OnStartups

6 Quick Tips For Landing That Startup Dream Job

Dharmesh Shah — Mon, 29 Jun 2009 09:13:00 GMT

My startup, HubSpot, has done a fair amount of recruiting/hiring over the past year (the team has grown by over 100%, despite the down-turn in the economy). Along the way, I’ve found some “patterns” to the recruiting that we do and the kind of people that end up joining us.

I’m going to stay away from the overly obvious stuff (mostly because I have no idea what the obvious stuff actually is). I’m also going to assume that you’re already smart and passionate and all the other trimmings of a star candidate.

Tips For Landing That Startup Dream Job

1. Match the culture: Remember that advice about dressing one level above the job you’re hiring into? Or the “it’s better to be over-dressed” advice? Forget that. Dress so that you’ll fit in. Dress as if you’re already on the team. Any startup you’d want to work for is not going to hold it against you for not dressing up. They wouldn’t expect you to wear something to an interview that they wouldn’t wear themselves into work.

2. Convey A Passion For Startups: If you’ve worked for startups before — talk about them. Talk about what it was like. Especially talk about the painful parts. They want to know that you know what it’s like to be on a startup team. We want to know that you’ve got that weird genetic flaw that causes you to want to take on that special kind of pain that only entrepreneurial people understand. If you haven’t worked for a startup before, come up with some really convincing reasons as to why you want to start now. And it can’t just be because you got laid off from some Fortune 500 company last week. Remember that startups are not in the business of creating jobs, they’re in the business of creating value. Help them understand how you’re going to be able to help them create value that nobody else can.

3. Read, Read, Read: Many startups today have a pretty wide footprint on the web. Does the CEO tweet? Does the CTO write a blog? Read them. You don’t have to be able to write a graduate thesis on their work, but you should be a wee bit familiar with their thoughts and leanings. Oh, and most startups will have you meet the founder/CEO/CTO before you are made an offer and they’re all human. They write for a reason — one of which is to be read; and maybe even understood.

4. Join The Conversation: Find out where the startup team is hanging out and chatting on the web. For HubSpot, for example, we have a relatively active group of people on Twitter. (Just do a Twitter search on “HubSpot” and you’ll see what I mean). Get to know some of the faces/names and find out the tone of the conversations happening around the startup you’re looking to join.

5. Connect Online: Chances are, whoever you talk to on the startup team is going to do a quick scan for you online (LinkedIn, Facebook, Twitter, blogosphere, etc.). Why not be more proactive, learn about them and connect with them online first? Another advantage to this approach? You could ask (without being too pushy or aggressive) some of the “insiders” you connect to what it’s like to work there. The idea is to convey that you care, you’re doing your homework and are savvy enough to make sure you want to work there first. Startup recruiting is a two-way street (the company should bring a lot to you, just like you’re going to be bringing a lot to them).

6. Emphasize That You “Get Stuff Done”: The single most important attribute that many startups look for in recruits is that they get stuff done. You can be the most brilliant engineer/marketer/whatever on the planet, but if you don’t have a tendency to get a lot of stuff done, you’re not an attractive recruit. The reason is obvious and simple — but I’ll tell you anyways. Startups are a grand exercise in resource-deprivation. There’s always too much work and not enough people. If the startup team hires you, they want to know that you’re going to put a dent in their workload — not just come up with great ideas for other people to work on.

What do you think? If you’ve got your own startup, what would sway you? If you’ve interviewed at startups, what’s worked and what hasn’t? Would love to hear your thoughts in the comments.

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Angel Investor Non-Admissons: 10 Things They Won't Say

Dharmesh Shah — Mon, 15 Jun 2009 10:34:00 GMT

As a tribute to the very funny VC Non-Admissions and the follow-up Founder Non-Admissions, I offer to you my own take on this — from an angel investor perspective. Sorry that mine aren’t in a cool presentation form with pictures and such. I don’t have that kind of talent.

10 Things An Angel Investor Will Never Say

1. I really want to support entrepreneurs — but just those that are going to make me money.

2. I dread having to explain your business idea to my spouse (who can veto any deal).

3. I don’t really have enough stake in your company to spam my network on your behalf.

4. I was lying when I said that some of my best friends were VCs. Even VCs aren’t best friends with VCs.

5. I have no idea what the hell you’re talking about 50% of the time. What’s a socially-semantic mobile platform for non-virtual currency mean? (Oh, it’s an iPhone/Facebook payment app).

6. The other 50% of the time, you have no idea what you’re talking about. Anti-dilution provisions in a termsheet are not about beer.

7. How the public market did last week does impact my decision making.

8. I like to invest in cool startups because it helps make up for high school.

9. I don’t understand what half the things in the funding agreement mean either, but I’m betting that most of them are to protect me, not you.

10. I really didn’t put the check in the mail the day I said I did. I was golfing that day. I sucked.

11. I’m in it to mostly have fun. If I wanted to do unpleasant work, I’d have my own startup.

—-

Feel free to add your best ones in the comments section, or if you prefer, you can tweet me @dharmesh.

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Flat Is The New Up: Introducing Hockey Stick 2.0 [cartoon]

Dharmesh Shah — Thu, 28 May 2009 11:02:00 GMT

Did this tickle your funny bone? Please tweet it.

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Is Your Startup Practicing Inward Facing Dog?

Dharmesh Shah — Fri, 15 May 2009 10:24:00 GMT

For those curious about the title, it’s a reference to “downward facing dog” (one of the most widely reognized yoga poses).

Is your startup practicing inward facing dog? That is, are you overly focused on things going inside the company with too little attention on what might be going on outside the company?

Signs That Your Startup Is Practicing Inward Facing Dog

1. More than a few days go by and you haven’t talked to a customer other than to provide support or try to sell them something.

2. When people bring up things like “Did you hear about X (a direct competitor) doing Y?” most of the time, you hadn’t heard the news and some of the times, you didn’t even know who X was. Note: I don’t advocate being obsessed about your competition — and I particularly don’t advise following them (i.e. X did Y, so I have to do Y…). But, I think there’s a lot that can be learned simply by observing your competitors.

3. You haven’t located 5 people in your industry whose blogs you think are worth reading regularly. I don’t care what industry you’re in, there are bloggers out there writing things you should be reading. Even if you disagree with them. Even if you think your industry is “broken” and you’re out to transform it. In fact, especially if you think your industry is broken. Read, read, read.

4. You haven’t been to an industry conference in a couple of years (or ever). Yes, budgets are tight, and most of the content from these things makes it onto the web anyways, but it’s not about the content. Yes, it’s unlikely you’re going to get a lot of customer leads. But, it’s not about those those things. It’s about learning. It’s about the real-time, in-person conversations. (This coming from an introvert — who hates real-time conversations).

5. You’re not watching the news about VC financings, acquisitions and IPOs in your market (or adjacent markets). Even if you don’t plan on raising funding. Even if your startup is going to crush everyone else, getting a sense of how the money is flowing in your industry is important to know. What kinds of companies are getting funded? Who is funding them? What other deals have they done? Who is getting bought? You don’t need to get obsessed with this, but just a quick scan once a week is well worth it.

6. You don’t meet with other startup founders that are at your stage — or beyond. Though we founders like to believe that our situations are unique and nobody else can possibly have the same kinds of challenges and problems we do — it’s just not true. There are many, many patterns that continually reoccur in startups. Even weird things that you think are too arcane to be common.

What other signs do you think there are that a startup is too inward focused? What do you do to make sure you stay in touch with what’s going on outside your four walls?

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The Attention Economy vs. The Wallet Economy

Dharmesh Shah — Fri, 08 May 2009 10:18:00 GMT

The attention economy has been all the rage for startups for a while.

Here’s the general line of reasoning with the attention economy:

1. Grab user’s attention.

2. Sell that attention to others.

Like many abstractions, this one is a tad over-simplified, but not so much as to not be useful. A bunch of modern-day startups fall into the above pattern. Get a mass of users to your shiny-new website then monetize that attention through things like advertising (basically reselling that attention).

Why do so many web startups take this approach? I think it’s for two primary reasons: 1) it’s easier and 2) it’s more fun. To understand this better, let’s contrast the attention economy to that other economy: the wallet economy. In the wallet economy, instead of competing for a share of people’s attention, you’re competing for a share of their wallet.

The wallet economy presents one big problem for many entrepreneurs (including me): It involes this unpleasant activity known as selling something. If you’re a software entrepreneur, I’m going to bet that if you had to pick amongst things like writing code, selling stuff and cleaning the office — selling would likely be at the bottom of your list. So, entrepreneurs will prefer doing (almost) anything other than selling. Enter AdSense, stage left. “I’ll just put AdSense on my site”. If the entrepreneur is not completely delusional, she’ll add statements like: “Yes, it’s only pennies, but you have to start somewhere, and we’ll grow the traffic over time.”

What’s really nice about the whole attention economy is that you can become a revenue-generating company today (revenue-generating is becoming fashionable again). And, because there are advertising networks out there like AdSense, you’re not dependent on all that selling muckiness. You get to avoid that whole “convincing customers to pay business”.

But, I have a few issuese with the attention economy, from a software perspective (I’ve written about this before, but I’m going to be a bit crisper this time):

1. Attention Is A Scarce Resource: Attention is a bit limited and fragmented. I’d ague that it’s getting increasingly harder to get people’s attention. The level of attention I can devote to stuff has stayed pretty much the same throughout the years. I might make more money now than I did 10 years ago, but the level of attention I can spend hasn’t gone up much — certainly not proportionally to income.

2. Battle of User and Advertiser: There’s a conflict between getting monetizable attention and solving the user’s problem. Let me explain: Back in the good old days of software, users had a problem, you wrote software that solved that problem, and they paid you for it. Nice and simple. All your incentives were to solve the problem as well as you could for as many people as possible. Now, contrast this with a web application that is monetizing attention. Now, not only do you need to make the user happy (so they’ll visit in the first place), you have to make the advertiser happy as well (because they’re buying that user’s attention). In fact, to make any real money you have to get better and better at interrupting the user well enough so that they pay attention to the ads. Basically, you have to balance the needs of your users and the needs of your advertisers. That’s hard.

3. Advertisers Make Lousy Customers: Even with all the fancy content-matching algorithms that pair up a given ad to a given context, I still don’t like advertising. I really don’t. I can see why it’s important in a lot of industries — but I don’t know that software is one of them. Given the choice between solving a user’s problem (which I understand, and hopefully care about) and an advertiser’s problem — I’d choose solving the user’s problem. There’s more creativity involved. It’s more focused. I can control it better. There’s only so much multi-variant testing you can do to get that CTR from 1.2% to 1.4%.

I’ve never had a business that focused on the attention economy (however, I have built tools like twitter grader that generate lots of traffic), so I may be missing something here. On the other hand, I have built startups that focus on the wallet economy, and I must say, my simple-minded nature likes the notion of solving problems and getting people to pay me to do so. Call me old-fashioned.

What do you think? Have you succeeded with the attention economy (succeeded, as in, you have a decent chance of making in your lifetime?) Has the monetization model changed at all that would make the attention economy more viable? Would love to read your thoughts in the comments.

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Why Startups Should ALWAYS Compromise When Hiring

Dharmesh Shah — Thu, 23 Apr 2009 12:07:00 GMT

There’s a non-zero chance that you’re reading this because you were thinking: “What the heck is he talking about? Shouldn't startups be hiring the best people possible? What's this about comprimising?”

And, if you were thinking that, you’d be right. Startups should hire the best people possible. But, if you re-read the title, you’ll notice that I’m saying you should always compromise. Why? Because there’s no such thing as the absolutely perfect hire along every possible dimension. If you recruit people that you think were a “no-compromise” hire, you’re deluding yourself with unrealistic expectations. Nobody’s perfect (and if they are, you probably couldn’t recruit or afford them anyways).

Everyone you bring on is a compromise. The trick is to compromise on the right things.

Let me explain. Here are several different attributes or “dimensions of awesomeness” you might seek for your startup recruit:

1. Passion: Are they fired-up?

2. Experience: Have they done this particular job before? Did they succeed at it?

3. Intelligence: Are they smart?

4. Academics: Do they have the right degree? From the right place?

5. Hunger: Are they motivated? Are they ambitious?

6. Risk-Tolerance: Can they share the risk? Or, are they looking to make fair market value?

7. Scrappiness: Can they get by with little? Are they resourceful?

8. Loyalty: Can you get them to commit to your cause? Will they be fiercely loyal?

Those are just a few I thought of off the top of my head. It’s by no means a complete list. I intentionally left out things like “integrity”, because it’s hard to argue in favor of compromising on integrity. That’s just plain stupid.

But just about all of the attributes listed above could be compromised a little in exchange for something else. For example, if you were somehow able to grade a recruit along all these dimensions, you might find that someone scores “average” in the academics dimension — but is off-the-charts smart (happens all the time). So, you might decide that it’s OK for them not to have an ivy league degree. Or, someone might be so smart, passionate and entrepreneurial — but lacking in experience. Perhaps that’s OK too. Or, maybe you really do have to have the absolutely perfect person along every possible dimension, but they’re so good, you’re just not sure you’re going to be able to keep them engaged. Perhaps you’ll have to compromise on the loyalty front.

The point is, like with just about everything related to startups (and lots of things in life), there are tradeoffs. You need to figure out which dimensions are absolutely critical (where you will not give), and which ones you’re willing to compromise a little on. There’s no right answer — it depends on your business, your culture, your values and your instincts.

What do you think? Which attributes of people do you value the most? What would you be willing to compromise on, if you could get almost everything else? What things do you hold inviolate — that you would never compromise on? Please leave a comment.

Or, if you'd prefer, you can take the conversation to twitter. You can find me @dharmesh on twitter.

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Startup Marketing: Tactical Tips From The Trenches

Dharmesh Shah — Tue, 07 Apr 2009 10:50:00 GMT

I’m speaking at the Inbound Marketing Summit later this month in San Francisco. There are some really great speakers lined up (David Meerman Scott, Chris Brogan, Charlene Li, Paul Gillin and others). If you’re looking to learn more about inbound marketing and how to get found in Google, social media and blogs, this should be a great event. If you decide to attend, use the code HUB200 for a special $200 discount. Drop me a note if you’re going to be there, would love to meet-up.

My session’s going to be called “Startup Marketing: Tips From The Trenches”. As I get my thoughts together for this, I started making a list of all of the things I’d advise a new startup to do to get things kicked off with a limited budget. As it turns out, there are a lot of tactical steps that individually don’t do much, but in aggregate start laying the foundation for much bigger things. So, I thought I’d share some of these things with you. This list is not intended to be a comprehensive “here are all the things you should do”, but more of a “if I were starting a company today, here’s what I would do in the first 10 days…” It’s written in a short, punchy style. I’ll likely revise it in the future as I add more things, but I wanted to get “Version 1.0” out there for you and see what you think.

Tactical Tips for Startup Marketing

1. Pick a name that works. Needs to be simple, memorable and unambiguous. The “.com” domain should be available without playing tricks with the name (like dropping vowels or adding dashes). Also, just because there’s no website on a domain doesn’t mean it’s “available”. Available means something you can register immediately, or that has a price that you’re willing to pay attached to it. Don’t wander down the rabbit hole of finding the perfect name if you have no indication that it’s for sale. This will waste a bunch of your time.

2. Put a simple website up. Doesn’t have to be fancy. The goal is to put enough content on the site to start the Google sandbox clock. Don’t worry about the site not saying much (nobody’s going to be looking at it anyways). Make sure to use a decent content management system (CMS) and not Dreamweaver or (shudder) FrontPage. Just because you can hand-craft HTML doesn’t mean you should for your startup website. The structure and features of a CMS are going to be important someday. Trust me.

3. Get some links into the new startup website. If you have a personal website, link to it from there. If you have friends/associates/family with websites, cash in some favor chips and get them to link to it. The goal is to get the Google crawler to start indexing your site. You only need one decent link to get things going. To check whether your site is being indexed by Google, do a search like site:yoursite.com (not perfect, but good enough).

4. Setup a twitter account. Name of the account should match your company/domain name. Link to your twitter account from your main site and to your main site from your twitter account. (Note: If you have a natural skepticism of the value of twitter, you are welcome to this skepticism. But, go ahead and grab your twitter account anyways. You can resume your skepticism after you do that).

5. Add e-mail subscription. Let people sign-up to get an email when you’re ready to show them the product. A simple email signup form is sufficient.

6. Get a nice logo. Run a quick contest on CrowdSpring or 99Designs and you’ll wind up with something decent enough. Make sure you get the vector file (Illustrator or EPS file) as part of the final deliverable. If you've got design skills yourself, or know somebody really good that can do it, even better.

7. Setup a Facebook business page (known as a “fan” page) for your startup. You’re not going to get many fans in the early days. That’s OK. Just get something out there. Add a simple description of your startup, link back to your main website. The usual stuff.

8. Create a clean Facebook URL. Facebook doesn’t allow simple/vanity URLs (unless you're big and established). So, to make things easier on yourself (and your users), setup a sub-domain and redirect it to your Facebook page. For example, here’s what I did: facebook.hubspot.com (notice that when you visit this link, it takes you automatically to the ugly Facebook URL). Setting up this sub-domain is free and usually pretty easy (it’s done through whoever your registrar is for your domain).

9. Kick off a blog. You can use one of the free hosting tools (like WordPress.com), but don’t use their domain name. Put your blog on blog.yourcompany.com — or if you’re proficient and can install WP locally, make it yourcompany.com/blog. Do NOT make it yourcompany.wordpress.com. The reason is that you want to control all the SEO authority for your blog and channel it towards your main website. And, chances are, WordPress.com doesn’t need your help on the SEO front.

10. Write a blog article that describes how you got to this point. What problem you’re hoping to solve. Why you picked this problem. It should feel a little uncomfortable revealing what you’re revealing. If you have tendencies towards being in “Stealth Mode”, read “Stealth Mode, Schmealth Mode”. With inbound marketing, you’re going to need to get used to revealing things that might be uncomfortable. Get over it.

11. Setup Google Alerts for at least the following: Your company name, link:yourdomain.com and “industry term”. Try to find a good balance for your industry term so you don’t get flooded with alerts that you simply will start ignoring. This may take some iteration and refining. (Oh, and use the “As It Happens” option in Google Alerts so you’re not waiting around for new alerts to show up).

12. Find three closest competitors. Pretend like someone is paying you $10,000 for locating each competitor. Really try hard. Barely managed to find three? Take a lot of effort? Great. Now find 3 more. Of these 6, pick the two that you think are the most marketing savvy. They should have a Website Grade > 90, a blog with some readers, a website that you can envision people using, a twitter account that they actually post to, etc. These are the competitors that you’re going to start “tracking”. Add their names and websites to your Google Alerts.

13. Update your LinkedIn profile (you do have a LinkedIn profile, right)? Mention your new startup, and add a link to your startup website to one of the three slots for this purpose. Make sure you specify the anchor text. Don’t go with the default of “My Website”. The anchor text should be your startup name and maybe a couple of words of what it does. You can look at my profile to get a sense: http://www.linkedin.com/in/dharmesh (note: I don't accept LinkedIn invites from people I don't know. If you're looking to get to know me, follow me on twitter @dharmesh).

14. Get business cards printed. Don’t go overboard, but don’t use a “free” option (because it’s not really free, it’s just subsidized). I don’t believe much in business cards, but you need them to simply avoid the 30 seconds of discussion as to why you don’t have a card when people ask you for one at conferences and meetings and such. They’re worth the price to avoid that uncomfortableness.

15. Use the Twitter Grader search feature to find high-impact twitter users in your industry. Start following them. You want to start forging relationships. Start building your twitter network. Resist the temptation to mass-follow a bunch of random people or play other games just to get your follower count up. That’s not going to matter. Get some high quality relationships going. If you’re really serious, start using an app like TweetDeck so you can more easily monitor the needed conversations.

16. Create a StumbleUpon account. Specify your areas of interest (part of registration). Spend 10 minutes a day (no more!) stumbling and voting things up/down. Start befriending those that are submitting sites that are relevant and interesting for your startup. Don’t submit your own stuff — just start contributing.

17. Subscribe to the LinkedIn Answers category that best fits your area of interest. Answer one question a day that you feel like you’ve got some expertise in. Don’t self-promote. You’re seeking to build credibility and trust — not sell anything.

18. Find the bloggers that are writing about your topic area. Subscribe to their feed, and read their stuff regularly. Leave valuable comments and participate in the conversation. (Do not spam them or write “fluff” comments. If you don’t have something useful to add to the conversation, don’t comment).

19. Start building some contacts on Facebook. Organize your users into groups (one for your business and another for friends/family). This will come in handy later. Don’t spam people and ask them to visit your website. At this point, your website is still probably not worth visiting.

20. Grade your website on Website Grader. Fix the basic things. You should be able to get a 50+ just by doing the simple things it suggests. [Disclaimer: I wrote Website Grader].

21. Get Some Analytics: Install some web analytics software and start watching your traffic. Where is it coming from? How is it growing? What keywors are people using to find you? What content are they looking at? It's ok to get a bit maniacal and obssessed about it at first. Many of us do that (and some of us never get over it).

Stay tuned for a revised edition in a few weeks as I think about this more (and watch my actual behavior). Also, if you’re interested in startups, you can follow me on twitter @dharmesh.

What have I missed? What ideas do you have on tactical things for startup marketing? What do you do?

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Startup Conversations With Myself: What Should I Work On?

Dharmesh Shah — Mon, 23 Mar 2009 10:40:00 GMT

Entrepreneurs (particularly bootstrapped ones) have a tough life. In the early days, things can get lonely. So many decisions, so many challenges, so much to do — and very little by way of clear answers.

This is a somewhat light-hearted episode in perhaps a series of articles that I’m calling “Conversations With Myself”. I’d like to think that I’m not alone in my strangeness in that I actually have these kinds of debates going on inside my head (often after 3:00 a.m.). My guess is that some of you have variations of these kinds of conversations yourself. If not, then I guess I’m just weird.

Conversations With Myself: What Should I Work On?

Me: Self, I’ve been thinking a bit about things.

My Self: Are you you sure you’re not just procrastinating? Don’t you have bugs to fix in the product or some other real work to do? Thinking is for smart people. Get back to work.

Me: That’s just it, there’s just way too much work, and the list of things to get done seems to get bigger every day — even though I’m staying up later and working harder.

My Self: So, what’s your point? It’s a startup, that’s the way it’s supposed to be. If you don’t have 10X as many ideas as you have time to do them, you don’t have enough ideas. Quit being a whiny-assed pansy. Nobody said it would be easy.

Me: Yes, yes, I get that. I know startups are hard with the 80–hour weeks and all that. What I’m saying is that there are several items in the backlog that must get done. And, as the product gets bigger and more users come on board, more and more time is taken up keeping the system running, responding to user issues and a bunch of other stuff. When will the new stuff ever get done?

My Self: Ok, so define “MUST get done”. What happens if you don’t do some of those things? The planet stops spinning? You lose some users? Your ego gets bruised? You watch one more episode of “The Office”?

Me: Ok, fair point. I guess not all of those things are technically “must-dos”.

My Self: Well, it actually goes beyond that. Not only are most of the things on your list not “must-dos”, a lot of them are probably “shouldn’t dos” .

Me: So, how do I go about figuring out what I should get done?

My Self: That’s a great question. Unfortunately, we share the same brain, so I don’t have a great answer. But, here are some things to consider.

Simple Tips For Deciding What To Work On

1. Are you tracking all of the bugs and enhancement ideas (however crazy) somewhere? If not, that’s step 1. You need a central list. Not this list and that list, but THE list The One True List.

2. Decide on a simple and semi-objective approach to classifying each item on the list. Scales of 1–10 work reasonably well. Some high level dimensions could be:

a) This will help make customers happy (0–10)

b) This will help me sell more customers (0–10)

c) This will reduce costs of keeping customers happy (0–10)

d) This will give me and my team joy and happiness (0–10)

e) How much effort will this take (0=Several lifetimes. 10=Hardly any work at all.)

Of course you don’t need to have those specific attributes, but you get the idea. Here’s why this is more useful than simply trying to assign a “priority” to an item. First off, many items in the backlog often have more or less the same priority. It’s hard to decide between them. Second, priorities change as things happen. You might wake up one month and need to focus as much as possible on getting new customers. Another month the priority might be to take your existing customers and make them happier (so they stay customers). By assigning the above attributes to each backlog item, you can “sub-sort”. The key is to remain flexible, while remaining mindful of the costs of task-switching when you change your mind. Maintain a steady velocity and keep cranking away at the items that are important.

Item (d) above is interesting. Why should you care whether a given task on the backlog will create internal joy and happiness. Shouldn’t we all be maniacally focused on customers and make money? Sure. But, startups are hard work and trying to continuously perfectly optimize is sub-optimal. Every now and then, you need to do some things that might not make sense, but might delight users or delight yourself or just plain allow you to sleep better at night. It’s worth the investment simply to keep spirits and energy up.

3. Try to build a rhythm for getting stuff done. It’s a great feeling when you can “feel” the forward progress (however small). If you get stuck on some project, put it aside and crank some of the other ones out. Don’t go too far down the rabbit hole for any particular project or task.

4. You should try to balance the kinds of tasks and projects that you select. Don’t work just on new features that will help sell the product. Or just work on things that make the UI/UX better. Or just work on system optimizations that make your costs lower. It’s important to pick a variety of tasks (with emphasis on whatever seems to be the bottleneck in the business right now).

So, what are your clever little tips and tricks to make sure you’re working on the right things? Do you struggle with trying to decide what to do?

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Startup Lessons From The Underpants Gnomes: PROFIT!

Dharmesh Shah — Fri, 27 Feb 2009 12:22:00 GMT

Are you building a profitable business? I’m not asking whether or not your business is profitable now, but whether it will ever be profitable? More importantly, does future profitability enter into your current decision-making? If not, you’re doing your business and yourself a disservice.

Leave the “no profits” model to the not-for-profits — they’re much better at it.

For some reason, many startups treat profit as a 4 letter word. The common argument goes something like this: “We’re going to create something so fantastically wonderful that millions of people are going to flock to our site, and then we’re going to be fantastically successful. Just like YouTube. Or Facebook. Or Twitter”

This reminds me of one of my favorite Southpark episode about the Underpants Gnomes.

Watch this clip if you haven’t seen it yet (or haven’t seen it recently).

The business strategy for the Underpants Gnomes goes like this:

Phase 1: Collect underpants

Phase 2: ?

Phase 3: Profit

Many startups have a business model that’s even sillier than the Underpants Gnomes. Why? Because the Underpants Gnomes are at least thinking about profits!

So, why do startups ignore profitability so often? There are several reasons, some of them pretty good. The most compelling one goes like this:

“We’re designing for high growth. In the early days, we need to be focused completely on getting as wide an audience/reach/user-base as possible. If we think about revenues/profits too early, it will undermine that growth.”

This is a reasonable argument. There’s definitely a tradeoff that occurs between growth and profitability. But, it’s short-sighted. I don’t have an issue making strategic decisions that are solving for growth. That can be fine (based on market opportunity, availability of capital, etc.) but I don’t think it’s wise to ignore profitability.

I’d argue that there’s a big advantage to thinking about profitability from Day 1 of the business. You can still decide to do things that are solving for growth, but you should at least be mindful of profitability.

Here’s what I would do:

Step 1: When looking at ideas for a startup, make sure that you pick one that has a decent chance of being profitable some day. Just because you’re not solving for profitability in the early stages, is no excuse for ignoring the future profitability potential of an idea. It’s going to matter. Trust me.

Step 2: When creating a product, make sure that you design and develop something that has hopes of being profitable some day. This goes to functionality, pricing, positioning, etc. Sure, you might give the product away for free and have zero revenues (like twitter) to start. But, someday, you’re going to need to find a way to make money from the product.

Step 3: When building the business, try to lay the groundwork so that you have hopes of making the business profitable within your lifetime. This often involves getting better at tracking the costs of delivering your offering. Sure, in the early days, it’s common to lose money on each customer (and as the joke goes “we’ll make it up in volume!”). But, your chances of survival/success go up considerably if you can get a better understanding of the economics of the business and what it will take to actually get to a point where you’re making money.

Here’s how we like to think about it at HubSpot. As the business gets built, we keep a very watchful eye on the “time to profitability” number. (This number is based on our level of capitalization and other factors). Then, as we try to make decisions, like what features to add, how fast to hire, what new projects to pursue, etc. we see how that might impact our profitability timeline. Often, we make a conscious choice to work on things that will not improve our profitability timeline — but we do that very deliberately. We try not to take the Underpants Gnomes approach of “we’ll worry about that later”. We invest in growth (vs. profitability all the time). We also make wrong guesses as to what impact certain decisions are likely to have. But it’s been very helpful to have a working hypothesis that can be iterated on.

I’d argue that profitability is important for all startups, all the time (unless you’re a not-for-profit). You can choose to defer it, just don’t ignore it. Particularly in these though times, being mindful of profitability is a good thing.

So, go forth and shoot for the stars in terms of pushing for spectacular growth — just stay mindful that you’ll likely have to get to profitability some day. Not all of us can be a Facebook or a Twitter (and in fact, most of us won’t be). And, there’s nothing wrong with making money. We are, after all, building businesses, aren’t we? AREN’T we?

What’s your take? Do you think about profitability every day? Every month? Never?

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Why Your Startup Shouldn't Copy 37signals or Fog Creek

Dharmesh Shah — Fri, 06 Feb 2009 09:29:00 GMT

The following is a guest article by Jason Cohen, founder of Smart Bear Software. He blogs about startups and marketing at http://blog.ASmartBear.com.

I don't know about you, but I'm tired of getting lectured about how my business should be more like Toyota, and like Zappos, how my blog should be more like Joel Spolsky and like Copyblogger, and how my software should be more like 37signals and like Apple.

OK, not "lectured." It's my own fault for reading too many blogs about how to run my company and how to blog and how to write software. But still!

Just because someone has success with a product or strategy doesn't mean you should copy it.

Will my blog be unsuccessful because I don't follow the Copyblogger rules that I should write like a third-grader with titles that look like they came from the cover of Cosmo?

I don't think so.

My discouragement begins with incompatible advice. For example, we're regaled with how Zappos uses Twitter as part of their phenomenal customer service which they cite as the reason for their success. Their embrace of Twitter is so complete, Zappos CEO Tony Hsieh even wrote his own Twitter beginner's tutorial.

All hail Twitter. But wait! Seth Godin, the 12th most popular blogger in the galaxy, says that social networking sites like Twitter are saturated with garbage to the point of uselessness. In fact, Seth doesn't use Twitter at all. Huh.

So which is it? Transformative or useless? Key business strategy or waste of time?

Same with blogging. The top 10 most popular blogs post more than once per day; some have used this as evidence that frequent posting is how to get popular. But when I look at my own list of favorite bloggers, most post once or twice a week at most, and some successful bloggers insist popularity increases when you post less often.

I've gone link-crazy here to illustrate a point -- that this isn't just a few people chatting about pros and cons, these are armies of bloggers, writers, and CEOs vehemently blasting away at each other. What's a little startup owner to do with all this? Who has the free time to study and research all this?

Surely the conclusion is that Twitter won't make or break your business and posting frequency won't make or break your blog.

The root problem is that the so-called "examples" we're supposed to learn from are outliers. An "outlier" is a data point well outside the normal range -- a statistical anomaly.

Malcolm Gladwell, winner of my award for Smartest Carrot-Top Lookalike, just wrote a book about outliers.

Like his other works, it's well-written, entertaining, and often incorrect.

Still, he presents evidence that at very high levels of achievement, no factor can be used to predict the success. For example, Nobel laureates are just as likely to come from unknown schools as from the Ivy Leagues.

I've noticed this in professional sports too. Kids learn the "right way" to throw a baseball, but watch major league pitchers and you'll notice they all do it differently. On a bicycle there's a correct seat height and top tube length to maximize power and prevent injury, but Jan Ulrich won the Tour de France with a short seat.

Because outliers are so far outside the norm, standard rules don't apply.

This "outlier principle" -- that extreme success is not due to simple, controllable factors -- explains the contradictions above. Zappos made over a billion dollars last year because of fantastic customer service while Amazon is the largest online retailer and doesn't even publish a phone number.

Both work because even something as fundamental as how you deal with customer service doesn't explain runaway success.

In fact, if I could pick something that all these companies have in common it's that they aren't afraid to buck conventional wisdom if they think it would be contradictory to their culture.

These companies have redefined "conventional wisdom." Is it your turn to buck the trend?

How much can we learn from outliers? Surely they have something to teach us, but when should we blaze our own trail? Leave a comment and join the conversation!

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Thoughts On The Economics Of Giving It Away

Dharmesh Shah — Sun, 01 Feb 2009 10:11:00 GMT

Chris Anderson has a new article in the WSJ titled “The Economics Of Giving It Away”.

This whole idea of free+premium (freemium) is one I’ve been fascinated by for a while. (See my article about the challenges of the freemium pricing model).

The article was good, but not a bit repetitive in places and didn’t quite have as much richness as other works from Chris. Having said that, there were so many sound bites and quotables that I couldn’t resist just grabbing a few and sharing them.

Here were my favorite bits:

1. “For the Google Generation, the Internet is the land of the free.”

Agreed that Google has trained us to expect things for free — but this makes it no less troubling. Google (at least until recently) had a relatively simple business model: Create the best search engine, make a ton of money on AdWords and do other fun stuff that helps one or the other (or just makes employees happy). They’re reducing some of the “it’s ok if it just makes employees happy” projects, but the core model hasn’t changed much. The troubling part is that you and I are not Google. Google has a reality distortion field that nobody else has. So, though it’s fine for them that they built a generation of people that expect a bunch for free, many of us have to actually figure out how to make money.

2. “The minority of customers who pay subsidize the majority who do not.”

Yep. Subsidize. That’s the right word. The trick is getting the ratio right. At some level, you need to charge a price to paying customers that matches the value being delivered (and is competitive) but that alsos makes sure that there’s enough money to pay for all those other users. Though costs for lots of things (hardware, software, tools) are falling steadily — they’re still not zero. This is one of the things I disagree with Chris on. Though he says the costs are “basically” zero, “basically zero” does not pay the bills. Often, the level of scale required to ensure that costs really are near-zero is high, and most startups will likely never get there.

3. “…when you have no money, $0.00 is a very good price.”

No argument here. In a down economy, people are even more price sensitive.

4. “The Web has become the biggest store in history and everything is 100% off.”

It’s an interesting sound bite, but not entirely accurate. We are sellers more than we are buyers. We’re selling our attention. Or perhaps even more accurately, we’re trading our attention for access to “free” stuff.

5. “The standard business model for Web companies that don't actually have a business model is advertising.”

It has taken a while for us to figure this out (again) but yes indeedy we’re back to a world where business models might actually be fashionable again. Who would’ve thunk it? You and me, that’s who. Let’s get to work.

6. “It's now time for entrepreneurs to innovate, not just with new products, but new business models.”

One of the areas that I was fascinated by, going through grad school, was how many of the tech successes of the past decade were as much about an innovative business model as they were about technology. We’re just starting to figure out how the internet can help us efficiently reach customers, build relationships and (gasp!) make money.

7. “Free is not enough. It also has to be matched with Paid.”

8. “Today's Web entrepreneurs have to not just invent products that people love, but also those that they will pay for.”

9. “Free may be the best price, but it can't be the only one.”

#7, #8, and #9 all say the same thingI could not agree more.

I’ll take this one step further. Just matching free with paid is not enough. You have to get the price that people pay “somewhat right”. The temptation for many is to make the price really low, and assume a certain (high) scale to overcome fixed costs. Don’t rationalize a really low price by assuming really high scale. To some degree, we have some anchoring (“hey, we’re giving a lot of this away for free, so people won’t pay much for the premium product”) — but that’s still no excuse.

Summary: The old strategy of simply getting a bunch of users and expecting that the details will somehow sort themselves out (like with an acquisition) just isn’t going to work right now. Probably not for a little while. Even the really successful folks like Facebook, digg and twitter haven’t figured it out yet. It’s a bit naive to think you’re not only going to get significant scale but that you’re also going to be able to monetize advertising even better. If I were you, I’d get practical and see if you can figure out a way to write software and charge for it. You know, like we used to do back in the good old days.

What do you think? Will many entrepreneurs start shifting back and tackling that highly unpleasant task of generating revenues? What are you going to do?

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More Reasons Why Now Is The Time For Hatching Something New

Dharmesh Shah — Mon, 29 Dec 2008 09:55:00 GMT

The following is a guest article by Neil Davidson. Neil Davidson is co-founder and joint CEO of Red Gate Software. He also runs the annual Business of Software Conference with Joel Spolsky. His blog is at http://blog.businessofsoftware.org and you can follow him on Twitter at http://twitter.com/neildavidson .

A couple of weeks ago, Jason Cohen of Smart Bear wrote a guest post on 6 reasons why this economy is good for startups. Damn you Jason, both for your perfect timing and for writing the blog post I wish I had written. So I'm going to have to ride on your coat tails, scrape the barrel and come up with 6 more reasons why now is as good time as any for startups.

Here they are:

1) VC money is hard to get. Yes, this is a good thing. You only need VC money for a software startup in certain, very narrow circumstances: if this isn't your first startup, and if having the money would genuinely accelerate your growth (if you're Dharmesh, for example). It takes time to get to used to running a software company. Mulla Rasrudin once said that good judgment comes from experience, and experience comes from bad judgment. Lots of money and bad judgment don't mix well. If you've not done this before then you will make many mistakes. Make small ones, not million-dollar ones, and make them without VCs breathing down your neck.

2) Even if you are unlucky enough to get VC funding, the odds are still good. In the late 1990s, in the days of Webvan, pets.com and Boo.com, the five year survival rate of VC-backed software companies was still close to 50%.

3) You need constraints to build great software. If there's one thing we've got plenty of in this economy, it's constraints. Make good use of them.

4) Constraints enforce discipline. You'll need to, among other things, manage your expenditure, focus on making products that people actually want to buy, learn the difference between cash flow and profitability and figure out how to market on a shoe-string. Now is an excellent time to forge those skills. You will need them the next time things go bad.

5) Times are turbulent, but the turbulence contains many pockets of opportunity. Big companies will be too large, or too clumsy or too slow to fill these pockets, but you, as a startup, can. And you only need the tiniest market niche to start up. Once you've started, you'll gather momentum, and you'll figure things out. Don't overanalyze: odds are you'll find success doing something other than what you intended anyway, so whether you pick a small market niche or a billion dollar opportunity doesn't matter. You'll end up doing neither.

6) In difficult times, skill and hard work, which you can control, become more important than luck, which you can't. I like this soccer analogy. If you want to compare my soccer skills with David Beckham's then don't put us both six feet away from an open goal and ask us to kick a ball into the net. I might get lucky, and he might show off and miss. Instead, start us off from the other end of pitch against a couple of defenders and a goalkeeper. Then you'll get a true picture.

Starting a business is risky, but not as risky as you think. The oft-stated fact that 90% of startups fail within their first year is an urban myth. In reality, the four year survival rate for IT startups is over 50%, and there's no evidence that this is significantly lower for companies founded in a downturn. And most start-ups that fail don’t crash and burn, owing people money and bankrupting their founders. They are quietly wound down, or sold on, and the founders set something else up or return to employment, with the added skills that even attempting, and failing, to build a business bring.

Starting up isn’t for everybody, but don't use the state of the economy as an excuse for inaction. Research shows that external factors such as the economy, or the industry you're in, aren't the only – or possibly even the main – factors that determine success. How much you love your product, and how deeply you're prepared to commit, count just as much. So choose something you are zealous about, think things through, save up some cash and quit your day job.

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Start Now: 6 Reasons Why This Economy Is Good For Startups

Dharmesh Shah — Wed, 03 Dec 2008 12:21:00 GMT

The following is a guest article by Jason Cohen. Jason is the CEO and founder of Smart Bear, Inc. Smart Bear creates tools for peer code review. Jason "gets" software startups.

---

Doom and gloom. Layoffs, bankruptcy, insolvency, bailouts. Blah blah blah Wall Street, blah blah blah Main Street.

It's a terrible time to start a company, right? Wrong!

Here are six reasons why you should start your new company right now.

1. Low opportunity cost

When the economy is booming, staying in a regular job makes sense. Generous bonuses are common when revenues are soaring, stock option grants are valuable when an IPO is imminent, your resume is improving in direct proportion to the success of the company. Upside and safety! Fabulous.

Of course that scenario is almost non-existent today. Most companies aren't hiring; many are laying off. Salaries are low, bonuses are suspended, stock options are as worthless as a vote for Pat Buchanan.

So if the alternative is working for low pay without job security, why not work for yourself and build your startup? You'll be investing your time and energy into something with more potential upside in future. If you're talented and have always toyed with the idea of a startup, financially it makes sense to do it now.

2. Cheap Talent

It's hard to hire good people because they already have a job. But right now that's not true -- companies are exploding and laying off everyone, even the stars.

If you're starting a company you're probably looking for a co-founder more than an employee. Even better. In an environment where few companies are hiring, lots of stars (or, better, potential stars) are out of work.

The market is flooded with good people. Maybe you yourself just got laid off with some co-workers you like! Just keep your hiring standards high and dig into your social network. (Or go get a social network now. See? That Facebook account really was a good idea.)

3. Cheap Stuff

Need cheap office space? Layoffs mean newly empty desks in empty offices with phones that still work. Look for subleases where someone is trying to recoup some costs -- often they'll throw in Internet as long as you don't abuse it.

Need cheap furniture? Companies are dumping stuff into used furniture stores and there aren't a lot of buyers. Drive a hard bargain.

Need cheap advertising? Ad revenue is drying up as companies down-size marketing budgets and miss their next round of funding. Combine that with lower readership (especially in print) and ad deals are everywhere. Don't listen to the protestations of ad reps -- they're under duress and will take almost any offer. (I'll post later on ways to wrangle with ad reps.)

With everyone hurting, deals are everywhere. Your expenses will never be lower than right now. Low expenses mean getting to profitability faster -- exactly what a new bootstrapped company needs.

4. Eager customers

When budgets are tight, people need to get stuff for free. Good for open source projects, bad for companies, right?

Good for startups. Remember, with your first twenty customers you'll be giving away your product for nothing. You need to -- your product isn't fully-formed, they're helping you work out the kinks, you're counting on them for testamonials, and you need to prove your product works in the market.

You'll be a Godsend to companies who need your product. Their (lack of) budget prevents them from buying anything else, including competing products that are better than yours. They'll be ecstatic to get something for free or cheap.

Here's a trick: Trade your product for a customer story (that you write and they approve). They'll be happy to tell the world how you bailed them out of their crisis.

I'd like a side of grated cheese, please?

5. Competitor carnage

Is there an 800 lb gorilla blocking your market? Or a few hip companies you're afraid to compete with?

They're all in SOS mode now. They have overhead, recurring bills, 12-month advertising contracts and 5-year office leases. Their prices are high and are hard to lower.

They're eating cash. Those that are unfunded are watching cash reserves fall, computing months-remaining before they'll have to close the doors. Venture-backed companies are in a bigger pickle -- they weren't profitable before, cash is now disappearing at an alarming rate, and many of them won't get fed again when they run out.

Perfect, if you're a little startup. You have none of these pains; you're sipping cash with no overhead and lots of time to devote to coddling new customers. While your competitors convulse, shed talent, and invent stories to calm their doubting shareholders, you've got nowhere to go but up. While they're figuring out how to wring more money from their existing customers, you're acquiring new customers they can no longer entice.

6. "Now" is always the right time

The most common day for starting a new company is the same as starting a new diet: Tomorrow.

Take the leap. Not tomorrow. Today.

The third-hardest thing you'll do is to take the leap. (The second-hardest is getting through the first fifty sales, the ones well before the chasm, when you're sick of tech support and wondering when the real money is going to show up. The hardest is firing someone.)

Never mind all that. Get started. "Now" is always the right time to start, because otherwise odds are you'll never start.

If you don't start, you're doomed to a life of trudging through jobs, depending on someone else for salary and bonuses and health care and retirement, a life's work without ownership or upside.

You're better than that. That's why you're reading this blog.

So go for it.

So, what are your thoughts? Are you convinced yet? Still think that toiling away at that (ahem) "stable" job at that Fortune 500 company is the right thing to do? I realize that taking the leap is hard, and situations vary, but it's good to at least think about it. Lots of other people are thinking about it (or doing it) too. The OnStartups group on LinkedIn now has 34,000+ members. Of the 170,000+ groups on LinkedIn, it's in the top 10. So, you're not alone.

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Dealing With A Downturn: Selling More Services

Dharmesh Shah — Thu, 20 Nov 2008 17:15:00 GMT

If you’re involved in the operation/management of a startup, you’ve already heard a bunch of advice over the past couple of months. Much of this advice can be summed into about two words: Reduce Expenses.

I did a bit of paraphrasing (there are lots of variations and extensions to this, but it’s close enough). The advice is intended to accomplish one thing: give you more “runway” so that you can survive the down-turn. Overall, I think this idea of increasing the time that you can continue to operate your startup is a pretty good thing to solve for. The more time you have before you run out of cash, the higher your chances that you’ll actually succeed. I’ve said this about long-term startup strategy before:

“Part of your long-term strategy should be to survive the short-term.”

If you don’t live long enough to see the long-term, all that strategic planning and world-changing vision is not going to amount to a hill of beans (I have a running assumption that the value of a hill of beans is negligible, though it does seem odd to me that we’d use this as a benchmark — but I digress).

So, back to the advice: You need to survive, and so you should reduce expenses and thereby increase the time you have to figure things out. That’s great, but it’s only one part of the equation. In reality, the length of time you will survive is a function of how much cash you’re burning. Your expenses contribute to this cash-burn, but there is this other variable in the equation that people don’t seem to talk about a whole lot. Revenue. It’s almost like we’d forgotten about that.

When software companies are born, there’s this vision of building a great products company. Software startups tend to make a conscious effort not to emphasize services. The reason is simple: The margins in selling a product are usually much better. Further, it’s hard to get venture-funding if selling services is a big part of your strategy — for the right reason. So, many startup people (including me), shy away from selling services. We accept that it’ll likely become necessary over time, but we hold-off on it as long as we can. Now, I’d argue that in today’s climate, things are a wee bit different. If faced with the decision of having to scale back expenses (which is usually means letting go of people), generating some service revenue might not be such a bad thing. Sure, as a software company, selling services may not have been part of the original plan, but neither was this massive economic downturn.

So, here are a few thoughts on selling services for revenue. Note: These points primarily apply to B2B companies. I’m also drawing these points mostly from experiences at my prior company (not my current one).

Thoughts On Product Companies Selling Services

1. Selling services (related to your offering) is almost always easier than selling product. If you don’t think you can sell services to your target market, I’d be concerned about whether you can sell your product.

2. Offering services to your existing client-base often works well. There are two benefits: You get some revenue and you help your customers get more value out of your product.

3. You should be careful that the services you sell don’t center around customer-specific modifications to your product. That’s a high price to pay for revenue. On the other hand, if a customer is willing to pay for enhancements that you think would be valuable to a meaningful percentage of your target market, it might be OK.

4. You might find that offering a bundle of services along with your product increases your probability of a sale. Some customers might be more wiling to buy if they knew they could get your help. This could include training, data conversion, implementation, and customization.

5. Though services margins are definitely lower than that of product, one of the nice things about selling services is that it’s easier to manage head-count. For example if you’re trying to figure out whether to hire/keep someone, trying to figure out whether they’d be accretive is simpler to figure out in the services business. Not easy (particularly in this economy), but easier.

6. I’ve found that the people delivering services on behalf of your products company are often great at uncovering sales opportunities. For example, you might have a consultant that is helping a customer complete an implementation. During this process, she could identify how your product could be used in a different division of the company, leading to an upgrade.

7. Services are often a very effective way to guard against attrition in some of your recurring revenue stream. If you’re delivering services to a customer on an ongoing basis, and they’re thinking about cancelling (in which case you’d lose maintenance/subscription revenue), you’ll likely hear about it sooner and have a chance to do something about it.

In closing, one important point. I’m not suggesting that you use the service revenue excuse to refrain from cutting expenses that you should be cutting. If you need to let people go, you need to let people go. Also, keep in mind that expense cuts are immediate and generating revenue (even service revenue) takes time.

Summary: You likely had lots of good reasons to not sell services when the company started. But, times have changed, and you might want to revisit some of those decisions and arguments. Selling services may be the lesser of two evils.

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Wimps Wait. Revolutionaries Release Early.

Dharmesh Shah — Tue, 18 Nov 2008 01:21:00 GMT

If you are not a believer in “Release Early, Release Often” you can safely stop reading now. No sense in clouding your passionately held opinions with my passionately held, and ill-defended opinions. My best wishes to you.

On the other hand, if you’re as passionate about the power of the “Release Early” model as I am, then this article is just for you.

If one of these tickles your fancy, please feel free to share it. Lets improve the world, one waiter at a time. [waiter, as in “one who waits”. Oh wait, those kinds of waiters wait too. Screw it, you know what I mean].

Enjoy.

14 Sound Bites And Insights On Releasing Early

1. Wimps wait. Revolutionaries release early.

Suggested reading: “Rules for Revolutionaries” by Guy Kawasaki. Guy’s my hero.

2. Failing to scale is excusable. Failing to release is not.

3. Don’t hug your software too hard. If you love it, set it free.

4. You will more often regret when you were reluctant than when you released.

5. At the end of the day…just ship it!

6. You don’t get a first chance to make a second impression.

I realize the above statement makes no logical sense. But, the argument against releasing early is often “you don’t get a second chance to make a first impression” and I wanted to twist it into something clever for my purposes. I failed. No worries. This one’s on the house.

6. It’s better to release early, and irritate some users than not release, and not have users at all.

7. If it helps you release earlier, know that my software sucks more than yours.

8. Ship it now. Why wait until tomorrow to learn what you can today?

9. There are always 10 pretty good reasons not to release. But, they’re not that good — so just release.

10. Software in the wild always trumps software in waiting.

11. You’re overestimating the degree to which people give a flying flip. Get over yourself and just freakin’ ship it already.

12. To succeed, you need to be remarkable. To be remarkable, you actually have to release something.

Suggested reading: Seth Godin’s blog. Seth’s my hero.

13. Better to release early and be ridiculed than just ridiculed.

14. No heroes and legends are created by software that almost shipped.

—-

That’s about the best I can do. I have a feeling you can do better. Post your best pithy insight on the awesomeness of “releasing early” in the comments.

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Startup Salary Data from Private Company Compensation Survey

Dharmesh Shah — Fri, 14 Nov 2008 10:21:00 GMT

It has been a while since I’ve written an article about startup compensation (what do founders, CEOs and others make)? My previous article about startup founder compensation continues to be popular, despite having been written in 2006.

The data in this article is taken from compstudy.com which publishes a report titled “2008 Compensation & Entrepreneurship Report in IT”. The report is based on a compensation survey. This year’s report is based on 342 survey respondents representing 1,600 executives. Note: I am not affiliated with CompStudy. I received the report for free, and I do not know what they charge for it.

Here are some points from the report that I found interesting.

1. This year’s survey was conducted between April and June 2008.

2. 31% of the executive population this year were founders in their companies (up from 28% in the prior year).

3. CTOs and CEOs were the most frequent founders.

4. Average base salary across all positions increased by 4.7% from 2007 to 2008.

5. On average, non-founding CEOs received a 5.4% grant.

6. Outside of the CEO/President the non-founder Head of Technology holds the highest average equity percentage at 1.53%.

7. Just 33% of the companies in the latest financing stages still have the founding CEO.

8. For companies raising one or fewer rounds, the average founding CEO holds nearly one third of the equity. After two rounds, this reduces to an average of 18%.

9. Founding CTOs have 17.1% on average in companies with one or fewer financing rounds and 7.49% of companies with 2–3 financing rounds.

10. CEO average base salary went from $227,000 to $237,000.

11. Non-founder CEOs have greater total compensation ($339,000) than founding CEOs ($286,000).

12. Founding CEOs hold an average of 22.05% of the company vs. non-founding CEOs which hold just 5.46%.

13. The chairperson is the CEO of the company 56% of the time.

14. Investors comprise more than half othe board of directors seats. Outside board members comprise about 20% of the board.

So, what are your reactions to some of these data points? What were you most surprised by? You can leave a comment here or discuss in the OnStartups community on LinkedIn (now with 30,000+ members).

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Boston: Lock The Students Up!

Dharmesh Shah — Mon, 10 Nov 2008 15:17:00 GMT

If you’re from the Boston area and into technology in any shape or form, you should be reading Scott Kirsner’s blog “The Innovation Economy”. Scott had an article on his blog recently titled “Boston’s Biggest Trade Associations Flunk the Student Test”. [Oh, and by the way, Scott also writes for the Boston Globe].

The article builds on a theme that Scott has been talking about for some time: How to keep all those great students that the Boston area is able to attract every year.

Let me open by saying that I hate students just as much as Scott does — which is to say, I love them. As an entrepreneur, my motives are completely selfish. I want to keep as much raw, passionate and brilliant talent in the area as possible.

In his most recent article, Scott looks at the local trade associations and grades them on how well they are doing to encourage and engage students. (The comments posted to the article are worth reading as well). I think getting the associations to pull in students more is definitely a great way to keep the students.

So, in addition to getting our trade associations to step up, here are some random thoughts on how we might lock up the students and keep the talent here:

1. Help students build a network locally. The more powerful and valuable the network, the bigger the sacrifice of moving somewhere else.

2. Help students get new ideas off the ground in terms of capital and mentoring.

3. Help students stay students. I think our academic institutions should invest in ways that graduating students can continue to stay involved and keep learning. The value of all of these graduate students is much higher than just the potential alumni donations.

4. Help students have fun. I don’t mean in the “they need to learn how to party sense”, but in the “creativity as applied to business” sense. Recruit student talent to help experiment with some new ideas for your business. Try unleashing some of their creativity. It’s not all going to work, but I’m guessing that lately, not all of your projects are working anyways.

Would love to hear your ideas on how we could do a better job locking the students up.

And, if you’re a student yourself, what are your thoughts on how we might keep you and your awesomeness around in the Boston area?

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Video from Business of Software : Everything I Know About Startups

Dharmesh Shah — Wed, 05 Nov 2008 10:27:00 GMT

Earlier this year, I had the opportunity to present at the Business of Software conference held in Boston.

Here’s a video of that event. Though I was a bit off my game (not enough sleep), people did seem to find it interesting and/or useful and the presentation was highly rated.

I’ll watch it along with you and add some notes to this article later today. Enjoy (and please leave your comments and criticims). Would love to hear them.

1. Your idea can suck. Just get started.

2. You can be in the middle of nowhere and still build a great business.

3. Not having cash breeds good behavior. It’s helpful to have constratints.

4. In defense of the modest outcome: You don’t HAVE to build the next Facebook. Modest liquidity events are highly under-rated.

5. “I’m a complete introvert. It’s not that I don’t like people, I just don’t like beind around them a whole lot.”

6. Something’ changed here. You don’t have to spend a lot of money to get your message out there.

7. The real issue with VC is not the cost of capital (which is high), but how hard it is to actually raise it.

8. You have to go through the 12 flaming hoops of venture capital.

9. All the time you should’ve been spending solving your customer’s problem, you use to start to solve the VC’s problem.

10. Write a blog, not a business plan.

Hope you enjoy the presentation. It was a great conference and I had the pleasure of meeting with many of you there. Look forward to the next one.

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Advice On Partnering With The Big and Powerful: Don't

Dharmesh Shah — Tue, 07 Oct 2008 13:09:00 GMT

The topic of partnerships comes up relatively frequently in startup circles. The common question entrepreneurs have about partnerships with Some Big Powerful Company (SBPC) can be reduced down to something like this:

Q: “My startup has the opportunity to explore a partnership with a Big, Powerful company. What should I do?”

(Short) Answer: Don’t.

Of course, there are exceptions, but on average, not knowing anything about you, your startup, the big company you are dealing with or the terms of the deal, I think this is good advice almost all of the the time.

Let’s dig a bit deeper into some of the analyis that I’d put into making the decision. One warning/disclaimer: I’m not a lawyer and don’t play one on TV. This is not legal advice. If you’re signing a deal, make sure to get competent counsel.

Thoughts On Partnerships With Some Big Powerful Company

1. Beware The Distraction: Big companies have something you don’t. Time. They can commit one or more people to the ongoing task of “exploring partnership opportunities”. You probably can’t. You have a day job (and probably a night job too). As such, the mere act of continued conversations with a big company to expore a partnership can be a major distraction for a startup. Even if it leads to something (which it usually doesn’t), it takes a bunch of time and energy. Beware this distraction risk. You were warned.

2. PR Glow Lasts A Day, Lock-In Lasts Longer: One of the reasons big partnerships are so tempting for a startup is you envision the positive press. It adds legitimacy. It makes your startup feel more “real”. You can almost feel the warmth and glow that comes along with signing a partnership with a big, powerful company. But, this glow is short-lived. On the other hand, even after the PR glow fades, the terms of your deal don’t. There are a number of tricky deal terms that could be prolematic later.

3. The True Cost of “Right of First Refusal”: Let’s say Some Big, Powerful Company (SBPC) is interested in partnering with you. One of the likely reasons is that you’re doing something innovative, and they “believe in innovation”. Heck, they believe in it so much, the’re considering investing in you or buying you. But, it’s a bit early for that. So, as part of the partnership discussion, they ask for a seemingly innocuous deal term like “right of first refusal” on a sale. Here’s how it works. A few years down the road, you find some other company (SOC) that wants to buy you for $50 million. Per the terms of your deal with SBPC, before you can sell to SOC, SBPC would have the right to look at the deal, and the option to buy you for $50 million. Now, at first glance, this doesn’t seem like that bad of a thing. What’s the downside? Wouldn’t you want to bring SBPC into the negotiations and hopefully drive the price even higher? Since they’re not getting a discount, and are willing to pay up, what’s the problem? The problem is that when you have a “right of first refusal” with SBPC, folks like SOC are less willing to enter into discussions. From a game theoretic perspective, SOC knows that regardless of what they do, SBPC is going to have the opportunity to evaluate the deal and take it away (exercise their right of first refusal). So, SOC thinks “I can’t win this game…someone else has the advantage. The deck is stacked against me. I’m not going to play.” This is a very specific example, and it’s a nuanced issue, but hopefully you get the idea. When you provide special rights to someone, you’re reducing the incentive of someone else to get into the game.

4. What Do They Have To Lose? What About You? As you overcome your initial excitement about all the opportunities that a partnership with SBPC would bring, it’s extremeley important to try and think through the downside scenario. What’s even more important is ensuring you have some way “out” in the event that things don’t work out the way everyone had hoped. For example, let’s say you sign a distribution partnership with SBPC. They volunteer to use their powerful sales resources to help sell what you have into their market. It could be game-changing! All they ask in return is that you exclusively work with them. So, in this kind of situation, the question to ask yourself is: “What if they don’t sell?” Could be intentional, could be uninentional, but the result is the same. Dollars are not coming in your door. And, unless you planned for this contingency, you’re sort of “stuck” into an exclusive arrangement where you can’t change your strategy to something that will deliver sales. One simple answer might be to trigger any lock-in provisions to actual sales results. So, if things are panning out, great. You hold up your end of the deal. If not, your hands are untied and you can do what you need to do.

5. How Are Incentives Likely To Change? Lets say for a second that the partnership works out and delivers real value beyond your wildest dreams (that’s highly unlikely, but it’s fun to dream sometimes). What then? How do the incentives of the parties (particularly them) change? If things are going swimmingly well, is SBPC going to be happy? Or, are they going to thinK: “Hey, we’re delivering all this value through the partnership, and we’ve got this big R&D team over here, wouldn’t it be in the best interests of our customers if we provide a scalable, integrated, enterprise solution?” This is a long-winded of saying that after you’ve demonstrated that there’s a market for your startup’s offering, and they’ve demonstrated that they can sell it into their customer-base, they may decide that they’d be much better at serviing this market than you are. So, even when things work out well (which once again, is rare), it creates its own set of challenges.

6. Have they succeeded with partnerships before? Not all partnerships are created equal (or is that equally, I can never remember), and there are many different types of partnerships. Technology partnerships. Distribution partnerships. Reseller partnerships. All sorts of stuff. When exploring a partnership with Some Big Powerful Company, one of the key things to figure out is if they’ve succeeded with prior partnerships they’ve done. If they haven’t done these kinds of things before, and you’re one of the first, you’re in for some pain. In theory, big companies see the value in injecting some innovation into their market through partnerships with startups. In practice, they usually don’t. It’s just hard to get them to move. If SBPC has done partnerships before, how did they go? Was there any value delivered to either side other than the press release and announcement?

That’s all I have for now. It’s a complicated topic and one that (thankfully) I don’t have to deal a lot with right now in my current startup. For those of you that made it this far, you might be tempted to write me an email describing your specific situation to get my thoughts. Resist the temptation. Although I’m a startup junkie, looking at individual startups and individual cases just doesn’t “scale”. Leave a comment and tap the OnStartups community. They’re much smarter folks anyways.

Also, if you’ve had experiences with partnerships with big, powerful companies (negative or positive), please share them. I’m an entrepreneur, just like you, so I have a limited set of data points. Share your wisdom, particularly if it was painful to acquire.

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Entrepreneurs and...Hey, There's A Shiny New Thing!

Dharmesh Shah — Thu, 25 Sep 2008 12:28:00 GMT

If you’re one of those rare entrepreneurs that has the discipline to stay reasonably focused on what you should be working on, feel free to skip the rest of this article with the comforting knowledge that you have my admiration and envy.

But, if you’re like most of us, you are probably plauged at one time or another by the “Shiny New Thing” (SNT) bug. This particular syndrome is pretty easy to describe. There you are, minding your own business (literally) and working on your startup. Then all of a sudden, BAM! Some shiny new thing comes along and tries to distract you. You either get distracted, or you stay up nights wondering if you should have gotten distracted. If you’re like me (my sympathies if you are), you have this experience quite frequently. I think it harkens back to our childhood days when just about any shiny new thing would immediately grab our attention. [Hence the toy robot photo, blog image selection is not a core competency.]

There are various manifestations of this Shiny New Thing (SNT) phenomenon. Here are a few:

1. New technology/platform/language/framework: This applies mostly to developers. There you are coding away on your project, and this article comes up in Google Reader about this new paradigm-driven-framework. BAM! It’s so cool! It could change everything! It could make you 10X more productive! So, you immediately start conjuring up ways to use that shiny new thing in whatever you happen to be working on at this point in time.

2. New market/customers/industry: Your startup has a market, you probably even have some of the product developed. You’re making sales, albeit things are going a little slower than you hoped. Then, you read a blog article somewhere and BAM! You think of this new market that you could go after. And, brilliant technologist that you are, you’ve already developed your existing product such that with just a few small tweaks you could go after this new market pretty easily. In fact, the beauty of it is that you don’t even have to give give up your existing market/customer/industry. You can do this one too! If one market is good, two has got to be better, right? Right?

3. New Feature/Application/Product: Your existing product is cranking along. The few customers/users you have seem to be happy. You’re signing up more people. You’re supporting your users. You’re truckin’ along. Then BAM! You get this idea for a shiny, new feature or product to add to your arsenal. You pause briefly to ponder whether the legal services industry really needs an ERP app for the iPhone. But hey, you know this industry really well, and your best customer has a daughter who has an iPhone. You’re just a little “ahead of the market”, right. Right?

3. New Company: There you are, cranking along. And, you just kind of start getting bored. Your idea was really cool and got you all fired up in the morning. It was so shiny, new back then. But alas, it’s just not that shiny any more. The idea is sooo last month. It’s really hard to be passionate about it now. You’ve got to absolutely love what you’re doing, every day, right? It’s a waste of time to stick to something that you’re just not excited about, isn’t it? And then, BAM! You come up with this new startup idea. It’s bright! It’s shiny! Life is good again.

So, you get the idea. If you’re like most entrepreneurs, you’ve been hit by some variation of the above Shiny New Thing bug at some point. Unfortunately, when you get hit with it, it’s rarely in the exaggerated, “Boy, that’s a supid thing to do, I would never do that” kind of way as the above examples illustrate. The SNT bug is usually much more subtle and insidious than that. It’s why it infects so many smart, rational entrepreneurs — and me.

What makes this problem a problem is that it is rare that going after the Shiny New Thing is going to increase your oddds of success (however you define it). Most of the time, it’s a distraction. The rest of the time, it’s usually a major distraction. To really succeed and get things done, you’re going to need to stick to something and get the basic machinery “working” and plug away at it. Good ideas take time. Great ideas take even more time. Don’t get me wrong, I’m not suggesting you be stubborn about your idea, business model, product, whatever. Far from it. I’m a big fan of the agile approach to startups. But, there’s a difference between iterating on an existing thing and being distracted by a Shiny New Thing.

So, here’s my advice to you the next time you see the Shiny New Thing bug buzzing around your head as you’re trying to get real work done. Ask yourself the following 4 questions:

1. Am I simply intrigued by the shininess and newness, or is there really a there, there?

2. What would I need to know and what minimal questions would I need answered to figure out whether this Shiny New Thing is worth my attention?

3. How long will it reasonably take me to figure out what I need to know? Can I even afford that investment? How does it impact what I’m doing now?

4. Should I go ahead and….Hey wait! As I was writing this, I just came across another topic for this blog as a result of something on Guy Kawasaki’s blog. Must…try…to…resist…shiny…new…thing. Oh no…it’s too…shinyyyyyyyy....[click]

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Startups and The Power Of Polarization

Dharmesh Shah — Wed, 24 Sep 2008 12:01:00 GMT

Startups, particularly those world-changing, curve-jumping, bet-the-farm kind are a tricky business. The temptation for startups is, as Seth Godin would say, “to create average products for average people”. The reason is simple, there’s a massive market of average people. And, they want average products. Nothing too controversial. Nothing that makes them too uncomfortable.

Guy Kawasaki, one of my favorite business authors addresses this in a recent article titled “The Art of Innovation”. Here’s #4 from that article:

“Don't be afraid to polarize people. Most companies want to create the holy grail of products that appeals to every demographic, social-economic background, and geographic location. To attempt to do so guarantees mediocrity.”

But, my advice would be to not try and “solve for the middle” — but strive to polarize an audience. If you’re really looking to make a big difference, you want a group of people that passionately disagrees with your idea/approach/business. Why? Because when you’re doing something that polarizes, and you have a bunch people that passionately disagree with you, you have a chance to find people that passionately agree. It is these passionate people that help fuel the growth and help spread your idea. And curve-jumping companies almost always have an idea that spreads at their core. Your enemy, as in many walks of life, are not the ones that hate, but the ones that are apathetic.

In short, have the courage to take a stand even if it means you’re going to make some people uncomfortable or annoyed. Of course, you actually have to believe in the stand that you take, but the idea is that if you believe in it, push towards the edges even if it causes a big rift in your community.

So, let’s take a look at a small, recent example from my own startup, HubSpot. I’m using the HubSpot case because I know it well and have been on the “inside” of (as a founder and Chief Stirrer of Pots). It also just happened yesterday as part of our own internet marketing efforts.

The quick story at HubSpot is simple: We believe there’s a massive transformation going on that is causing people to move from outbound marketing (advertising, direct mail, telemarketing, etc.) to inbound marketing. Inbound marketing is about increasing the chances that people that actually give a flying flip about your offering will find you. (Not to hunt down masses of people most of whom don’t give a flying flip and interrupt them with your message). The idea itself is not that controversial. But, this video that we created recently is. It’s short, and sort of funny, so go watch it and then continue.

So, here was our issue. When building this video we had to decide: Are we really advocating that companies throw away all of their old marketing methods (including telemarketing) so they can switch to our way (inbound marketing)? It’s just not practical. If we asked people to do that, we’d risk losing a bunch of prospects that just wouldn’t take us seriously. We’d risk a bunch of our prospective customers thinking we were a whole lot of clueless. But, we did it in anyway. Then, we went a step further. When we created the associated blog article, we gave it a controversial title “Dude, Cold Calling Is For Losers”. Now, not only are we making fun of people that are doing cold calling, we’re actually calling them losers. Remember, we have 5,000+ people that are subscribed to this blog, many of them are marketers, and most of them likely do some sort of telemarketing.

So, what do you think? What are you doing to “take a stand” when it comes to the vision of your startup? What was the last risk you took online? Something that would really irritate a big batch of potential customers? Share your experiences here. I promise, we won’t hate you.

Apologies for those that think this is article too self-promotional. I try to keep OnStartups focused on things that I think will help other entrepreneurs. Often, my best exampes are from my own personal experience. Nudge me back if I cross the line.

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8 Startup Insights Inspired By The Mega Mind of Seth Godin

Dharmesh Shah — Wed, 10 Sep 2008 14:35:00 GMT

I’ve had a really interesting and crazy week (crazy in a good way). As many regular readers of OnStartups.com know, I’m a huge Seth Godin fan. I’ve read most of Seth’s books over the years and keep up with his blog. He’s even been kind enough to comment on one of my prior OnStartups articles (“Why Your Startup Shouldn’t Hire Seth Godin”). But, until recently, I’ve never had the opportunity to actually hear him speak in person. This past week, I got to hear Seth twice.

Most recently, Seth was a keynote speaker at the recent Inbound Marketing Summit in Kendall Square, Cambridge (MIT central). Not only did I get to hear Seth speak, live and in person, I had the thrill of getting to have lunch with Seth and “just chat about stuff” (like getting some advice about my startup). This has got to be the most thrilling thing that’s happened to me all year. Very exciting. [Interesting trivia: Early in Seth’s career he worked in Kendall Square for Spinnaker Software].

So, here are some of the ideas and insights I gleaned from Seth, that I thought might be useful to other startup fanatics. Although the core insights were inspired by Seth, I put my own lens/spin on it from the perspective of a startup. All the really brilliant stuff is Seth, the mediocre stuff is mine.

8 Startup Insights Inspired By Seth Godin

1. Resist becoming “average”.

This is my favorite insight. At my startup HubSpot, we use the geekier term “regression to the mean” to refer to this phenomenon. Basically, the notion is that over time, the world pushes you towards becoming more average. Often this means doing what is “tried and true” or “proven. Or, as Seth says, “creating average products for average people”. For businesses in general, but startups particularly, regressing to the mean is a dangerous thing. Why? Because the “average” startup is not successful. The only way to succeed is to not be average. You have to go to the edges and resist the pull to the middle.

2. Communicate Directly With Your Customers

You’re the founder/CEO/president/whatever of the company. You’re doing your best to work on the company, intead of in the company (just like all those business coaches said you should) . You may think you’re really important to the business. In fact, you may even be really important. It doesn’t matter. TALK TO YOUR CUSTOMERS. Whether you’re in the backroom writing the next Facebook/YouTube/Google/whatever or you’re more of an operations/finance person, you need to be have direct conversations with your customers/users. There is no substitute. For startup people, this is not particularly hard advice to follow (because someone has to talk to the customers, and there’s only two of you in the company, so there’s nowhere to hide). But, you’d still be surprised at how often people avoid direct contact with the customer. No, not you of course, but your co-founder. For a great example of a successful startup that talks to customers, look to Jason Fried from 37signals. He actually reviews and responds to customer support emails. He’s a awfully busy guy too. And, he’s got over a million users. What’s your excuse again? [Note to self: write an article with notes from meeting with Jason Fried last week].

3. Let Your Users Talk To Each Other

Online communities are all the rage. But, too many of them are started because companies want to “build a community to establish ourselves as a thought-leader and promote rich interaction amongst our team and our customers.” Blah, blah, blah. It’s fine that you want to be a thought-leader and at the center of your universe. It’s great that you want to start a “rich dialog”. But, provide some mechanism for those that inexplicably find your offering “interesting” (hopefully interesting enough to actually pay you) to connect with each other. Give them easy, convenient ways to connect to each other and then get out of the way.

4. Start a Freakin’ Blog

Yes, I know. You’ve been meaning to do it. But amidst the writing of code, and raising of funds, and meeting of minds and all the hundred other things you have to do this week, there’s just no time to write. Heck, it’s just you and your buddy Joe, right? And besides, you kicked off that bobandjoeblog.wordpress.com a few months ago, wrote about some stuff, and only 4 people read it. It just wasn’t worth it. You have a business to grow! But, you promise you’ll make the time. Someday. Once you get done with this product-release/funding-round/support-nightmare/pr-event/whatever you promise to try the whole blogging thing (again). I’m here to tell you that you need to make the time. But, don’t listen to me. Here’s Seth Godin: “You’re forgiven if you don’t get it…it’s easy to write the whole thing off…here’s what to do if you still don’t get it: Start a blog.”

5. Stories Spread, Not Facts

Sure, I get that your shiny new startup with it’s shiny new software written in a shiny new programming language is going to change the world. I get that. But I, like most people, don’t want to hear about product. I certainly don’t want to tell other people about your product. But I love a good story, and I’m guessing others do too. If you want your idea to spread, stop focusing on the facts, stop focusing on your offering and start focusing on your story. Make it genuine. Make it interesting, and as Seth would say, make it remarkable.

6. Beware The Need for Critical Mass

I’m going to lead with a quote from Seth on this one: “Failing for small audiences is a loud cue that you will fail even bigger with big audiences.” Too often, startup founders talk about how they are pushing to get to “critical mass” and how “economies of scale” are going to kick in. That’s all fine and dandy. I get it. I’ve been in the software industry for a long time. But, is it absolutely, positively necessary to get to some “critical mass” before your business starts to make any sense at all? Is that mass all that critical? Does it have to be?

Can’t you make some kind of business out of something that looks a bit like this:

Mass You Have < The Magical Mass That Is Critical

Why do so many startups have these mythical, magical numbers (“once we hit 1,000,000, users rainbows are going to spontaneously pop out of nowhere and magic fairy dust will fall out of the sky and make our financials look sooo much better”).

7. They Didn’t Call It the Industrial Gentle Change

It was a revolution, and like all revolutions, it’s neither gentle nor comfortable. If you’re building a startup that really is going to revolutionize something, you’re going to have take some chances and make some people uncomfortabale.

8. You Have To Start

To do anything, you have to start. You can’t wait for the perfect situation. The perfect idea (which doesn’t exist), the perfect business plan, the perfect timing, the perfect market, the perfect investor, whatever. You need to get going.

I’ll close with this quote from Seth during lunch: “I’m impatient and shamelessly unafraid of failing.”

I’ve got lots more Seth nuggets and pearls of wisdom, but that’s all we have time for right now. I need to get back to working on the next alpha version of Twitter Grader.

So, what do you think? Did any of the above insights resonate with you? Any you just don’t agree with? I’m not qualified to defend them, but that’s never stopped me before.

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Startup PR: Tips For Getting Publicity Without A PR Firm

Dharmesh Shah — Fri, 22 Aug 2008 18:33:00 GMT

I came across a great article today by Jason Calacanis on the topic of PR for startups. Jason Calacanis is founder and CEO of Mahalo, but you probably would better know him as the the guy behing Weblogs, Inc. In any case, he’s accomplished, and knows a thing or two about getting visibility for a startup.

I’ve always thought of myself as being really different from Jason (note: I’ve never actually met him). He seems to be the classic extrovert and seems capable of really putting himself “out there” for his startup. Though I don’t think of myself as lacking in passion, I just don’t have the gumption he does.

In any case, If you’re involved in a startup (particularly if you happen to be venture-backed), the article is worth the read. However, the original article is over 4,500 words and on the off-chance that you’re lazy like me, here are some of my favorite points from the article:

1. “My philosophy of PR is summed up in six words: be amazing, be everywhere, be real.”

2. First time I’ve ever the heard of the term ceWebrities. clever. With regards to these ceWebrities, “these overnight successes are 10 years in the making.”.

3. “Be the brand…you must be in love with your brand and inspired by your brand’s mission to have any hope of getting press.”

4. “Be everywhere…every single night I would go out and meet folks in the internet industry…while other folks went home to their families, I went out and made a family.”

5. “Your job is to transfer the enthusiasm you feel for your brand to everyone you meet.”

6. “Always pick up the check — always…everyone remembers who picked up the check”.

7. “Set a goal of creating deep relationships with a small number of folks as opposed to running around trying to trade business cards with as many folks as possible.”

8. “Be a human being. The best way to get PR is not to sell someone on your company or product — it’s by being a human being. Journalists hate being pitched…journalists and bloggers are, in fact, humans.”

9. “Before meeting with a journalist, it is your job (as CEO) to read their last five articles in full…”

10. “Your job as the CEO/founder is to create direct, honest and personal relationships with journalists.”

11. “Attach your brand to a movement.”

12. “PR is, by definition a reflection of what you’ve done. When a startup hits, it’s not one thing that does it, it’s typically many things working in concer.”

I'd summarize the advice and change the 6 words of advice to: Be amazing, be passionate, be human. What's your 6-word version?

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Startup Teams: Why Capability Doesn't Matter Without Trust

Dharmesh Shah — Tue, 19 Aug 2008 11:23:00 GMT

I’ve been thinking a bit this past week about startup teams and what makes them work (or not work). Most people that are in and around startups will readily agree that recruting the best team possible is critical to success. This leads to statements from startup pundits that look a lot like “get the best people possible.” Far be it from me to argue against this kind of sage advice. You should get the best people possible onto your startup team. All things being equal, who wouldn’t want to recruit the best people possible?

However, the phrase “best people possible” is a bit too vague for my tastes. The question is, what makes a given team member the best? Are they the smartest ones? The ones with the most experience? The ones with the greatest skillset for a given role? The ones with the most domain expertise? For purposes of this discussion, I’m going to “merge” all the things that makes a given individual really, really good into something I’ll call “Capability”. You can feel free to make Capability a function of whatever attributes (intelligence, experience, skills, etc.) as suits your taste.

So,

Capability = How well the person can do the job

Now, this article isn’t really about capability. It’s about a somewhat orthogonal concept that I’m going to refer to as Confidence (or Trust). By confidence, I don’t mean how much confidence they (the candidate) have. I mean the degree to which the rest of the team believes a person has the required capability.

Confidence = How strongly people believe in a person’s Capability

My argument is this: The best people to recruit into a startup are the ones that have the optimal mix of capability (can get the job done) and confidence (trust from others that they’ll get the job done). Even with lots and lots of capability, if there is moderate or low confidence, the individual will be second-guessed, undermined, and ultimately just plain ineffective. Even if they would have a bunch of good decisions, it’s not really going to matter, because they won’t get to make that many, and the ones they do make might not “stick”. Unfortunately, this kind of team dysfunction does not jump right out at you, it creeps in when you’re not looking. Everyone has the best intentions. A quick (totally made-up) example: “Billy’s a great web design and UX guy…and he’s been lobbying for this simplified design to replace the $25,000 website we created last year. Sure, he goes to all the conferences and stuff, but does he really get that sorts of people come to our website, not just customers?”

So, you ask, why would people making the decisions ever hire folks that they didn’t have confidence in anyways? Isn’t that stupid? What’s the point talking about that? I’d respond with two things: First, confidence is not a binary thing. It’s an analog thing. There are degrees of confidence. Second, confidence may start out being really high, but can be chipped away at as time goes.

Now that we have some of the baseline behind us, here are some thoughts on capability and confidence when it comes to startup teams:

Capability vs. Confidence

1. How did we find this person? Certain sources of referrals engender more confidence than others. Did your co-founder bring the person in? Is she your niece, once-removed?

2. Who has the most confidence in them? Is it the person that introduced them? Someone that will be working with them? One of your investors? One of your advisors?

3. How important is confidence for this role? There are certain areas in your startup where folks need to have a fair degree of discretion. For example, regardless of how smart and passionate the founders might be, if you hire a professional UX designer, you have to let them do their thing. Debates are good, but whoever is the best qualified to make the decision should make the decision.

4. Who on the team loses the most if they don’t work out? Yes, I know, everyone loses when you lose a team member. But, who is impacted the most?

5. Is the eroding confidence justified? Is it possible that a bad hiring decision was made? Did people expect a degrree of capability that just did not get delivered?

Some though (but important) questions.

Closing words of advice: When recruiting team members make sure someone on the team will go to bat for the person when things are shaky. You need a trusted member (like one of the co-founders) to help objectively assess issues of eroding confidence — and help restore it if needed. Otherwise, things go into a downward spiral and nobody wins.

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Y Combinator Summer 2008 Demo Day: Best Batch Ever

Dharmesh Shah — Thu, 14 Aug 2008 23:58:00 GMT

I just got back from Y Combinator Demo Day, Summer 2008. For a startup fanatic like me, it’s hard to imagine a more fun use of a few hours. I got to watch 20 back-to-back, rapid-fire startup demos.

Here are some of my initial reactions and thoughts on the newest cohort of YC startups. Note: Like most OnStartups articles, this article focused on the entrepreneurial perspective (not the investor perspective). The folks that should (hopefully) get the most out of this are the YC startup founders themselves.

Notes From The Y Combinator Summer 2008 Demo Day

1. Best Cohort Yet: Overall, in my (highly subjective) opinion, this is the best batch of YC startups yet. I think I have a bias (which has been tempered over time) for startups that have demonstrated some thinking around things like monetization and revenue, and that might be influencing my thinking. The current cohort, on average, seemed to have a stronger emphasis on not just making something people want, but something that will yield revenue, and (gasp!) profits. Good stuff.

2. Presentations were better than what I’ve seen in the past. More fluid, more polished, more effective. My hat’s off to all the YC startup founders that presented today. You guys did a great job! Having said that, it’s not a totally fair comparison. You guys do have the advantage of many more YC founders before you that you can learn from. I’m guessing that Paul, Jessica and the rest of the YC crew are also getting better and better at nudging you in the right direction when it comes to Demo Day presentations.

3. Tip: Use your precious minutes: The Y Combinator team did a great job keeping things moving, and I think the format of Demo Day works well (6 minutes per presentation, no audience questions). One quick tip for the presenting team: If you are doing the presenting, you should begin with your message even while your team member is setting up. Don’t wait for the slide deck to come up on the screen. Don’t shift the focus to your buddy who is switching out the cabtes and stuff. Don’t wait. Just start delivering your message. In your preparation, come up with introductory remarks that don’t rely on your first slide being up yet. When you only have a precious few minutes, 30 seconds counts.

4. Don’t use gender stereotypes: This one’s going to be a little touchy. A few of the startups today used examples and screenshots that were um, a little too “gender-stereotypical” (that’s a semi-polite way of saying they were too far down the spectrum towards being sexist). I can understand and appreciate that most of the YC founders are young males in their 20s. But, my advice would be to resist the temptation to use scantily clad women in demos. It’s both inappropriate and sub-optimal.

5. Answer the question you know people are asking themselves: Once you start doing presentations a lot, you begin to realize that there’s a “pattern” to the kinds of quesitons people have in their heads. The same themes recur. Do what you can to make it as difficult as possible for people to dismiss you because they’ve got that one big “obvious” question/objection/whatever. For example, I thought the Fliggo team did a smart thing by closing with this nugget: “I know you’re asking yourself, how are these guys going to make money…I’m glad you asked…”. You don’t necessarily have to answer the “how do you make money” question (though that’s not a bad thing), and you don’t even have to frame it as a quesiton. Just try and address the most obvious things people are likely to wonder about.

6. Tip: If you’ve got traction, share it earlier in the presentation: There were several startups that had pretty impressive early traction (like users and revenues). They didn’t talk about this until later in the presentation. I’d suggest possibly getting this message out earlier in the presentation, because it will grab people’s attention and cause them to listen more intently to the rest of your story. Imagine an opening sentence that is something like this: “Hi, we’re XYZ. We launched just a few weeks ago and we’re getting some encouraging early evidence that we’ve built something people want…Here’s what we’ve learned from our 14,000 users…”. I’m not suggesitng you use that exact sentence, just a thought. When dealing with investor types, remember that folks have short attention spans and you’re best served by grabbing them as early as possible with something they care about.

7. Memorable sound-bites are not just for TV: I’m generally not a big fan of over-preparing for presentations (more often than not, sounding natural is more important than sounding polished). Having said that, some clever, funny, well-crafted sound-bites thought of in advance and added to the presentation are a good thing. They’re particularly good for bloggers and media types that might cover you. For example, the PopCuts folks had this great snippet: “The only way to get famous on BitTorrent is to get arrested.” Simply brilliant.

8. Audience participation/engagement works: A couple of the startups were able to work their demo such that the audience was “involved” in the demo itself. Although this is hard to do, it’s valuable. It also helps a lot when you get audience members to do something (instead of just sit there and listen).

That’s all I have for public consumption. However, I have notes from each of the presentations. If you were one of the startups that presented today and want my quick thoughts or feedback, feel free to email me.

I just noticed a great summary write-up of today’s event on Scott Kirsner’s Innovation Economy blog. If you’re not yet reading Scott’s blog, you should be.

Best wishes to all the Y Combinator startups. It was great to see you all and chat with many of you at the close of the event. Knock ‘em dead next week. In the meantime, some closing advice: Get some sleep!

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