Posted: May 24th, 2010 | Author: Robert Shedd | Filed under: posts | Tags: best practices, startups, thoughts | 6 Comments »
A fruitful behavioral interview question is to ask about a time when the interviewee was working in a group and they had to deal with someone who wasn’t cutting it. I say it’s fruitful because it usually is always asked and therefore, since candidates know it’s coming, they have a thought out answer for it. The question usually attempts to get at how the person dealt with the issue – did they work with the student to resolve it, did they work with the professor, etc.
It can certainly be interesting to know how people handle themselves in difficult situations. However, I think for entrepreneurs, there is a different, more telling way to look at this theme. You want to get at what did the person learn about who makes them successful.
As I’m finding out, entrepreneurship is everything you expect from hearing about it – it’s fun and rewarding, it’s also confusing and downright tough sometimes. And it’s a constant roller coaster from good days to not so good. There’s some debate about whether you need a co-founder in this modern age of startups, but the plain truth is that it’s hard to succeed, in general, with startups and being alone doesn’t add much to your chances. I’m with Paul Graham on this one (see #6). The point of the Business Insider article is that you have slim odds of finding a co-founder that you align well with.
So, steering back on topic – figuring out who makes you successful.
In most groups in school, students are lumped together in groups, usually at random. But when it’s over, did they figure out who they worked well with any why? Did they distill that thought nugget down, so that the next time they get to pick who they’re going to work with, they know what traits they should be looking for?
Each person usually has specific types of people that they work well with. Maybe a visionary works well with an organizer. Or an organizer works well with a someone who’s very driven and motivates the team. Regardless of the specifics, I think its highly important for people to figure out who those types of people are for themselves and to do so as early as possible. Then, as you meet folks and make connections, you can seek to build relationships with those that align with the type you’d work well with.
This is a critical concept for entrepreneurs. The team is everything – it’s one of the three critical legs of the stool. If you know more concretely who you would work well with, that should go a long way towards helping you to figure out who you want to co-found a startup with.
As I started to discuss in my post on the first two steps to encouraging entrepreneurship, I think a big part of learning to be an entrepreneur is learning to be cognizant of things that most people notice, but don’t take note of or take action on. In much the same way as you need to train yourself to recognize the market “pains” that product opportunities create, you need to train yourself to note who you work best with, what personalities are most compatible. It’s almost like an entrepreneurial variation of Situational Awareness, perhaps a combination of the three levels. Regardless, being able to make those observations and and pushing to distill them down into something more actionable is key and if you can figure that out, you just increased your startup’s odds.
So, focus on who makes you successful.
Posted: May 17th, 2010 | Author: Robert Shedd | Filed under: posts | Tags: entrepreneurship, entrepreneurship education, seed stage accelerator programs, startups, thoughts | 7 Comments »
The list of startup accelerators I’ve been cataloging has grown larger than I expected. We’re now up to 93 programs, in many corners of the world.
I think it’s fantastic that there are many people working to encourage entrepreneurship. It’s wonderful for the aspiring entrepreneurs and an extremely positive development for the innovation that drives our economy.
There’s another aspect to this growth that I’ve been discussing with several accelerator alumni and other entrepreneurs recently, though. That is: I wonder, though, if aspiring entrepreneurs are getting the right message about what ‘success’ is, as people rush to inspire and motivate these business moguls of tomorrow.
There seems to be an unstated message that success for entrepreneurs in today’s world is to raise a six figure VC round and scale your business to millions and millions of users. Funding = validation and its build a massively scalable business or fail fast. As a culture, we’re captivated by the outlier success stories – it clouds our visions. Really difficult challenges become simplified in our minds to make the impossible seem within reach. Things like: “After all, it’s only a matter of fine tuning your user acquisition formula and then just dumping gallons of virality fuel on the fire…” (Simple, right? — Because money burns really well!)
Seeking validation from investors by way of filling the bank account with other peoples’ money becomes the goal. Right from the get-go, entrepreneurs are planning how they can go from 0 to 1,000,000 rather than 0 to 1,000. My friend, DJ Stephan, Chief Marketing Officer for Notehall.com, likes to say “It’s like setting off to build the next Empire State Building when you haven’t even even looked at the construction plans for a one-story house.”
Now, to be fair, no entrepreneurship professor, speaker or mentor I know or have heard of has ever stood up and defined success like that. But just look at the headlines that are being featured. These are the role models that entrepreneurs are watching.
$2m to Newsy in series A round. $3.6m to HelloWallet in series A round. $6m to WordStream in series B round. $7m to Critero in series C round. $23m to Invidi in series D round. And that was just in one week.
Building a so-called “lifestyle business” is a dirty word, apparently. (So much so that Josh Kopelman put out a call for a new term.) I’ll use sustainable business.
I get it. Building a business that doesn’t sell for hundreds of millions of dollars to Google isn’t as sexy as one that does. It isn’t the splashy news that TechCrunch wants to feature. It isn’t as cool a story to tell your friends.
Is that ok?
A sustainable business that brings in more modest revenue is still a driver of innovation and economic development. It still can beget the entrepreneur life-changing money. Perhaps more importantly, it gives them experience and a success to someday parlay into another venture. It keeps them in the entrepreneurship game, rather than putting it all on the line, burning out, and not giving it another go.
And the probability of success is higher. It is likely easier to figure out how to create a useful business for your 40,000 fellow students than 400,000,000 Facebook users. And once you figure out how to make modest money from one market, it doesn’t necessitate putting all your chips on the table to see if you can turn on virality faucet.
It’s not that it’s wrong to aim for the stars. But after evaluating that option and finding that it might not be fully baked, it should be ok to aim for something more reasonable and to have that success celebrated.
There are only 600-some venture capital deals per year in the US. Assume that a percentage of this activity is series B/C/D financing, leaving only a portion of these deals for seed-stage / series A investments. Let’s assume 50% are seed/series A, to be generous — so, 300 VC deals for new ventures. Now, I realize that not all of the 93 accelerators on the list are in the US nor are all companies in the accelerators VC-fundable and not all of these VC deals go to accelerator-launched startups, but if they were, that would be ~3.22 deals per program. Assume each program has ~10 startups. So, on average, that’s 7 startups that aren’t getting funded, per program. The real number is actually much, much bigger. Are these entrepreneurs just going to give up and go home? If they define success as raising money, they might as well. Even if you include angel deals, there is not enough dealflow for each company to define success as finding follow-on funding.
Sometimes I feel like with the age of tech startup businesses, the focus is exclusively on building a product that people want. Entrepreneurs forget first and foremost that they are setting out to build a business. As in something that generates money. With not enough “Other Peoples’ Money” to go around, some of these companies are going to have to push the envelope and actually create businesses that generate revenue from day one.
Fortunately, there is more than one way to build a company than to focus on raising VC funding. Let your startup evolve and see where it goes. If VC funding is the right way to go, great. But just because you don’t build a company that fits with the pattern VCs are funding, it doesn’t make you any less of an entrepreneur. Let’s make sure we define success appropriately.
Entrepreneurs know in the back of their heads that raising funding is unlikely. Still, the temptation is there to keep telling yourself that the metrics don’t apply to you. With the number of accelerated companies seeking follow-on funding, the writing is becoming more plain on the wall. If entrepreneurs knew up front that building a VC-funded rocket ship wasn’t feasible, would they still think it was worth the long hours, the lack of pay, the risk, to build a successful business that is a bit smaller? Enough to get started?
I hope so. And I hope that the mentors in the 93 startup accelerators around our world are conveying that message. The message that explosive growth powered by VC rocket-fuel or smoldering ruin aren’t the only two options in entrepreneurship. After all, we can’t all be in the first group – another direction is perfectly ok, too.
Posted: May 15th, 2010 | Author: Robert Shedd | Filed under: posts | Tags: funding, seed stage accelerator programs, startups | 1 Comment »
The comments and suggestions that my list of seed accelerator programs has drawn have been the interesting part of maintaining the dataset. One recent comment pointed out a new resource, an overlay of the seed accelerator programs on a Google Map. It’s an interesting visualization, seeing how the programs are distributed. I’ve embedded the map below, but also suggest you take a look at the full version – the author has a detailed description and related information included for each program. For those entrepreneurs looking for a program nearby, this should be a nice resource for you.
View Seed Accelerator Map in a larger map
Posted: May 12th, 2010 | Author: Robert Shedd | Filed under: posts | Tags: best practices, building startups, dreamit ventures, startups | 5 Comments »
This past weekend was the kickoff event for DreamIt Ventures’ 2010 program. The program, considered as one of the top three accelerators in the country, received over 350 applications for its third class, per opening remarks from co-founder Mike Levinson.
On Monday, I wrote about some of the lessons that the 2009 DreamIt Ventures alumni panel spoke about at the kickoff event for the 2010 cohort. Following this panel session was a presentation by Steve Barsh. Steve was the DreamIt partner who ran the day-to-day operations last year, but he’ll be taking a somewhat reduced role this year, as his main focus now is his newly launched startup that’s a marketplace for great last minute deals on vacation rentals, PackLate.com.
As always, Steve had a ton of great thoughts for the companies. His presentation was a collection of startup tips and tricks, to get the companies in the right mindset for the first day of the program (which was Monday). Here were some of the highlights of his talk:
- Steve talked about some of the common problems startups face. One of the key issues he mentioned was early-stage startups commonly looking for validation from investors, and thus attempting to raise money from investors too early (More on Steve’s blog). Steve told the DreamIt companies that you don’t need any funding to go out and ask your customers if they would buy your product if you built it. And if they say no, you can ask why not and dig into what their concerns are. For more, see Steve’s blog post on the topic.
- He covered the concept that every startup has a number of key assumptions and that the companies want to be looking for ways to kill these off as early as possible during the summer. Remove these assumptions to increase the probability that your business will succeed, but also if you are going to look for funding at some point down the road, this is one of the best ways to improve your valuation. (Post on Steve’s blog)
This concept of de-risking your business plan was an extremely transformative way of looking at building startups for me last summer and I hope that this important concept was driven home for the new founders in a similar way.
- Steve spoke about how a startup’s job is to learn as quickly as possible – to run through a maze filled with a ton of dead ends, realizing that you’re heading towards one of these dead-ends as quickly as possible, and pivoting to start off on a new route.
To this end, each week, you should be figuring out what you can learn, what experiments you’re going to be running. What marketing experiments? What product experiments? Pitch experiments? Set a hypothesis and then go off and prove or disprove it. Build a minimum viable product, release it, learn, improve, and release again. Along those lines: If in retrospect, you look back at your first product and you’re not embarrassed by it, then you waited too long to release it.
- Steve also talked about the importance of not sitting there and debating these learnings amongst your team. A/B test everything. Think people want a new feature? Put a button on a page and see if people click on it. Put Google Adwords up and see what people click on – refine your pricing and positioning via this methodology. Steve has some good tips on these techniques here and here on his blog.
- He shared an interesting way of looking at startup strategy: every single day, what can you do to gain an unfair advantage? What can your mentors, advisors, board, university connections, LinkedIn, etc. do to give you an unfair advantage? Can you call in favors from friends? Can you get in touch with a key contact through a fellow alum? Figure out what you can do to give you an edge over your competitors – you are in this to win. In that vein, start building your networks on LinkedIn – those shared connections will be the basis of your personal competitive advantage.
- Steve shared one of his classic tips that I’ve always thought was one of his best: he suggested that the companies, as they’re meeting with investors this summer (for advice – most are too early stage to be pitching for real), end their conversation with this question: “If you would ever consider making an investment in a company like ours, what would it take for you to make that investment?” I love this question, because it’s a great way for the entrepreneurs to get inside the investor’s thought process, and get some insight into the kinds of issues that they’re going to need to address before they can have the follow-on investment conversation for real.
- Steve closed with this bit of advice: You are getting on a roller coaster. You are going to have great days. You are going to have days where you’re ready to pack up shop. Stay stubborn and focused, but keep looking for pivot opportunities.
And so many more great thoughts and ideas. The summary recap hardly does the presentation justice. So, the presentation is embedded below – check it out.
In many ways, Steve offered similar thoughts and techniques to what he presented last year at the DreamIt kickoff event for the 2009 companies, however, I think the presentation was much richer this year. For the better part of the past year, Steve has been living the early stage startup life again and putting all of these techniques into practice with PackLate.com. All of the lessons learned really came through in this talk. Tons of great advice for the DreamIt companies – hopefully, they’ll take a handful of these and put them into practice. And just like that classic novel that every time you read, you get something new out of it, there were even things for the DreamIt alumni in the audience to take away and put into practice. Certainly, if you ever get the chance to hear Steve speak about his tips for startups, take him up on it – there will certainly be something worthwhile for you and your business.
Check out the presentation for yourself, from SlideShare:
EDIT: The presentation has been embedded.
Posted: May 10th, 2010 | Author: Robert Shedd | Filed under: posts | Tags: best practices, dreamit ventures, startups | 2 Comments »
This weekend was the 2010 DreamIt Ventures Kickoff Event in Philadelphia. It was great to see 15 new startups in the Philadelphia area, buzzing with activity and ready to get started. The kickoff events were held at the soaring Comcast Center on the 45th floor, an exciting venue that helped amplify the energy.
Lots of folks from the Philadelphia startup community attended and there was a ton of good advice dolled out to the incoming companies. Two segments of the weekend, in particular, captured some good lessons for the 2010 DreamIt companies. I’ll recap these from my notes in two posts.
The first segment that I want to summarize was a panel session with three companies from the 2009 cohort: Jack Groetzinger from SeatGeek.com, DJ Stephan from Notehall.com, and myself for FanGamb. Clearly, having been on the panel, I’m a bit biased, but I felt there were a lot of good points made.
A summary of some of the important takeaways from the panel discussion:
- There’s more than one way to build a startup.
- SeatGeek launched at TechCrunch 50 and raised a good sized series A VC round.
- Notehall.com was featured on ABC’s SharkTank program in October and closed a moderate seed round.
- FanGamb closed a family & friends round in the fall to continue iterating the core game (something larger in the works that can’t yet be disclosed).
- The message: There are lots of different funding options. Find the one that works for your business. Raising VC funding isn’t the only definition of success. The longer you hold off on raising funding and the less you raise, the more options you keep open and the more ownership you maintain, generally. Another point by Jack: when raising funding, put one person in charge of the process and send him/her to the meetings only – don’t let the process distract your entire team, keep them focused on building the product.
- Don’t be afraid to pivot.
- SeatGeek grew out of the largest pivot from DreamIt ’09. The founders, Russ D’Souza and Jack Groetzinger, were accepted to DreamIt with an entirely different business – Scribnia.com, a blogger review platform. They sold this business in June 2009 and built the SeatGeek prototype in 1.5 months in time for Demo Day. The message: no matter what pivot you’re considering, it’s not bigger than changing your business entirely, so keep all options open.
- Notehall changed the way it sold notes at campuses. Originally, it gave notes away for free to kickstart the market, but advisors were suggesting they try another model. Finally, after months of ignoring this advice, they finally piloted a different model and found it to be hugely more successful. The message: be open minded – the DreamIt partners and your mentors may not know your market specifically, but they know how to grow businesses. Be true to your vision, but be open to trying other models.
- FanGamb pivoted with regard to two aspects of its model – how to drive engagement and its business model. Regarding engagement, a key assumption was that badges and leaderboards (i.e. social proof) would be enough to drive users to be engaged with the site. To a point this was true, but never to the level expected. Similar, virtual goods were expected to be a key monetization engine for the site, however, without the high levels of engagement, this wasn’t effective as a first step. As a result, the FanGamb team tested multiple options and is in the process of implementing a new model (again, no specifics currently – news coming soon). The message: get your core user base using the product as soon as possible, throughout your iterations and test your user acquisition methods, too. We wrote off early user behavior because we were testing with a different sport than we would launch with in the fall, but in retrospect should have taken a harder look at the data.
- What do you think some were some of the key factors that led to your companies succeeding, versus those that didn’t from your DreamIt cohort?
- Don’t die – find a way to pivot. In nearly every startup concept there is a nugget of truth/value – you need to distill your concept down and figure out what that is as quickly as possible and make course corrections along the way. Startups are a process of going down as many dark alleys as you can before you run out of motivation and money.
- Get real customers using the product as soon as possible and find out what they really think. (Side note: it was amazing how many of the DreamIt startups talked about the status of their customer development efforts in parallel with their product development efforts in their overview/status talks – quite a change from a year ago, really showing how the lean startup methodology has taken hold. Seems to be effective lean startup, too, not lean washing…)
- Solid, stable teams that put in a ton of hours (the three companies on the panel represented teams that put in some of the most hours throughout the program – SeatGeek put in 36+ straight at one point, winning the prize for the most time in the office) — this wasn’t specifically mentioned during the panel, but was an observation we noted afterwards
Certainly lots of good thoughts and lessons learned from the panel. More great thoughts and startup advice from Steve Barsh’s Kickoff presentation coming in a future post.