Posted On July 18th, 2016 by Crowded Ocean
Pundits are calling the first half of 2016 “an adjustment phase” in the VC business as overall VC investment is down 20 percent and deal activity down 25%, compared to a year ago, according to this update in the Wall Street Journal. Meanwhile, valuations have diminished significantly: the median valuation in the first half was $20 million compared to $55 million a year ago. This period of correction, as VCs hold on to their wallets and check books a bit more in recent years, means we’re seeing a new (and unfortunate) trend: strong Series A companies working harder for their next round of financing or having to quickly tighten their belts in light of the current environment.
All of this brings us back to what we’ve seen for the past two decades: ‘running out of money’ is still in the top three reasons that startups fail. Why? Well, first-time CEOs are optimists by nature, meaning they’ll assume their product will stay on target and budget. Also,they want to part with as little of the company as possible at this stage.
All of which is both commendable and understandable. But the rule of thumb these days—and we strongly back it—is to take your original budget and schedule and then add 50 percent to it. If you come in on target or ahead of us, you’ve got money in the bank. Literally. If not, you’ve still got room to maneuver and live to fight another day.
Posted On July 12th, 2016 by Crowded Ocean
We work with a lot of venture capital firm partners, and once we’ve worked with them enough that they can be candid with us and vice-versa, one of the things we discuss with them is how unproductive Board meetings often are.
First, the company (or at least the CEO) shuts down for a week or more to prepare for the Board meeting (since the CEO never wants to look like he/she doesn’t have all the answers). Second, the Board feels like it’s only getting the sunshine part of the story, not the rain—and when they push for the bad news, they feel like they’re bullying, rather than looking for areas where they can help. And third, many Board meetings are just a forum for the VCs to opine, but nothing really gets done.
So, after enough of these conversations, we’ve put together a summary of the guidelines we’ve received from our VC partners on how to get the best out of both your Board and the meetings:
- Set a format and publicize it before the first meeting. It should consist of three components:
- What’s going right. Highlight the best programs and deliverables, with supporting stats. Aim for a level of detail that’s “executive summary” in nature.
- What’s not working . Own up to it before the Board discovers it. Be truthful and have a plan on how to address and remedy issues.
- What can the Board do to help. This isn’t a one-way street. Identify areas (recruiting, introduction to key accounts, etc.) that can benefit from their involvement, assign action items with deadlines and hold the Board member accountable (put all Action Items—including those assigned to Board members—on every agenda.)
- Don’t let assholes hijack the meeting. Here’s a headline: some VCs are full of themselves and love to hear themselves opine. (Helpful hint: make sure these get the most Action Items). Keeping to your agenda can help dampen their self-promotion, but if this behavior keeps up, remember that you’re not in this alone. Hopefully your other VC is more like a consigliere and you can ask him/her to address the issue with your fellow VC off-line.
- Always pick a different area of the company to focus on for each meeting. First, it’s sales. Next, it’s marketing, and so on. Invite the person who’s running that department into the meeting. It gives them their moment in the sun (or under a harsh spotlight) and shows that you’re not making the whole thing about you.
- It’s okay to say: “I don’t know. I’ll have to get back to you with the answer.” That’s far better than spending hours that you don’t have trying to anticipate and answer every possible question.
- Give your Board members a summary of the meeting that they can take back to the ranch, since they have to update their partners on a regular basis.
Most important, from the start, try to make this an ‘Us’ forum, with everyone on the same team. If you’re already in an ‘Us/Them’ scenario, you can reclaim it, but only with the help of your most influential Board VC. But it’s more than doable—it’s necessary
Posted On July 5th, 2016 by Crowded Ocean
In professional sports two of the toughest jobs are that of General Manager and scout. The latter watch tons of film, interview athletes, attend ‘combines’ to measure performance, then make their recommendations to the General Manager, who then has to determine how high to draft that athlete and how much to pay him/her.
Contrasting these sports, based on the success rate (how many players you draft actually make it to the Bigs), it’s best to be in basketball, where the rosters are filled with first and second-round picks, and where scouts can even predict, as they did with LeBron, that he’d be a #1 pick—when he was in 8th grade. Then comes football, where the hit/miss ratio is higher (81 players were drafted ahead of Joe Montana). Finally comes baseball, where more first- and second-rounders wash out of the game than make it the big leagues. (In fact, Mike Piazza, a Hall of Famer, was the 1391st person drafted in 1988.)
So what does all of this have to do with technology? Well, being a VC is more like being a baseball General Manager than any other sport. So much can go wrong between the moment of signing and the Big Leagues (IPO or acquisition). In baseball, can’t-miss prospects often stall out in AA ball (arm trouble, can’t hit the curve, etc.). The same applies to startup CEOs and their companies. Can their product scale? Can they scale as leaders? Can they be marginalized by a competitor? Add all of this up and you can see why a 10% hit rate for VCs is considered successful.
What can startup CEOs do with all of this? First, look at life through the VC’s eyes—what is their track record, both hits and misses? Find the characteristics of their 10 percent success rate and tailor your pitch accordingly. And, above all, know that you’re going to hear ‘no’ initially more than you’re going to hear ‘yes.’ Just like Joe Montana and Mike Piazza did.
Posted On June 29th, 2016 by Crowded Ocean
The concept of the startup “trough of sorrow” coined by VC titan Paul Graham of YCombinator has clicked with Silicon Valley in a big way. The trough is a stumble in the life of a startup, just after launch, when marketing momentum stalls out, customer acquisition slows (and the words “customer traction” are no long uttered).
Having launched 42 startups, we’ve lived through our share of troughs and now make ‘trough avoidance’ part of every launch plan.
The trough is a period when marketing, understandably, comes under tremendous scrutiny. Everyone from the office manager to the Board will ask for website traffic stats, lead status, and metrics. Here’s our advice to help your startup go into launch with a strategy to avoid the trough.
- Plan ahead: Easier said than done, but no startup team should claim they are ready to launch without a 90-day marketing plan in place. In other words, the quarter after launch should be a fundamental component of the launch plan. That way, the visibility that your launch creates can be converted into visibility, leads, and mindshare with less cost and downtime.
- Invest in value nurturing : As our marketing colleague Anne Janzer stresses in her book Subscription Marketing, successful marketing teams focus not just on lead nurturing, but on value nurturing in order to maximize the loyalty, longevity and revenue potential of their customers. Value nurturing is the logical next step after lead nurturing and should be part of the best practices of every launch strategy.
- Test, measure, and iterate: After launch, the path to customer traction also depends upon an iterative approach to messages, materials and focus. In other words, expect to tune your plan. Successful startup teams go into launch with the idea of listening, testing, measuring feedback and iterating their sales focus, content and tools based upon feedback and learning from launch.
Bottom line, think of your launch as a major milestone, rather than the destination, along the path to growing your startup.
Posted On June 21st, 2016 by Crowded Ocean
Even before a startup appoints its VP of Marketing, there are three “chiefs” that need to be in place to help position the team for growth and to support marketing.
Chief Content Officer – the VP of Marketing will be the one responsible for creating the content (including page content, downloadables, blog, social channels, etc.) that powers a startup’s website, equips the sales team, and nurtures the backlog of sales inquiries into a pipeline of sales leads.
But what if you have not yet landed your VP of Marketing? That’s when the CEO needs to name an owner to make content development happen for the team. Yes, it will either be someone’s second job or it will be a consultant who has to stand in for the VP in the interim, but it’s essential to have someone owning the content.
Chief Culture Officer – sounds like a B.S. title for someone on your startup team but this is a very important role. This is someone to keep a watchful eye on how the culture of your startup is growing.
That way, you, the co-founder, can ensure that attributes that your team values are reinforced and even strengthened as your team expands. The Chief Culture Officer should be a team player who is tapped to “report in” periodically on how the culture is evolving and to flag concerns for the leadership team.
Chief Revenue Officer – it goes without saying that sales growth should be the bullseye on the target for every startup team. But we often find that in the early days, before a VP of Sales has been named, everyone on the team says they are doing sales. This is a wonderful and logical sentiment, but sometimes when it’s everyone’s job, no one really owns it. Our advice is to anoint someone on the team as “Chief Revenue Officer” which will be their second title, no doubt, but this temporary assignment will go a long way to centralizing sales activity and to reinforcing the need for sales focus (and for eventually naming a true VP of Sales as soon as possible.)
Posted On June 15th, 2016 by Crowded Ocean
Virtually every startup that we’ve worked with in the past three years has gone exclusively to the open bullpen office layout, with hardly a wall in sight. At first glance it’s collegial, it’s democratic in its lack of hierarchy and it’s cost-effective.
But is it good business? Is it good for your employees’ frame of mind and productivity? The open floor plan has now been in place long enough that there are studies, not just anecdotes, about its role in business. And the findings are almost all in favor of some kind of return to ‘personal space’. Here are some stats to consider as you plan your next workplace:
- Open office noise results in an increase in epinephrine (adrenaline)—great for a short burst of activity, bad for the long run.
- Workers in open offices took 62% more sick leave than workers in single offices.
- A University of Sydney study found that loss of productivity due to noise distraction doubled in open-plan offices compared to private offices.
We’re not productivity experts: we’re just reporting what we see and hear in our experiences with multiple startups. And the only positive spike we’ve seen—and the most collegial conversations we’ve overheard—are new employees asking the veterans which high-end headphones they should invest in.
Posted On June 7th, 2016 by Crowded Ocean
A good friend of Crowded Ocean, Anne Janzer, just shared with us an early copy of her book, The Writer’s Process. It has wonderful merit for all writers, but the reason we promote it here, to our startup marketing audience, is that she has some very sound advice that can be applied across all forms of Content: web copy, white papers, contributed articles, speeches and more.
Anne does a great job of addressing the complexities and barriers that go into writing. Most of us have faced the fear of the blank page (or blank screen) and frozen. Anne takes a look at the different personalities of a writer (The Muse and The Scribe), the balance of creativity and discipline, as well as the tools for unlocking a blocked mind.
As many of you know, Crowded Ocean is writing our own book: The Ultimate Startup Guide, and in the process both Carol and Tom have come up against the barriers—psychological, work-space oriented, etc.—that Anne discussed in her book. Reading her book has made writing our own substantially easier—which is probably the highest praise we can give The Writer’s Process.
The book is due out later in this year. Check out Anne’s books here.
Posted On June 3rd, 2016 by Crowded Ocean
We love to track new terminology and jargon in startup-land. Here are our latest picks:
Swatting: a form of online harassment in which a fake emergency triggers the arrival of armed authorities or local police.
Fuzzing: in the world of cybersecurity, “fuzzing is the usually automated process” of finding hackable software bugs by randomly feeding different permutations of data in a target program until one of the permutations reveals a vulnerability.
Computer Vision Syndrome: estimates are that 70 to 90 percent of people who use computers have one or more symptoms of this new malady: neck and back pain, vision pain, headaches.
Breach fatigue: yes, the relentlessness of breaches is something consumers are getting used to. But experts say consumers are not indifferent, and are changing their online habits. Meanwhile, corporations are investing in security awareness and training for employees to build a culture of security.
Posted On May 25th, 2016 by Crowded Ocean
In this age of dire warnings about spending and an upcoming ’nuclear winter’, what the hell are we doing, expanding our employee base by 50%?
Good question. But, as always, we have a good answer. Because we need to.
As many of you know, we’re under contract with Career Press to author “The Ultimate Startup Guide”, which is due out in January. Consistent with that is the requests we get to take the lessons we’ve learned in launching 40+ startups and offer them in some form of workshop or class. So we’re looking for a sharp sales and marketing agent who can help us with the following:
- Workshops for accelerators (groups of startups)
- High-end workshops $4-5K for 3-day seminar on starting and succeeding in the world of startups
- MOOCs (Massive Open Online Courses) for universities and business schools
- Subscription-based video series based on the 20 chapters in “The Ultimate Startup Guide”
The position is commission-based, with the agent receiving 20% of any revenue she/he generates from the above activities or any other original programs. The ideal candidate has 3-5 years of sales and marketing experience, great phone skills and a desire to own and manage what could be a substantial and growing segment of the agency.
So if you know of any hard-chargers looking to join forces with two wonderful marketing gurus, please put them/us in touch.
Posted On May 18th, 2016 by Crowded Ocean
Everywhere you look, there are articles forecasting the bursting of the startup bubble and the coming of a ‘nuclear winter.’ It’s true that VCs are starting to heed their own counsel and beginning to scale back on their investments, but they’re not stopping altogether—they’re just taking a more critical (and longer) look at their candidates and options.
One item that is continual concern is a company’s burn rate. Which is why more and more companies are looking at their bottom line from a ‘must-have’ perspective—especially in the area of headcount.
It’s easy for Crowded Ocean to tout the idea of ‘just-in-time’ hiring, since we’re essentially a just-in-time VP of Marketing. But the same reason that startups have for hiring us (no overhead, no commissions to headhunters, we’re hired for our specific expertise—positioning, staffing and launching a startup—and then we go off the books) they’re now employing that same rationale for everything from coding to quality assurance to legal and financial services. With so many just-in-time resources available these days, the burden is now on the CEO and CFO in Board meetings to justify a large number of full-time hires.
We’re not saying that full-time employees are unnecessary or passe; we’re saying that what used to be an open box on the org chart should now be viewed by the function needed (short-term or ongoing) and the budget ramifications. And, whether the long winter is coming, already upon us, or a reality that never materializes, this way of thinking and hiring is here to stay.