Archive for the ‘Startup life’ Category

Product Marketing is More than Ready Fire Aim

Monday, April 18th, 2011

by Steve Dearden  |  Steve is part of the Seattle practice and brings experience in IP licensing and software services, manufacturing and devices sales to the Altus team. Email Steve with questions or comments.

Ready Fire Aim

Ready Fire Aim

Ready, Fire, Aim is a frequent joke among startups. There is some truth to it, of course. A young company cannot know all the ways in which the market and its customer will respond. In this post, I’ll share some thoughts on how to shift that phenomenon to preparation, focus, and execution.

While there are many pitfalls along the startup path, one of the earliest problems new companies face is identifying, acquiring and nurturing the customer base that is optimal for growth. Finding those customers who have a clear need for the product or service, are willing and able to purchase, and ideally become enthusiastic advocates once they become users; fueling the early expansion of the startup. An additional challenge is that many tech products are solving a problem that customers may not even know they have (think about a better contact management or project management or document storage solution).

Finding this best customer is not as straightforward as it sounds. There are several factors at play between a fledgling company and enduring success with a loyal customer base.

Problem: Even with social networking, no one has heard of you.

Often early stage entrepreneurs with great ideas produce products that are new and innovative. Even though friends, business contacts and other engineers rave about the product, the company still fails to get revenue traction. Revenue does not expand as expected, and new customer acquisition turns out to be much harder than anticipated. Those critical early adopters don’t materialize.

Preparation: What are the 3 most important benefits you provide your customers? Just as important: How you are finding these new customers? How you find them is often as critical as finding them. What are you doing to help those customers find you?

Michelle Riggen-Ransom, co-founder and CCO of Providence-based start-up BatchBlue Software (makers of social CRM BatchBook) recommends a two-pronged approach. “Certainly create accounts in Facebook and Twitter and make sure you are engaging and responding there as you build your online network,” she says. “But don’t neglect the power of making connections in real life. Some of our best customers have come attending local meet-ups, conferences, or when we’ve sponsored an event.”

Problem: A “product for everyone” has high value for almost no one.

When the new product or service has many potential customers, in many different industries or groups, there is a tendency to make the product generic to meet the wide range of marketplace tastes. By making the product “generic”, often it does not have enough value to any one group of customers to be compelling. Instead of being adopted by multiple groups of customers, penetration into each segment is limited because the product has not been “honed”.

“There is a benefit to casting a wide net when you first go to market,” counters Riggen-Ransom, “But you should have the flexibility to adapt once you see where you are picking up traction.”

Execution: How do product enhancements get prioritized?  Who is providing input to that process? Of all the potential customer types, do you know who will be compelled to buy the most, who will buy first, and who will buy again? Conversely, are you willing to throw your plan out the window and create a new one if it looks like your initial assessment was incorrect or changes once you’ve launched your product?

Problem: Crawl, walk, and then run.

While long term success for the business may require acquisition of large customers, it is better to prove technology and sales process with smaller companies first. Targeting the so-called elephants in the room (large customer prospects) as the first and only customers can lead to disappointment.

Focus: Regardless of company size, are you asking yourself why you lost a deal or why you won it? The answers can reveal gaps in your customer communication process.

Problem: Drinking too much of your own Kool-Aid.

Just like finding bugs in a piece of code is hard for the person that wrote the code, many companies have their own image of what their products mean to their customers and what value they provide.

Surprisingly this is often without talking to the customer to really understand how the product affects their lives or business. Without truly “getting inside the customer experience”, there is no way a fledgling company can really understand what it is they offer. So they need to develop an understanding what customers think about the product or service and its value to be successful.

Preparation: How do you regularly communicate with customers? Is there a communication process or flowchart guiding what you say and when? Given the social nature of customer service today, do you have a social media plan?

Problem: Jumping into a crowded pool.

Is there an “obvious” customer out there? Many companies go to market believing there is an obvious customer that will be easy to reach. This may or may not be the segment that will be the best in terms of profitability, top line growth and enduring customer loyalty. The “obvious” customer segment may be crowded with competitors, with price competition and margin erosion. There may be so many product alternatives that customers feel no need to be loyal. From the customer perspective the choices boil down to price and availability, there being little or no meaningful or significant feature differences between the multiple offerings.

Focus: How are you segmenting? The biggest segment is not necessarily the best. Early gains and growth are critical. Pick the segment that can give you early gains, not the one that looks like the largest.

Conclusion: As your customer base expands, and you start to take on more customers providing more features and delivering more value, you will find that these preparation and focus questions can keep your execution on track. Ready, Fire, Aim will not be in your vocabulary but replaced with preparation, focus, and execution. Or, as Michelle from BatchBlue says: “Research, Reassess and Repeat as necessary.”

Image Credit: cliff1066™

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How Great Entrepreneurs Think

Tuesday, March 8th, 2011
by Steve Dearden, Partner. Steve is part of the Seattle practice and brings experience in IP licensing and software services, manufacturing and devices sales to the Altus team. Email Steve with questions or comments.

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Entering Startup_Photo by Dierken on FlickrInc. Magazine recently wrote a piece entitled How Great Entrepreneurs Think and it starts out asking “What distinguishes great entrepreneurs?” A question we believe we know something about, too.

From the Inc. article:

The piece highlights the work of Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business, set out to determine how expert entrepreneurs think, with the goal of transferring that knowledge to aspiring founders.  Sarasvathy identified 245 U.S. entrepreneurs who met her criteria, and 45 of them agreed to participate. Revenue at the subjects’ companies—all run by the founders at that time—ranged from $200 million to $6.5 billion, in industries as diverse as toys and railroads.  “I always live by the motto of ‘Ready, fire, aim.’ I think if you spend too much time doing ‘Ready, aim, aim, aim,’ you’re never going to see all the good things that would happen if you actually started doing it.”

On ready, fire, aim, I have to say interesting.  There is a big difference between quantitative research and qualitative research however. We call it a market-driven baseline and it is more qualitative than quantitative. Any company can and should do such a baseline assessment. It focuses on in-depth customer engagement – from a sales perspective. We are not just sizing markets (quantitative); we are trying to develop those HOT (high odds target) customer profiles. By talking to them (qualitative).

This is where a lot of startups fail (and even larger companies with new product initiatives). You have to engage with the customer base. So I think there is a risk here of taking the implied “analysis paralysis” message above and over stating it. While I agree that you can’t let yourself get caught in ready, aim, aim, aim and ever get anywhere, Sarasvathy did not ask or was not able to ask questions that took her deeper than a surface answer.

What an early stage company does need to do is quickly figure out the customer profile that can give them the best results in the shortest period of time. Yes you have to think about it, so at some level it is theoretical, but the real results come from hands on engagement with paying customers, and finding out what the product or service really does for their business or life. These successful entrepreneurs did not succeed by shooting from the hip, they learned and adapted. A market-driven baseline approach helps you figure out that customer profile.

More from Sarasvathy

“I would like to get from them…by meeting with them or getting their input on what they think of the limitation of existing programs….just kind of sit and listen to them telling me…what new features they’d like. And I’d just listen to them talk, talk, talk and then be thinking and develop something between what they want and what’s possible technically.”

Sarasvathy says executives rely less on firsthand insights, because they can afford to place bets on multiple segments and product versions. “Entrepreneurs don’t have that luxury,” she says.

I have to agree here. Basically she is saying here that the value of deep interaction with early customers is key. These CEOs understand what the first real customers do for the business. At some stage though the CEO cannot be the only person that talks to these valued customer/partners. The CEO has many other things to deal with as the company starts to scale. What is important is that the initial sales team is capable of that level of engagement (not just closing the deal) and can feed the critical information back to the rest of the team. What is working for the customer what is not?  Has this customer provided insight that gives you a better idea of what the next customer is going to look for or need? Just as the product may need to be honed, the ideal customer profile will evolve in these first few engagements.

Sweat competitors later

Entrepreneurs fret less about competitors, Sarasvathy explains, because they see themselves not in the thick of a market but on the fringe of one, or as creating a new market entirely. “They are like farmers, planting a seed and nurturing it,” she says. “What they care about is their own little patch of ground.”

Agree wholeheartedly with this one. It is not about market share until you become much larger. What stops most startups is execution, not competition. Most startups are not late entrants into a crowded space. They are innovators entering new spaces or new ways of doing business. They need to get to a significant size before established companies take notice, and those companies probably have too much inertia to react quickly anyway.

The faster the startup can secure customers and define their own market the more likely they are to end up being the dominant player in the (new) segment. The time to start looking at competition is later in the life cycle. That does not mean they don’t need to do their homework though. Knowing who else is out there that may be a threat is important, but execution at early stage pays way more dividends than deep competitive analysis and defensive strategy.

Don’t limit yourself
Corporate managers believe that to the extent they can predict the future, they can control it. Entrepreneurs believe that to the extent they can control the future, they don’t need to predict it. That may sound like monumental hubris, but Sarasvathy sees it differently, as an expression of entrepreneurs’ confidence in their ability to recognize, respond to, and reshape opportunities as they develop. Entrepreneurs thrive on contingency. The best ones improvise their way to an outcome that in retrospect feels ordained.

This is a tricky one. The entrepreneurial CEO is a great source of ideas, and needs to recognize opportunities that are possibly outside the original plan for the product. However where these CEOs stand out, is in balancing the possible with the execution.

In the example above, “It’s easy to see how within an hour you could name 10 products that would each address huge markets, like all employees in Fortune 500 companies, who are rich enough to pay $100 for it.” I cannot believe that the successful entrepreneur would advocate going after all 10 products at once. The startup CEO that succeeds will pick the product most likely to succeed and run with it, ignoring the other 9.

Yes, they stay adaptable, and are ready to change if they need to, but clear instruction and leadership is more important than a new idea every day. Too many companies fail because they thrash between the old direction and the new. There is a fine line that the successful startup needs to walk between myopia (not changing enough) and chaos (changing strategy too much).

Overall, I would say this article has some useful insights and data, but only scratched the surface.  We want to keep following Sarasvathy’s work and wait for her to continue peeling back the onion layers, as the saying goes.  There are some great second level questions behind some of these answers that these CEOs shared and we’re eager to hear the next phase results.

Read the entire Inc. article by Leigh Buchanan here.

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10 Effective Tips Entrepreneurs can Use to Meet Investors

Friday, February 25th, 2011

http://www.flickr.com/photos/robandstephanielevy/Here are 10 tips overall, five DO and five DON’T…

5 tips to help entrepreneurs succeed in a meeting with a potential investor.

1.  Leverage your network and convince trusted individuals to introduce you to investors. An effective trusted individual is someone investors will listen to. Our investor pool pays attention to:

  • Entrepreneurs whom the investor has backed and made money with, wants to back, or is currently backing.
  • Other investors whom the investor has co-invested and made money with, wants to co-invest with, or is currently co-investing with.

2. We often get asked — where do I look for potential investors?  These three categories of Professional Services Providers are good sources, but hard to reach many times:

  • Attorney
  • CPA
  • Investment Bankers

3.  YOU MUST be able to describe your company and it’s value succinctly and quickly. (Since I hate aphorisms I won’t say “you need an elevator pitch”) However you need to be able to describe your company’s vision in a single phrase or sentence. I.E. Groupon is a deal-of-the-day website that is localized to major geographic markets in the United States and Canada.

4.  YOU MUST have a short, concise investor presentation. It needs to include; deck that tells a compelling story about your team, product, traction, and plans. (see “5 things not to do, #1) Email me at  larry@altusalliance.com for the template we recommend.

5.  YOU MUST know your financial/revenue model and the assumptions behind the model backwards, forwards and in your sleep.

5 Things You Must NOT Do When Pitching Investors

1. DO NOT send business plans, we don’t read them.

2. DO NOT spam investors with your business plan, see above

3. DO NOT send business plans attached to items you think will get our attention like steaks, gorillas, coconuts etc. It makes our office smell and we will NOT get back to you.

4. DO NOT ask us to sign an NDA — we won’t sign one. We see far too many deals each month.

5. DO NOT tell us about “sweat equity” when asked how much of your own money did you put into your venture.  We like when you have your own money in the deal.

Of course, you’ve probably heard many of these things before.  As the president of the Keiretsu NY Chapter, I see a lot of plans and pitches. I meet a lot of startup companies.

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Startup America Ventures Need Sales Help

Wednesday, February 9th, 2011

startupamerica_altusStartup America is a new government program that has the potential to change and improve our economy and small business growth in America. In this post, we share 5 Recommendations that we believe can help the program to be a success.

A brief overview of what Startup America promises to do:

  • Expand access to capital for high-growth startups throughout the country;
  • Expand entrepreneurship education and mentorship programs that empower more Americans not just to get a job, but to create jobs;
  • Strengthen commercialization of the about $148 billion in annual federally-funded research and development, which can generate innovative startups and entirely new industries;
  • Identify and remove unnecessary barriers to high-growth startups; and
  • Expand collaborations between large companies and startups.

Startup America is a well-conceived initiative. We believe both public and private organizations need to come together in a coordinated fashion to actually deliver a program and value that can be understood by the entrepreneurial community. The country has experienced successful public examples including the SBA, Dept of Commerce, Dept of Energy, and other grant programs. In the private sector, working examples of entrepreneurial programs include: Kaufman, Case, TechStars, investor groups, and a myriad of foundations.

Add a “Revenue Acceleration Program” to the Partnership

After seeing and participating in a number of these programs, we hope and expect that this next generation of startup support and education includes the critical phase of the initial sales and helping young companies find customers for their products/services.

Mostly these programs focus on the creation of a business plan (document) and the development of the initial product with little attention or remaining funds for the actual sales process.

Mark Leslie, founder and CEO of Veritas, and one of the Stanford professors who developed the Sales Learning Curve would say that a team and product that takes too long in the initial build-out (as it always does in the development) ends up rushing and pushing and spending too much money with a rushed and ill-defined sales strategy.

Our advice and contribution to the organizing committees is to create the framework into two phases: initial build-out and initial sales. Investments, education and support should be in those two phases.

What is essential in Phase Two (when a product is ready) is the development of the vertical segmentation, customer profile refinement, sales structure, value proposition (to name a few) all of which need to be rolled out and evolve based on real market experience.

We are not alone in advocating this approach. In addition to Mark Leslie, many prominent and well-known academics and professionals express how critical the sales and market timing stages are to a young company.

Many people cite Geoffrey Moore’s Crossing the Chasm to explain how the market responds and adapts to a new product or service: Innovator, early adopter, early majority. Or the concepts of Infancy, Childhood, Adolescent, and Adult are used from Michael Masterson’s book: Ready, Fire Aim. We believe that early revenue traction can achieved for startups, if the proper resources are committed from Startup America.

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Here are five recommendations that Altus Alliance partners want to share with Startup America:

1.    Expedite Disbursements: Once federal and state grants are awarded from government agencies, then please expedite the money disbursement to awarded venture start ups. Note: Now there are lags of many months to half a year– depending on the agency.

2.    Restore Qualified Programs: Restore grant funding to programs that have were slashed due to non-strategic across the board budget cutting – especially for R&D grants, and PhD hires. Example: New Jersey Commission on Science and Technology – closed in 2010 with no replacement grant issuing entity.

3.    Add Market Validation to R&D: Establish and increase market research and market validation related grants to enhance likelihood that funded R&D will more likely be commercialized in the marketplace. Currently there is too much emphasis on R&D and hardly any focus on commercialization. Perhaps the Department of Commerce could take the lead.

4.    Establish Net Loss Carry Forward Tax Program: Encourage all states to establish or maintain Net Operating Loss Carry forward tax policies. As a tax policy example, we applaud the US Federal Government for its Qualifying Therapeutic Development Project Grants which were part of the Healthcare Reform Act of 2010.These grants were established to cover past operating losses of life sciences companies. We advocate creating regulation streamlining and cycle reduction for U.S. patents and for FDA approvals because they would have a positive effect to current bottlenecked ventures.

5.    Recognize Sales Stages: Segment programs into pre-product and post-product development so that you create an ecosystem built on market realities. Product development, product creation happens on a different timeline than a Go-To-Market timeline and funding and other types of assistance should reflect this reality. Expand the channels for funding start ups and startup assistance – not just through traditional entities like universities, workforce state agencies and known players who may not leverage this spending in a way that truly impacts sales results, but instead create a challenge program open to those who know how to create new businesses and to reinvent the start-up ecosystem. Wired Bio-1 is an example of a program that was hamstrung and unable to make an impact with a grant from the United States Department of Labor Education and Training (USDOLETA).

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Overall, we believe the biggest issues that small companies face is moving from the idea, or initial product phase, to their first customers and sustainable growth. We want to encourage Startup America to accept and build on the idea that there is much more to growing a successful company (one that can generate profits from revenue, tax dollars and jobs) than just getting them started. In order to succeed, almost every startup needs help getting revenue traction with the right customers. To close, we’ll quote Peter Drucker – “The purpose of business is to create and keep a customer.” Let’s help today’s new startups do just that.

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5 screw-ups and 10 Rules from a startup CEO

Sunday, September 30th, 2007

Liz Gannes recaps a talk on a high-flying startup whose CEO was remarkably candid in a recent speech. What’s particularly interesting is this same CEO wrote a much reach piece entitled Ten Rules for Web Startups (see excerpts below). Here’s the list of screw-ups…

Williams went through a tidy list of the top five Odeo screw-ups:

  1. “Trying to build too much” – Odeo set out to be a podcasting company with no focus beyond that.
  2. “Not building for people like ourselves” – For example, Williams doesn’t podcast himself, and he says as a result the company’s web-based recording tools were too simplistic.
  3. “Not adjusting fast enough” – The company thought its comprehensive web-based strategy would win out over the competition, primarily Apple, in the long term. “It turns out long term is not soon enough for a startup if you’re trying to get a foothold.”
  4. “Raising too much money too early” – Williams seeded the money with $70,000 of his own money, and after the TED excitement added another $100,000. After he tied up over a million in angel funding, a term sheet came through from Charles River Ventures at three times the angel round valuation. They took the money.
  5. “Not listening to my gut” – “When you’ve got a bunch of money and you’ve hired a lot of people and you’re talking to your board and you’re talking to reporters, your gut can get drowned out.”

Ten Rules for Web Startups

The following are the ten rules with a couple of samples of his rules. Click here for the details behind each.

#1: Be Narrow

Focus on the smallest possible problem you could solve that would potentially be useful. Most companies start out trying to do too many things, which makes life difficult and turns you into a me-too. Focusing on a small niche has so many advantages: With much less work, you can be the best at what you do. Small things, like a microscopic world, almost always turn out to be bigger than you think when you zoom in. You can much more easily position and market yourself when more focused. And when it comes to partnering, or being acquired, there’s less chance for conflict. This is all so logical and, yet, there’s a resistance to focusing. I think it comes from a fear of being trivial. Just remember: If you get to be #1 in your category, but your category is too small, then you can broaden your scope—and you can do so with leverage.

#2: Be Different

 #3: Be Casual #4: Be Picky #5: Be User-Centric #6: Be Self-Centered #7: Be Greedy #8: Be Tiny #9: Be Agile

You know that old saw about a plane flying from California to Hawaii being off course 99% of the time—but constantly correcting? The same is true of successful startups—except they may start out heading toward Alaska. Many dot-com bubble companies that died could have eventually been successful had they been able to adjust and change their plans instead of running as fast as they could until they burned out, based on their initial assumptions. Pyra was started to build a project-management app, not Blogger. Flickr’s company was building a game. Ebay was going to sell auction software. Initial assumptions are almost always wrong. That’s why the waterfall approach to building software is obsolete in favor agile techniques. The same philosophy should be applied to building a company.

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Andreesen’s take on what life as a startup founder is like?

Tuesday, July 31st, 2007

Marc Andreessen (founder of Netscape) nails it describing the good and the bad. Here’s a taste of his post…

    First, and most importantly, realize that a startup puts you on an emotional rollercoaster unlike anything you have ever experienced.You will flip rapidly from a day in which you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again.Over and over and over.

    And I’m talking about what happens to stable entrepreneurs.

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