rooms, copiers / fax, receptionist service, mailbox. Big room for events. Free parking. First month free. Lots of events.
• Mix of startups and small tech businesses.
• Myra – myra@teqcorner.com – 703-286-0808-  http://www.teqcorner.com

Telecom Industry Association

• Arlington, Courthouse
• 1320 N Courthouse Rd, Arlington, VA
• TIA is an industry association that has a very cool office space, and they’re trying to contribute to the community by creating a “startup membership”.  This membership gives you access to their offices, conference rooms and event space in exchange for a reasonable membership fee.
• The only place I’ve ever visited with a 100 Gbps connection to the internet!
• http://www.tiaonline.org/weve-moved
• You’re best off getting an intro from someone already in the space. Eg. Judy Schramm or Sam Aparicio 

UberOffices

• Rosslyn, Tyson’s Corner & Dupont Circle
• Rosslyn & Tyson’s have space now. Dupont coming in September
• $300/mo for desk in open area or $2000/mo for furnished office w/ sliding door that fits 4-5 people
• Conference rooms that can be used whenever available, kitchen, outdoor terrace, coffee, internet, beer, about 25-30 other startups & excellent community vibe, pitch days, very good mentors.
• http://uberoffices.com/
• (571) 335-8237 or info@uberoffices.com

WeSpace

• Reston, in front of the Reston Town Center
• 1801 Reston Parkway, Suite 300, Reston VA 20190
• Daily drop in $30. Monthly Drop-In $250 Private space from $750.
• Tour - http://wespace.biz/tour/
• Andrew Nachison (andrew@wemedia.com) – 703-651-1452 - http://wespace.biz

The post Office space for startups in the DC metro area appeared first on Sam Aparicio.

• Credit cards expire quicker than you think. On average, a credit card has a likely expiration date of 18 months or less. The challenge is to remind your subscribers so that you don’t miss payments because of expiration.
• Credit cards get stolen all the time. This has two side effects: your customer’s bank will cancel cards that you have on file, and when you go out to charge them, you will find out that you can’t process payments. Also, you’ll have customers who are actually using stolen cards to defraud you, and eventually you’ll have to deal both with the fraud, and the original cardholder.
• Cardholders issue card disputes instead of contacting you with their billing problem. The industry calls this “friendly fraud”. It takes an average of 90 minutes to dispute a chargeback. If you don’t dispute them, not only are you getting your revenue struck, it will affect your credit worthiness with the credit card companies.
• Merchant processors can hold your money for as long as they want to. If a company like First Data Merchant Services or American Express Merchant Services thinks that there is a risk that your customers will be issuing chargebacks, they are authorized to hold whatever credit card proceeds they deem necessary to cover their risk. Their risk provisions can last for months.
• It’s easy for revenue to slip through the cracks. The transaction chain between your customer paying for something and you getting the money in the bank is long. It normally involves: your product collecting the payment information, a recurring billing solution calculating the charges, a payment gateway sending the transaction to the acquirer, a merchant bank running transaction batches, and your bank, receiving nightly deposits. Because there are so many moving parts, a configuration error, a delay, or other sorts of gremlins may cause you to lose or to postpone the collection of thousands of dollars in revenue.
• Securing credit cards is hard. By taking credit cards, you are agreeing to the card companies’ data security standard, known as PCI. PCI is a beast. The fastest way to comply with PCI is to not store or transmit credit card numbers, and leave that to a specialized party like a payment gateway (e.g. a data vault). But it’s easy for credit cards to be written down in orders, or by employees in customer service… each of these instances increases the chance of insider fraud.

What can you do about these challenges? For starters, get educated. Also, consider other forms of payment, like eCheck (also known as ACH), wire transfer, or old fashioned checks. Think about pre-pay models. Put clear guidelines in place about what kind of customer can pay you with a credit card and what kind cannot.

The post Challenges of accepting credit cards appeared first on Sam Aparicio.

(c) Digital_Rampage

You can chase revenue. You can prioritize revenue. But when revenue is your only goal, you become a slave to revenue.

Revenue is like happiness. The more it becomes your goal, the less likely it is that you will attain it.

Why do startups become revenue slaves?

• They are undercapitalized or in survival mode
• They are being pushed by an aggressive investor with a timeline
• Their founders run out of patience seeking fit
• They are under pressure from competitors

Whatever the reason, revenue slavery shares with human slavery the same absence of meaningful outcomes. While a slave, all purpose, all freedom, and all enjoyment is gone. There is no other goal than to live another day.

Not only that. It’s a vicious cycle:

• You chase the wrong customers
• You build the wrong features
• You destroy morale
• You hurt your company valuation

It’s not easy to get out of the yoke of revenue. But it can be done. Cut costs, lower your lofty ambitions, sell someone on your vision. Renegotiate a bad deal. Give yourself a deadline. (“Damnit! We’re going to get to break even this summer”)

The post Slaves to revenue appeared first on Sam Aparicio.

He brings a consumer internet mindset to a market, voice conferencing, in need of innovation. We can talk about audio conferencing in some other post, because what really caught my attention was the contrast between his approach to building a killer product and mine.

The Consumer Internet Approach to building a product

• It’s all about acquiring hundreds of thousands or millions of active users
• You get your users through viral loops.
• The primary focus of features is user acquisition
• The product has to be patently simple, as this is the only way to support the user base

The SAAS Approach to building a product

• It’s all about acquiring thousands to tens of thousands of paid seats / subscriptions
• You get your users through inbound marketing. Viral loops are a cherry on top.
• The primary focus of features is supporting the use cases of your target buyers
• The product has to be powerful and differentiated, as this is the only way to get prospects to pay you.

Is one approach better than the other? Neither is perfect and both have tradeoffs.

Pros:

The Consumer Internet approach will get you lots of buzz, PR, and free publicity. It should make fundraising easier. It gives you thousands of data points to iterate on your product. You stand a better chance of creating a Billion Dollar company using the Consumer Internet approach. And it’s probably more fun:

John gets Speek’s logo tattooed on his butt

The SAAS approach will get you revenue and product validation early. It gives you passionate users who cannot live without your product, and who will force you to build a sustainable business quickly. You stand a better chance of creating an exitable business using the SAAS approach.

Cons

The Consumer Internet approach is capital intensive. You’re going to be funding all your efforts out of capital for a long time. So you will give up large chunks of equity and control in the business in order to get a chance to see if there’s something to monetize later. You may find out that you built something that lots of people want to use, but very few people want to buy, and the ratio between the two may be insufficient to bring in the revenue that would justify further capital or the kind of exit necessary to satisfy the investors you onboarded. So it’s more of a boom or bust approach.

The SAAS approach is time intensive. You develop your product slowly, and may not ever discover its true market where it can flourish. You may get stuck as a niche player, and customer acquisition is hard without a brand. You may never stumble into interesting twists or pivots simply because you didn’t expose yourself to enough users, and run the risk of building something that very few people want.

Whatever approach you end up choosing, it’s important to understand the tradeoffs and to be comfortable with the inherent risks.

The post Consumer Internet vs SAAS approach to building a product appeared first on Sam Aparicio.

Inbound marketing turns marketing upside down. It is based on the belief that you don’t find customers, they find you.

So your whole job as a marketer is to be found more often and in more meaningful ways.

Inbound marketing in 60 seconds:

• Forget about “brochureware” websites – design matters only a little, and it’s all about the conversations about your company happening elsewhere other than your website
• Create remarkable content. – text, video, live webinars. Great content is not about your company. It’s about what’s in the mind of your customers. 
• Make the content easy to find – through SEO, and social media. See SEO 101.
• Share the content and engage with prospects in social networks.
• Master the call to action – the call to action is the part of your website that asks something to the web visitor (“Free Trial” or “View Demo”) and that requires their giving up of personal information.
• Nurture your leads – once you know who they are, warm them up unti they’re sales ready.
• Be more analytical – ’nuff said.
• Hire DARC marketers (Digital Citizens, Analytical Chops, with great Web Reach, and awesome Content Creators)

The post Inbound Marketing in 60 seconds appeared first on Sam Aparicio.

(c) Flickr user en-shahdi

Over the last few days I’ve met a bunch of people: fellow entrepreneurs, engineers that were teammates at prior companies, people trying to decide on the next step of their careers and we talked about risk taking.

In every conversation, there was a big decision to make, and it almost universally struck me how most of us are naturally wired to avoid risk taking. An anthropologist may have a historical explanation, probably something to do with surviving.

Thing is, this survival paradigm does not serve you well to make smart decisions. If you are part of the tech industry in the US, there is no scarcity of jobs, or of capital, or of ideas. There  is an abundance of each of these.

Under these conditions, avoiding risk robs us of the opportunity of reaping rich rewards: financial rewards, fulfillment rewards, career growth rewards.

When I was first considering leaving a well paid job to start Ringio, I sought out a business coach and shared my fears with him.

Me: What if I fail? What if my business doesn’t work out?

Coach: What if you fail, Sam? (typical coaching answer FTW Will you live under a bridge?

Me: Don’t be so drastic… I guess we’ll have a place to live.

Coach: Oh…so you mean your kids will have to walk around naked because you won’t be able to clothe them?

Me: LOL… no, I guess they can always get the hand me downs from their cousins.

Coach: Ah, I see. They won’t be able to go to college.

Me: Now that you put it so bluntly, all those things are very remote possibilities.

The thing to realize is that, unless you’re a fool, some part of your hind brain is already working overtime to keep you from undue risk taking. If you want to reap the rewards in your professional life that you’re capable of unlocking, you have to use your frontal cortex to keep your fears in check, and force yourself out of your comfort zone… in other words:

Take more risks.

The post Risk taking pays off appeared first on Sam Aparicio.

Now we know what this means. (c) FAKEGRIMLOCK

This week we got punched hard. Multiple times. We had the two longest outages of our history in two consecutive days. We lost our biggest customer (and probably more to come). Our biggest licensing partner doesn’t want to play ball anymore. Our bank account is razor thin. Fuck.

You have heard about the rollercoaster ride that is entrepreneurship. It’s not an apt analogy because rollercoasters are designed as a rapid succession of highs and lows, but in any entrepreneurial endeavor the highs and lows are very unevenly distributed. They generally come in clumps of highs followed by months of even keel, and then punishingly consecutive lows.

How do the lows feel? Frustration at first. Disbelief (“why is this happening to me?”). Anxiety. You think of giving up. Some people teeter on the verge of a nervous breakdown. I tossed and tossed for hours in bed the other night. I couldn’t possibly have gotten out of bed if it weren’t for a 10 minute long hug from my wife.

2 Excedrines and 8 hours later. The sun is out. Glorious walk in the forest. My thoughts start to get organized. More than my thoughts. My feelings.

Why am I taking everything so personally? Why do disappointments hurt so much? Then I remember. I have every penny in this. Not just my money. My investors (many of them my friends and family). 8 families who rely on this to work. My brothers in arms.

So it’s personal. And you know what that means? It means it matters so much to me that I’m not going to let it fail. Not because of this. Any of this.

So I channel my rage. Because this is what I feel. I channel it to do better. To find more reliable providers. To build a more robust system. To accelerate our sales & marketing. To improve our customer relationship tools. To find better licensing partners. I channel my rage to build a substantially better business.

I must burn.

The post Harness the rage appeared first on Sam Aparicio.

JWT’s offices in NYC

Synergy – what a beautiful thing. And it seldom happens because we’re not intentional about it. Here’s a simple way to do good and get good stuff in return: host a startup at your corporate office for a few months. Startup office space is so hard to come by that you’ll be doing the startup a huge favor.

Benefits for you:

• An infusion of fresh energy. Want your employees to be entrepreneurial? What better way than for them to see others model entrepreneurialism in their day to day activities. The speed at which a startup operates is mind-blowing, and your employees will benefit from seeing the startup’s sense of urgency.
• A dose of fresh ideas. Startups are trying new things, and they’re risking more, making edgier choices. If your company is mostly sticking to the tried and true, hosting a startup will expose your team to new technologies, new marketing approaches, new ways to sell, and new tools for collaboration.
• A great deal of goodwill. Companies don’t live in a vacuum. They’re made possible in part by the ecosystem they live in. When you do good to those coming after you, they will remember. They will be more willing to refer new hires to you, to send opportunities your way, to speak good things about your company. All this positive karma helps your business in intangible, but real ways.

Benefits for the startup:

• Subsidized office space. You already know how important it is to have a good space for collaboration. Startups need it just as badly, but the commercial real estate market doesn’t really cater to them. Your free or cheap office space is a godsend to the startup.
  
• Employees who watch and learn. Every startup is filled with people who are not really sure if they are doing it the right way. For the most part, they benchmark themselves against other startups, when in reality, many of the great business practices are more prevalent in more established companies like yours. By seeing your team operate, the startup accelerates its pace of learning.
• Much needed mentoring, and cheerleading. Do you remember when your company was a startup? Weren’t there people there who you looked up to? Well, now it’s others who look up to you! What you say, your feedback, your encouragement, your cheerleading means a whole lot to them.

Some practical advice to make it all work:

• Sign a mutual NDA. You want everyone on both sides to be clear that what goes on in the office is confidential.
• Sign a mutual non-solicit. You don’t want to be poaching the startup employees, or viceversa.
• Have clear rules about how long and how much.

The post Top reasons for hosting a startup in your corporate office space appeared first on Sam Aparicio.

All hat, no cattle by Rick Zimmerman

Glen Hellman recently threw a shot across the bow to the DC Tech entrepreneur community. It managed both to stir and to revulse. After all, he called DC Tech founders a bunch of unhappy, feckless complainers. In his view, our choices as entrepreneurs are to move to California or to educate DC Tech investors about why our businesses deserve to be funded.

Then the community responded:

WOW what a terrible perspective

Is that what you want? Good companies deciding to leave?

No real encouragement to entrepreneurs that value the opinion of someone like Glen who’s “been there done that” in the blog, more like a rant.

Why give Glen veto power over that…veto power to go solve the problem that is eating you up inside, day after day?

It will require substantial efforts at INVESTOR education. I don’t see much of that going on here. And even if someone does take that on, it will take many years before you have an appreciable increase in the number of angels in this region

The main problem I see with Glen’s perspective is that it is rather one-sided. It puts the entire onus on founders. But if you think about it for a minute, it is investors who have a primary interest in building a thriving startup community. Without it they’ll be limited to subpar returns.

Fact is, there are plenty of founders who are building distinct, high-value businesses in town. Focused on:

• Solid business models going after solid revenue growth.
• In a grounded, systematic and mature manner.
• Targeting cash-rich customers with differentiated hard-core technology
• Building high-performance teams with significant competence and corporate experience.

So, while we’re happy to educate, that is not our primary goal. Our goal is to build our business. But we have an opinion too. It is really up to the investor community to:

• Invest in what they know, not in what SV investors know — if you spent your career and made your money in the enterprise, or in telecom, and then invest in a social media startup for restaurant reviews or whatever, you will be getting what you deserve. Investors who succeed focus on what they know. So should you.
• Police itself for fake or inactive investors — Investing is about returns. In order to get them, you have to invest. If you like to network with other successful entrepreneurs, there’s no need to join an investment breakfast club. If your VC fund appears active but it’s a zombie, don’t pretend like you’re a dealmaker. Just move to another fund, raise your own fund, or become an entrepreneur. Active investors should do what they can to expose those in the community who are giving them a bad name.
• Get the Titans of tech involved — We have in this town a few entrepreneurs who made a few hundred million to a few billion dollars in tech. Most of them are involved in nationwide efforts (like Steve Case with StartupAmerica) or not at all (like Michael Saylor). Bring those people into the investor community because of their savvy, their connections, and, yes, their capital.
• Become extra helpful – The seemingly endless supply of deals that you assume exists in town is created by the scarcity of investors and the relative low quality of investments, but as the founder community matures in DC the quality will go up, and more people will get into the funder game. As the supply of investors increases, the cost of being standoffish, unresponsive, or simply unhelpful will skyrocket. The legendary angels, those with career-long track records, are frequently identified as people who went out of their way to help their founders. If you want quality dealflow, you gotta build a reputation for being an asset to the company you’re looking to fund.

And let’s leave the confrontational rhetoric for some other town.

(This is cross-posted from the Washington Business Journal Techflash newsletter. Awesome startup news source)

The post DC Tech investors also need to step it up appeared first on Sam Aparicio.

Report #1: Online conversion metrics

SAAS Conversions Benchmark. Click to open PDF.

Totango very lucidly explains how 10,000 monthly web visitors can be turned into 60-200 retained customers after 90 days depending on the trial model, and pegs benchmark monthly churn at 2.5%.

Their recommendations for maximum conversions:

• Big top of the funnel with top quality content
• No credit card trials work significantly better
• Monitoring the active trial users and nurture the next tier of users maximizes trial conversion chances
• Minimize churn by looking for people who don’t use the product and reach out to them.

Report #2: SAAS financial metrics

This monster survey from Pacific Crest highlights growth, retention, margin analysis, use of capital and other metrics of interest to investors, founding teams and boards. It covers a wide spectrum of private SAAS companies, so make sure you focus on your revenue segment and your particular go-to-market approach.

Pacific Crest SAAS Benchmark report, click to open PDF.

Highlights:

• YOY Revenue growth >65%
• SAAS companies with an inside sales go to market have a significantly higher growth rate than field sales or internet sales.
• Good SAAS companies are upselling to the tune of 18% of their new annualized recurring revenue.
• Customer acquisition cost equals 0.93 of ACV. That means if you’re not spending an entire year’s of new recurring revenue on marketing you’re probably slowing down your growth.
• Margin should be around 70%. Sales around 1/3. R&D around 1/4. G&A around 15%
• Try to get at least 50% of your ACV secured in annual or longer contracts
• It takes a lot of capital to reach revenue milestones.
  • It took 2 years & $5M for these companies to get to $1M ACV
  • It took 3.5 years & $10M to get to $5M ACV… my guess is that the capital number has gone down in the last 3 years.
• Then, there’s a whole section dedicated to churn, which is worth an entire new post. (You can always refer to the guru) Suffice to say that growing SAAS companies are total masters of churn, and that, when taking into account upsells, they have negative churn, which means that the same base of customers provides ~6% more annualized recurring revenue every year that goes by.

You may want to check out David Skok’s interpretation of some of these numbers, as he sheds some light into what they should be.

The post Marketing & Financial SAAS Metrics for Startups appeared first on Sam Aparicio.

Lead Management for SAAS (click for larger version)

You’re going to want to implement this worfklow in your CRM system of choice. At Ringio we use SugarCRM, but most systems will allow you to configure your flow as needed.

• New – Anything comes into the system as New. For example, a signup, a whitepaper download, a webinar attendee. This is the starting point for your marketing team.
• Disqualified – If the lead is junk, trash it. A Disqualified lead is a lead that will waste your sales team’s time.
• Qualified – as far as marketing can see, this lead is ready to engage in a personalized conversation about needs, pain points, and your service.
• Nurturing – this lead could be a buyer, but they’re not ready. This is where all the slow buyers, all the people who want to read your content, all the people who ask questions but have no urgency go.
• Converted – this is a lead that a sales person, after an initial exchange with the lead, turns into an opportunity. A converted lead has an associated sales opportunity somewhere in the CRM.
• Unreachable – it looked good from marketing’s perspective, but the lead won‘t talk to sales or return emails. Use your judgment to figure out why they’re unresponsive. Either they were supposed to have been disqualified, or they needed to be nurtured.
• Not target buyer – it looked good for marketing, but a few more questions from sales uncover that the buyer has no budget, or your product won’t really fit their needs.
• Future buyer – the product is a good fit and this is a target prospect, but there is no buying urgency. Sales should return this lead to marketing for further nurturing.
• Customer - hurrah! You converted the opportunity into a deal. Keep them happy.
• Lost - so they had budget and your product was a good fit, but they took a pass. This is the group you need to focus on in your win/loss analysis.

The post Lead Management appeared first on Sam Aparicio.

You can use this type of document to train your sales people to fish for pain points in areas where you’re strong. Your lead generation people can use it to hone in on the right kind of buyers. And your engineers can focus on building around high differentiation.

Competitive analysis template (Click to open in Google Docs)

Broadly speaking:

• The stuff in green is your ace-in-the-hole features that will help you command a premium in the market. Ultimately they are the reason why you’ll become a dominant player or get acquired.
• The stuff in yellow is where you can build confidence in your price points, because it’s valued and you have an advantage. There are lots of buyers who care about the stuff in yellow, and it’s hard to hit ever bigger numbers if you don’t do well there.
• You make promises to customers who ask for the stuff in purple, because the majority of your roadmap items should be in those categories, so it means they will be available soon, right?
• Buyers who value the stuff in red are hard to win with your product proposition. You need to have the discipline to say lots of “no” to people asking for these things. Or steer away from the product into a relationship or non-functional advantage value proposition.

If you want to learn more about this stuff, I recommend the guys at Pragmatic Marketing.

The post Competitive analysis template appeared first on Sam Aparicio.

If you’re responsible for revenue at a SAAS company you have to understand the impact of recurrence. Every extra $1,000 in Monthly Recurring Revenue (MRR) contributes $78k to the annualized revenue number.

This is basic math, but it’s funny how human psychology works. You don’t think much of a couple thousand bucks. But here’s what a couple thousand bucks in extra MRR buys you:

• A new hire
• Office space for 5 people
• 1,600 customers at $100 CAC
• $30k bonuses for 5 people in your team
•  An all-expenses paid cruise for a company of 30 people

Let’s say you’re growing at $5k of new MRR/mo and that last year you did $1M in annual rev. This year you’ll do $1.4M. That’s 40% growth. That might mean you’re sitting on a $5-6M valuation. If you increase your new MRR to $7k/mo you’ll end up this year at $1.6M. Or 60% growth. Suddenly, your valuation jumps to $10M. So those extra two grand can swing potential cash to your investors by $4M in an exit!

So, next time somebody pooh poohs those extra two grand, point them over here.

The post Recurring revenue impact for SAAS appeared first on Sam Aparicio.

from flickr user deflam

“Done done” is an expression that describes a fully accomplished outcome. It’s easy to get something done. Not so easy to get it done done.

If you did something that moved the ball forward on a project, maybe you think it’s done. But is it fully done? Is it there all the way? Can someone depend on the outcome without further actions needed?

Done means complete from the perspective of the do-er.

Done done means complete from the perspective of the asker.

If you get used to doing things all the way your actions will be powerful!

Done done for developers.

Don’t confuse with:

• Git’r done
• What’s done is done
• Done and done

The post Done Done appeared first on Sam Aparicio.

The book was written by and is the story of a brawny SEAL who was part of the team who eventually breached the Bin Laden compound in Abottabad. It is a fairly terrible read, but a good first hand account.

The movie centers on Maya, the brainy CIA operative who stubbornly and intelligently put together all the clues that led to the discovery of Bin Laden’s location.

It’s a fascinating story because it provides a small unvarnished glimpse into the world of counterterrorism, and because it highlights how teamwork benefits from skilled multidisciplinary work.

Maya (or Jen in the book) is an intense, fibrous woman who is single-mindedly focused on one goal: to catch Bin Laden. She exhibits the traits of a mastermind: someone of high intellectual ability who can read the clues better than her peers, and whose work ethic and lack of multi-pronged agenda provides the context for achieving results of strategic importance.

So she finds the most wanted man in the world.

But then, she has to sit back and wait (and harass) others to go get him.

And this is where the brawn comes in. Highly trained soldiers, bordering on the psychopathic. Men who live for the mission. In love with their weapons. Their tactics. Professional assassins. Those are the guys who get UBL.

The contrast between the brain and the brawn is so striking. You are bound to like more the element with which you personally identify most.

But at the end of the day, nothing would have been accomplished without one and the other relying on each other to get the result.

It’s funny because in startups there is the same kind of dichotomy.

Engineers tend to be brainy. They see everything through a “prove with data” paradigm. But also they are notorious cave dwellers. Have a hard time empathizing with normal people.

Sales people tend to be brawny.  They see themselves as heros. Each quarter as a mission. Highly competitive. Loud and gregarious.

And when the two worldviews collide…

But those collisions are mostly avoidable. Harmony stems from a deep understanding that brain without brawn doesn’t get the job done, and that brawn without brain will get a job done, but most likely not the right job.

Don’t let one culture drown out the other or you won’t capture your UBL.

The post The Brain & the Brawn: Startup lessons from Bin Laden’s Capture appeared first on Sam Aparicio.

This is a lessons learned post. This lesson has cost me a great deal to learn.

If you are an entrepreneur, you are comfortable taking risk. You take an above average amount of risk. This, it is my belief, pays off, because most people play it too careful and end up overestimating the consequences of failure, which robs them of positive outcomes in their life.

The other side to that coin, though, is that as an entrepreneur you are more susceptible to taking on too much risk. As you progress in your journey of risk taking, the rewards of the risks you took that paid off de-sensitize you to the  potentially disastrous consequences of events where the unlikely scenario materialized. So you end up discounting those possibilities.

This is especially true of risks associated with execution. When you plan, you consider the chances of bad outcomes mostly in isolation. But if you look at the post-mortem of any disaster, you see a repeating pattern. It is normally a confluence of events with bad outcomes (the ‘perfect storm’) that produces an unexpected result.

In business, we have the wonderful construct of cash. It is an amazing tool because so much of what we do is connected to it. Cash is a currency that we can use to transform many problems. You can solve a sales problem, a marketing problem, a legal problem, a scaling problem, a technical problem, almost any problem with cash. This is why we say ‘Cash is king’. Cash gets pre-eminence in the entrepreneurial tool chest because of its versatility in value creation. Cash de-risks almost any situation and its absence increases the risk.

This is why running out of money in business is so risky. Startups run out of money all the time. Startups are chronically undercapitalized. The VC community preaches the “don’t run out of money” mantra aggressively. But despite this, it still happens all the time. For understandable reasons. But I don’t want to dwell on why startups run out of money.

Instead, I want to simply point out that, as they approach this point, companies enter into Survival Mode. And describe the dynamics of Survival Mode.

Think about the following situations in life:

• A person who survives on less than $2/day – their day, every day, from sunrise onwards, is a constant struggle to put food in their bodies and on the bodies of their family. Sometimes this activity of putting food in their bodies will take well past sunset. Nourishment wipes out any time for anything that might improve their situation. (This, BTW, is why Microcredits are one of the most powerful ideas of our century)
• A football team that is behind on the scorebard when it arrives to the 2 minute warning – the lack of time in the game forces them into taking huge risks to get posession, and if they have possession they are forced into a risky 2-minute, or even 1-minute drill. During the drill every play becomes a must win play. Every down has to move the chains AND stop the clock.
• An airplane that is about to land – in the final seconds, as it hovers above the runway, it performs a maneuver called a landing flare, in which the pilot points the nose of the airplane upward. But as it does this, the airplane is likely to loose speed and possibly stall. Every little control input becomes a do or crash maneuver.

In all these situations, the subject, be it the poor person, the football team or the airplane, are operating in critical conditions, or Survival Mode. Any mistakes will have far more disastrous consequences than under normal operating conditions.

So for businesses, Survival Mode is when you are close to zero cash. A business in survival mode:

• Struggles with execution as its management goes out of its way to get out of survival mode.
• Struggles to retain its talent
• Does bad or worse deals as its negotiating hand gets weakened
• Puts strain on its partners and suppliers who become a de facto source of finance through aging of the A/P
• Destroys long term value by focusing on short term outcomes
• Rapidly deteriorates morale

As you can see, this is highly inefficient, and a plausible prelude to actual failure. So how do you avoid being in Survival Mode?

• Raise more money than you think you need
• Spend more frugally than you think reasonable
• Hustle more / execute with more intensity than what feels right
• Be more aggressive than your nature when it comes to deal making
• Save for a rainy day
• Make more conservative financial projections. Then, when you’re done, make them even more conservative.
• Have a Plan B for everything that is a big revenue contributor.

Survival Mode is no fun. And you can avoid it by giving yourself a bigger margin of safety. And still, you will be in Survival Mode. And then, may the force be with you.

The post Survival Mode appeared first on Sam Aparicio.

Telecommunications matters

What do you call an organization that knows who I am, where I am, who I talk to, what I buy, what I like and how I spend my time? No, you silly, not the CIA. I’m talking about my telecom provider!

What industry other than telecom has the ability to reach almost 100% of the population with its products, services and marketing, transact with that population wherever they are, and do it reliably and cost effectively?

Yet, despite all these unique advantages, telcos are playing defense when it comes to many of their products, and are seeing global Internet giants emerge as formidable competitors.

The reason why Google, Microsoft, Apple and Facebook have become a threat for telcos around the world, other than their scale, is that almost all value in technological innovation is happening in networked software.

And nobody has understood better how to build this kind of application than Internet developers. Seeing how well their approach to innovation has worked over the last decade, Internet giants have recently decided to expand their business into telecom. After all, it’s a sweet opportunity.

So telecom companies find themselves at a critical juncture, where their customers have gotten a taste of the salient attributes of the products offered by Internet giants (magical user experiences, self-service, simplicity and ubiquity) and feel almost universally negative about what their telco company has to offer.

Will they answer the threat or retrench into their lobbying bastions of protection by regulation and golden shares?

Innovation happening elsewhere

Ironically, it’s not like the world of telecom is devoid of innovation. On the contrary, innovation in telecom is exploding: it’s just, for the most part, not exploding at telecoms, but despite telecoms.

It’s startups and a few service providers who are shaping up the future of telecom. On their side they have a simplicity of purpose and better tools. Against them, a lack of channel muscle and not enough access to the PSTN

These innovators are testing their own concepts in the market. To the untrained eye they may look different. Upon closer inspection, one can see these concepts share common traits:

• Being telecom apps in their own right, they offer the point and click configurability that we’ve come to expect from internet services. As a result, immediacy of service.
• They are dead simple to use. In the worst cases, they are an order of magnitude simpler to use than the alternatives they replace.
• They mix modalities: voice, SMS, chat, conferencing, email, social network updates… it all comes together in a winning formula. The boundaries between communications channels don’t matter to the user, so they don’t matter to the apps.
• They track conversations, not just calls. This is a significant paradigm shift.
• They make the most of the available data out there, whether private, public, or available through the social graph, to enrich and smooth the interaction.
• They’re either broadly applicable and highly innovative or narrowly applicable but very useful.

The skeptic may ask: if innovation is exploding, why isn’t there a true telecom 2.0 industry emerging, why are we not seeing a displacement of the existing players?

The answer lies in the nature of the voice network. This formidable construct of the 20th century has both created immense value and become a natural barrier that acts as a moat to anybody that is trying to disrupt it. Every time one of these applications touches it, it inhibits the growth of the app. A true anticatalyst.

If these innovations were in the hands of a true first-class member of the PSTN they would spread like wildfire.

A time to be brave

In the face of all this pressure, what can telecom companies do?

1 – Rediscover “tele-” and “-communications”

The soul of telecom is

• “tele-” – at a distance: dealing with the reality of physical separation
• “-communication” – the exchange of thoughts and messages: in their 3 manifestations (information exchange, storytelling, presence as articulated by Douglas Galibi and translated for the rest of us by Martin Geddes) For the liberally educated, communication comes from “common”+“union”+“act of”, when we communicate we are reinforcing what we have in common that unites us)

Everywhere and everytime that distance (not just physical, but more conceptually as a gap that separates two parties to interact) is an obstacle for humans to interact, in either exchanging information or weaving their common story, or sensing where each other is in relation to those around us that give meaning to our humanity as social animals, telecom has an important role to play.

Lest I be accused of getting lost in philosophical weeds, let’s observe that a human need of such a high order, and services and products that facilitate the fulfilment of this need will command a high premium in the market.

A sustainable way to measure the relevance of telecom is its continued involvement in the delivery of this mission.

If, as a telecom product manager or strategist you look at your portfolio and you can’t see how it’s delivering on this mission, you can take it as a sign that the apps and services are in need of rethink.

2 – Open the gates to the innovators

So other people today are trying to define the products and services of the future of telecom. Why be afraid? Does this mean that they will own the network? No. Will they own the channel, and the brand? No. These are not to be understimated assets that will invariably remain in the firm control of telecoms for as long as they are relevant to their customers.

How can we be more relevant? Bring products to the masses that deliver on our mission.

How can we bring more of these products? Open the gates to all the innovators out there. Make it possible for internet developers to define category killing telecom apps, then make it easier for them to deploy them to your customer base than to go around you. Put your best people in charge of this process.

What are developers clamoring for?

Telecom APIs to control the network

To:

• Initiate and control phone calls, text messages, videos, chats, twitter & facebook posts. All aspects of it.
• Intercept, redirect, and treat phone calls with voice automation
• Provision, control, modify any of the network objects: DIDs, Customers, CPE, Applications, Devices (anything with a SIM card),
• Manage and extend the identity of customers, as well as understand their privacy preferences
• Locate the customers
• Transact with customers
• Manage the relationship with customers… get their feedback, promote to them, upsell and cross-sell them, reward them, remind them, nurture them.

Ingredient technologies

That would allow them to focus on higher level matters:

• High quality codecs for audio and video (Why did Google buy GIPS and open source their stuff?)
• High quality network stacks for different protocols
• Softphones
• Super-reliable, telco-scale softswitching plaforms

Market data

Developers want to know and understand who your customers are, what they buy, what their behaviors are, what messages work with them, and this information is so hard to come by.

Marketing channels that work

It doesn’t matter if it’s an app store, or a a section on your website, or your own custom-made marketing program. What matters is that it be no different from your main marketing efforts that work so powerfully and that took you decades to develop. If you make something special for third party developers it is almost guaranteed to suck.

An open mind about other business models

Charging for minutes and bytes is obscenely great, but will only get you so far. Transactions, subscriptions, two-sided models, site licenses, there’s a rich panoply of alternatives which are working in the software world, why not adopt them?

It’s not just about what the line item is, it’s also about the layer of the value that we charge for. There’s plenty of money to be made selling a utility but sometimes the distance between the utility and a differentiated offering is not that far. (Think bottled water vs tap water)

Access to your salesforce and retail presence

Last but not least, if you find there is demand for an app or service, how can it hurt to use all the assets at your disposal to maximize the demand? All those brick and mortar investments where a customer can have a human explain face to face how it works can dramatically boost the adoption rate, so why not use it?

3 – M&A baby

The last piece of the puzzle for thriving in the next few years of telecom is acquisitions. Every year, hundreds of tech startups are acquired by the software giants. These acquisitions effectively expand the R&D capabilities of companies like Google, Apple, Microsoft and Facebook, and serve them well in recruiting top talent. The acquired companies bring more than IP and bodies, they constantly renew the entrepreneurial spirit within the absorbing organizations. A not-so-unintended side effect is that they take off the market potentially new competitors.

Frankly, I find this to be some of the lowest hanging fruit for transforming a telecom company. A good place for tech startups at a telecom would be their innovation labs. With strong leadership one could successfully merge the hunger of software startup people with the knowhow of top network engineers and marketers from the operating units.

The post Telecom, Developers and Innovation appeared first on Sam Aparicio.

From: Sam
To: the inner circle of people in my life

Hello dear person,

I like you. I enjoy your company. I respect and possibly admire you.

But please don’t confuse that with a willingness to be your SECRETARY.

If you need to find a phone number, how to get to x location, a bank account or social security number, the name of somebody we met and who gave you their business card, a copy of a document, or any of a myriad of facts and figures that we have previously shared, I would kindly ask you to LIUY – Look It Up Yourself

I know, I know: it looks like it’s faster to ask me for it, but a) it pisses me off (not good) and b) in the long run, it will be faster to LIUY.

Why, you ask? Well, when you do the extra 10% effort to look it up, it will bother you. To eliminate that bother, you may even do an extra 10% of storing it it somewhere that is easily accessible. And as you rinse and repeat, you will increase your productivity.

Contrary to popular belief, we organized people are not soul-less. Maybe a bit more boring and annoying. But hey, that’s not the full picture.

Sam

PS1: Since I really like you, I have made a list of tools to help you LIUY more often.

Some tools to keep you organized:

• Your email: these days your email has almost every single piece of info you’ll ever need. Make sure yours is searchable. Get on Gmail. If you’re an Outlook diehard, get Xobni. Learn to use the search operators. E.g. “from:michael franz has:attachment”
• Your files: use spotlight. Use Alfred. Windows user? Upgrade to Windows 7. Tip
• Your thoughts: Evernote
• Your passwords, bank account numbers, credit cards, social security numbers, etc: 1Password, LastPass
• Your paper documents: have you consider getting a scanner? Too lazy to scan? OfficeDrop

The post Look it up yourself – LIUY appeared first on Sam Aparicio.

Let’s start by saying that:

So…. if I can do it, YOU can do it too!

The basic structure of a pitch:

• One sentence on what your company does.
• Framing the problem and why it matters
• Outlining the most salient aspect of the solution
• Emphasizing its core benefit
• Wrapping it up with who uses it and why

All pitches are given orally, so write it down if it helps you structure it, but don’t use words that belong to written English, use words and expressions of oral English. When you say your pitch, it needs to sound natural, and believable, and not rehearsed.

When you say your pitch you cannot be thinking about the pitch… it goes too fast, you need to be sensing the person who is getting it.

In order to deliver this pitch at TechCrawl East I had to rehearse for 3 hours straight… it took me 60 rehearsals or so to get it down.

Why go through all the trouble?

It took me a year to realize that, as the founder of a startup, I’m always selling. Almost every conversation with a stranger is a sale. If I’m not selling, I’m not moving the ball forward. So I might as well be prepared to sell, and having a pitch ready is a handy tool for that.

The post How to construct your pitch appeared first on Sam Aparicio.

Biggest challenges for startups when it comes to teambuilding:

• Competing for the really good talent against more established players
• Getting those critical first few hires right… wrong first VP of Sales can wreck the company, or so the legend goes.
• Coming up with the right incentive structure
• Getting everybody on the same page

So where do you find them:

• This is where high-quality networking pays off. Networking understood as a 10-year horizon effort of truly helping others through proactive generosity and social arbitrage, as Keith Ferrazzi would put it.
• At your competitors. You get the talent, they lose a key player.
• Through your personal social life. I’m bad at this, but others report a lot of success. (Think kid’s soccer, golf outings… etc)
• At local events, user groups.
• Through your investors (especially for “gray hair”)

Who do you look for:

• People who share your core values. Forget about company culture: you are the company culture.
• People who are very different from you. Different skill-set, different network, different professional experience.
• People who are smarter than you. Remember the old adage: A players hire A+ players, B players hire C players.
• In new hires, you value attitude more than aptitude.

How do you compensate them:

• The golden rule here is to first understand what motivates them. Then cater their compensation to match that.
• For example: are they highly economically driven or are they looking to change the world? Do they like the entrepreneurial lifestyle, or the accomplishments?
• Understand their risk aversion. Equity is wasted on risk averse hires. Cash compensation doesn’t motivate those who want to be part of a grander mission.

Non-cash compensation:

• Multiple forms of equity, listed from strongest to weakest: restricted stock (shares with vesting), stock options (appreciation of shares, with vesting), phantom stock (cash bonus based on share-equivalent value), stock appreciation rights (cash bonus based on value equivalent to the appreciation of a stock)
• But make sure that your employees understand what they’re getting and don’t feel like you screwed them later
• Many of these instruments have terrible tax consequences: they won’t understand them so the right thing to do is to work with a lawyer to design the right instruments. (Restricted stock seems like the way to go at the moment for Corporations and Profit Interests for LLCs)
• Understand that all these instruments, when based on illiquid shares have problems of valuation. Either use a recent investment round and grant them at a higher valuation or spend $2,500 and get a 409(a) valuation done.

Legalese

• Employment agreement – what senior executives joining your management team get, which include terms of employment designed to protect them.
• Employee agreement – what everybody else gets, designed primarily to protect the company.
• The core issues to solve are mostly related to what happens where employees leave.
• Make sure that these agreements are written in a way that they would pass muster with an investor doing due diligence: not too sweet, not too exotic.
• Don’t deviate from a standard document.

Traditional ideas of HR

• The traditional interview process is an intellectually bankrupt idea. People rehearse for these things and they tell you very little. Instead, spend time working with them on real problems.
• Employee handbooks, processes, all of that. We all hate it. It’s demotivating. Try the Netflix approach to HR instead.

The actual team-building

This is something we’ve discussed in other blog posts. But basically, you’re creating a forward looking story of what you’re out to do, and you’re telling the story over and over, drilling it into each person’s heads, fleshing out their role in the story, until the team has a shared vision. Then you go out and model it in your behavior, and you remind people about it when conflict arises, or when things look dark, or when you deviate.

You tell this story to the team members, and the prospects you hire, and the investors, the analysts, your coaches and mentors, anybody who will listen… and that puts everybody in the right mindset to maximize the chances. It’s not so much a self-fulfilling prophecy but the notion that people operate better when they have a higher purpose that they can remember.

On a personal note, I’m working hard on these things, but my experience is limited and I’ve got much to learn, so don’t take all these points as advice, as much as curated information that I believe to be true

photo credit – flickr user michael costolo – link

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