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Posted On September 27th, 2016 by Crowded Ocean

3 rules-of-thumb for hiring an effective startup team

Inspired by the presidential debate yesterday, here are three rules-of-thumb that we like to Screen Shot 2014-03-22 at 8.50.31 PMshare with first-time CEOs on how to build a strong team in those critical, early days of growing a startup.

  1. Stick to the no-assholes rule. You can call them jerks or idiots, but the label “asshole” seems to need no interpretation among a team of startup founders who are striving to build a company. We proclaim “no assholes” as a universal guideline for all emerging companies to follow. We would go so far as to state it as HR policy, right along side the Rooney Rule for creating meaningful interviews of minority candidates to build diversity into your team. Especially in the early days, there can be no assholes. Because assholes will often hire their own kind and your startup just can’t afford that.
  1. Dispense with bullshit new-age titles. If you’re serious about building a real company that’s going to go global, then stick with job titles that may seem “retro” to the millenials on your team. Remember that “real” titles on business cards actually mean something to the majority of your customers who aren’t headquartered in Silicon Valley.
  1. When you’re interviewing, take a candidate out to lunch and watch how they treat the waiter. This is a tried-and-true test for most candidates because they are focused on impressing the hiring manager across the lunch table. But if they are rude or dismissive when the bus boy stops to refill their water glass or they are discourteous when an over-eager waiter starts to hover, just order your lunch to go or ask for a doggie bag.

Posted On September 20th, 2016 by Crowded Ocean

5 Steps to Take Your Startup to the Next Level

  1. Write your launch press release as early as possible to unify sales and marketing messaging

As much as startups like their white boards, when it comes to their core positioning, lone-survivorproduct capabilities and supporting messaging, they don’t take anything seriously until they see it in print (or in PPT or HTML). As important as a launch is to a startup—and as important as press coverage is to the launch—you’d think they’d recognize the fundamental importance of the press release and act accordingly. And yet most startups don’t write the release until about 3 weeks prior to launch. Only then are fundamental inconsistencies and misunderstandings revealed, causing everyone to scramble, from website authors to the PR firm. Instead, draft your news release as early as possible to crystallize messaging. Start by writing your ideal headline for the launch, then write the release that will best generate that headline. Then take the components of that release and insert them into all your key marketing and sales materials.

  1. Ditch the “elevator pitch”; use a 20-second “bold claim” instead

The “elevator pitch” is a time-honored marketing exercise and tool for distilling your company’s value proposition. But we’re living in an ADHD world where your prospective customer is addicted to nonstop interruptions in multiple streams delivered on multiple screens. So forget the elevator ride: you don’t have that long. Imagine you’re on an escalator instead, with 30 seconds to make your pitch. Lead with your ‘bold claim’. It starts with: “what if I told you that…” (An example: ‘What if I told you that you could wash your car while driving it home from work?’) An effective bold claim poses a question that redeye failuregenerates this customer response: “I don’t believe you can do that, but I’ll take your card.” It’s a statement that sits at the core of your sales pitch, PPT decks and website–one provocative enough to grab your customer’s attention and initiate the sales process.

  1. Build a company “war room” around your “buyer persona”

Defining the buyer persona is a best practice supported by business books, courses, institutes and online tools. And it makes more sense than ever now because customers have more power and more options. But for so many companies creating a customer persona is just a paper exercise. The key is to develop a 3-D understanding of your persona’s personality and affinities, knowledge that you can then apply to your website, sales pitches, and white papers—and to make it a company exercise. The more advanced startups not only create these 3-D images of their customer, they name them and put an image (or imagined photo) of them on their walls, reminding everyone of what (and whom) they’re working for. This is particularly true of the Sales “war room,” where the customer persona should have equal wall space with all of your competition’s material, a constant reminder to stay focused on your customers—their needs, their options and their reasons to choose you.

  1. Bring your “chief content officer” to the leadership table

Think about it: in an enterprise product sale, the average sales process requires seven ‘touches’ (or interactions) with your prospect. So, to support their transition from prospect to buyer, you’ll need at least seven pieces of original content. And yet, for many startups, content is a last-minute addition to their launch and sales efforts.

Content needs to move to the top of a startup’s Maslow hierarchy. And it has to be everybody’s job. The problem is that every team at early-stage companies is so busy iterating on their product—both in features and possible business applications—that crafting sales content for lead nurturing and demand gen often takes a back seat. We recommend designating a “chief content officer” and giving him/her a seat at the big table for sales pipeline reviews, product planning meetings, maybe even board meetings. Make generating topics and content ideas a corporate-wide function, then recognize and reward those who generate this content—blogs, mini-white papers, etc.

  1. Set diversity goals (just like growth/revenue targets) and report on them just as frequently

Diversity is not only good for a company’s culture, it’s good for business, paying off in better decisions and improved profitability. But how to achieve it? A few innovative startups like Slack have adopted the Rooney Rule that requires that “persons of color” and women be candidates for strategic hires within an organization. Meanwhile, VC firm and startup builder Kapor Capital has taken the Rooney Rule a step further by requiring their own firm be diverse. Now, Kapor Capital partners are requiring the startups they invest in to create a culture of inclusion from the beginning. They ask their startup founders to sign a diversity pledge, then deliver a diversity report every quarter to investors.

Tech titans like Apple, Google and Salesforce have diversity initiatives that they report on publicly. Startups can build diversity in from the ground up by giving it the same status in their business plan as goals for customer acquisition, revenue and profit. And, by reporting on those goals every quarter to your board, investors and your team you’ll be able to reinforce diversity as a value and a business goal that will help set your startup apart.

 

 

Posted On September 13th, 2016 by Crowded Ocean

The Meh list for Startups

This is our list of some of the attributes of startups that are “in” and others that are just, well, “meh”….screen-shot-2016-09-11-at-2-10-23-pm

* for more on the bold claim, see our earlier blog post

Posted On September 6th, 2016 by Crowded Ocean

Why your demo is part of your secret sauce

Whenever we’re working with new startup clients, we try to walk through the demo as early as possible during our discovery and due-diligence phases.

Screen Shot 2015-11-16 at 8.28.27 AMWhy?

Because the demo constitutes so many things for a young startup:

  • It’s the truest indication of the product and functionality that they (and we) have to sell (no vaporware allowed)
  • It usually reflects the early stage constituency of the startup—meaning it’s often designed by techies for other technical buyers or influencers (which means we have a lot of work in front of us)
  • The key selling points, unique value proposition and secret sauce are probably buried, which again will require some excavation, but many of the points are in there

We’re also looking to see if there is consistency between the startup’s PowerPoint presentation (usually developed by Sales or Management) and the demo (often developed by the product team). Not just in messaging and product claims but in UI and look/feel. In other words, do they come across as a company that has its act together.

Regardless of whether the demo is already hitting on all cylinders or needs a lot of work, it all comes down to the SE delivering it. An SE who “gives good demo” has perfected the sequence and screen-by-screen commentary of product capability that is built into the demo in a way that is important to understand; he or she also has a bit of Sales in their DNA, meaning they can read the audience and adjust the pace and content accordingly which are decisions that should help inform your Marketing plan.

Why focus on the demo again?

Because product demos often develop organically during the early phases of a startup to address obvious pain points and also to blunt direct claims by current competitors. So, while your PowerPoint deck may describe the founding vision of the company and the pedigree of the founders, as well as promise all sorts of future product functionality, the product demo itself is a vital proof point of what problem your startup addresses “here and now”, and what competitor you’re up against.

Then again, we’ve all seen vaporware demos that are essentially automated screen caps.

So, caveat emptor.

Posted On August 30th, 2016 by Crowded Ocean

The Anatomy of a Successful Startup Launch

Ask anyone in Silicon Valley and they’ve got a theory on how to launch a startup. Most of them revolve around the role of Marketing. Those who doubt the value or efficacy of Screen Shot 2015-02-10 at 9.04.47 PMMarketing cite the success of such startups as Slack, Atlassian and WhatsApp, who launched with limited investment in Marketing. But the other 95 need Marketing to grow their enterprise—click by click, demo by demo, free trial by free trial.

Having launched 42 startups, we’re often asked what are the ‘best practices’ in launching a company. So much depends on the market the startup is in as well as the company’s focus (B2B vs. B2C), but there are still some guidelines that apply across the spectrum:

  1. Launch with a cross-functional team. According to a feature in the latest Harvard Business Review, 75% of cross-functional teams are dysfunctional. That stat caught our eye because the heart of every successful startup launch is the launch team—which by its very nature is cross-functional. That’s product, support, sales, marketing, and the CEO/founder coming together to introduce a new solution that solves a real pain point. The dependencies, tradeoffs and decisions that need to be made to meet the goals of launch can be made faster and more effectively with a cross-functional team.trough
  1.  CEOs need to be on the team, but as players, not coaches. If you want your launch to happen fast and well, put your CEO or co-founder on the cross-functional launch team. Otherwise you’ll spend more time socializing options and hunting down decisions than on getting things done. But make it clear to the CEO and everyone else: the CEO is a member of the team, not the leader. That role is reserved for Marketing. The CEO’s job is to reinforce the goals, deadlines and accountability of the launch. When tough decisions need to be made, it’s the team’s job to make them, the CEO’s job to support and implement them.
  1.  Banish pixel polishing. Part of the Steve Jobs legacy is his famous/infamous attention to the details of Apple product design that bordered on obsession, a habit we call “pixel polishing.” Now Jonathan Ive and Elon Musk are celebrated for their same rabid focus on product details ; and while this pursuit of perfection may be admirable in established companies, it can be fatal to a startup. A startup team in launch mode doesn’t have the time or the money to afford pixel-polishing. Just say no to pixel polishing and yes to “Done is good.”
  1. Beware nomadic board members. In a successful launch, board members should be heeded but not seen. Getting their input offline is both good business and good politics; but when we see board members ‘dropping in’ to the startup’s offices frequently prior to launch, it’s usually a red flag, a signal that the CEO is not strong enough to manage his board. In launch mode, feedback can be hugely valuable. But, it’s better to get feedback from early customers, not board members.
  1. Bring PR to the table early. There are two types of PR firms: ‘upstream’ strategic firms that have a seat at the big table in developing positioning and messaging and ‘downstream’ implementation firms. Startups should hire only upstream firms, then use their experienced outsider perspective to build a solid story that will attract attention and followers among media, analysts and industry influencers. Encouraging the team to challenge assumptions, build and test the message and advocate their point of view at the table.
  1. Build content early and often. Once positioning and messaging are established, start to work on the content. Launches are often delayed—once, even twice—due to product issues or customer feedback; but they should never be delayed because of lack of supporting content. You can never have enough content, so start developing—and reviewing—it the moment your positioning is finalized. Since iteration is a way of life in startup marketing, start drafting content early to hit your deadlines.
  1. Website UX trumps brand – if the founder starts talking about favorite brand colors and fonts, that’s another red flag. The most important thing for your launch website is designing the information architecture and content to drive conversions. Yes, design is integral to a successful site. Yes, building your brand is a process that starts with launch. But you need to focus on content and conversions first, or you’ll wander off into discussions of fonts and colors. See dangers of pixel polishing above.
  1. Anticipate—and prepare for–the trough. Before you launch, be sure to have a post-launch PR plan as well as two months of demand gen programs defined, funded and queued. Otherwise, you run the risk of allowing all of the visibility, brand awareness and site traffic from early adopters to vaporize. To leverage the blood, sweat and tears of launch and leverage early market momentum to build early sales, use smart planning to avoid the post-launch trough.

According to a CBInsights article from May 2015, your startup has a 1.2 percent chance of becoming a unicorn (a private company valued at $1 billion or more). Even so, there are a record number (but shrinking) number of unicorns roaming the Valley today. Success in unicorn-land has a lot to do with vision, team, and timing, but it also depends upon strong marketing and a great launch.

 

 

Posted On August 23rd, 2016 by Crowded Ocean

Living Through History: a Renaissance in Silicon Valley?

Before Tom went into the technology industry, I was an historian—specifically, a Lecturer in Holocaust and Genocide Studies (happy guy, I know). Screen Shot 2016-08-12 at 8.12.32 PMAnd one of the things that we History dweebs would do when we got together was wonder, out loud, what events of today are going to be ‘history-altering’ and which of them, though seemingly important at the moment, are going to be quickly forgotten (see: Trump, Donald).

History is a matter of perspective: the later you come along, the more perspective you have.

For example, it’s hard to image Leonardo da Vinci and Michelangelo, over a glass of wine in Florence in the early 1500’s, musing to each other: ‘Isn’t it great to be alive during the Renaissance?’ Why? Because they were caught up in something so new that it didn’t have a name. In short, they lacked the perspective to appreciate how unique their situation was.

Screen Shot 2016-08-12 at 8.13.44 PMWhy all this historical musing? Because we have an opportunity that those who have come before us haven’t. We’re living in a time that is easily the equal of the Renaissance (or Industrial Revolution) in terms of its impact—and we should appreciate it now, not in our dotage. Just as the printing press and steam engine dramatically changed the world, so, too, have the internet and the PC/smartphone. And these tools are only a couple of decades old: think what the world will be like as they mature and their availability extends to every corner of the globe.

At Crowded Ocean, given the wide range of companies and industries we work with, we have a ringside seat to a variety of new technologies. Are any of them as potentially impactful as the internet or the PC/smartphone? Probably not (though we’re just scratching the surface of what Artificial Intelligence can do), but it’s important for all of us—not just those of us in the business—to stand back every now and then and marvel at the world we’re living in today and speculate on what tomorrow will bring.

Posted On August 16th, 2016 by Crowded Ocean

How Not to Get ‘Pitch-slapped’

In interviewing over 20 VC partners for our upcoming book, The Ultimate Startup Guide, one of the questions we asked was: what do you want the entrepreneurs who are pitching you to understand before they arrive? The answers came back in different forms, but they had one common component: empathy.

Screen Shot 2016-08-12 at 8.04.28 PMNote: not ‘sympathy’. VCs may not live a life of roses and champagne, as some shows and articles depict them, but they’re not eating Alpo either. They don’t want or need your sympathy: what they do want is for you to understand what their life—and daily life at that—is like, and what it means to you in terms of getting their attention (and ultimately, their money).

Here are the most common points that emerged from the interviews:

  1. VCs invest in far fewer projects than the public appreciates—usually 2-3 in a year.
  2. While the number varies from firm to firm—and VC to VC—they can have between 20 and 30 meetings similar to the one they’re having with you—in a week.
  3. ‘Fit’ is everything. Are you the right fit for the market they’re most interested in, are you coming at the right time in their investment calendar (given that they only do 2-3 in a year)? Are you the right person (passion, experience, drive, leader of a team) to make this all work?
  4. There’s a partner meeting ahead at which the VC partner that may become your sponsor has to sell your company and you. Did your pitch give them the tools to do that?
  5. A week (or less) from your meeting with them, how will they remember you (if at all)?

So what the bottom line for startup entrepreneurs? Be memorable. Be succinct (as an earlier Crowded Ocean blog noted, you really have 10 minutes at best to make your point, not a full hour). And why you and why now? What’s in it for your investor—not the ‘market’ in general. Again, put yourself in their place as you prepare the pitch, then again as you deliver it.

 

Posted On August 9th, 2016 by Crowded Ocean

New Words in Startup-land: Aug 2016 edition

Swarm session: if you’ve got a knotty problem to get through, one of the new startup tactics is called a “swarm session” which involves convening a group of people who lock themselves up for a couple of days together to solve it already.

Intrapreneurial hacktivists: large corporations are encouraging new product development within their walls to foster innovation and develop new markets, according to an article in Harvard Business Review.

Breadcrumbers: described as “one step shy of ghosters” are colleagues, friends or romantic interests who pop up with a text, and email, a creep of your LinkedIn page but never commit to a meeting or a concrete follow up. They are connections but not relationships or conversations. Tantalizing and frustrating both.

Creepers: unlike breadcrumbers (see above), these are people who peek at your social media pages and leave a trace of their viewing and almost-contact but they do not text or email.

Reputation scoring: Spam filters are built to examine the servers sending the email and rank the servers to determine the legitimacy of the sender. Email providers like MailChimp and ConstantContact innovate on the deliverability of email by investing in reputation scoring.

Posted On August 2nd, 2016 by Crowded Ocean

The 10-Minute Window: a guide for startup pitches

In the process of researching our book, The Ultimate Startup Guide, we interviewed a wide range of VCs—some of whom we’ve worked with before, some of whom we knew only by reputation. Screen Shot 2016-07-28 at 3.23.28 PMAs we collated our notes by topic, there were a couple of back-to-basics takeaways that stood out.

The first had to do with the nature of the relationship you’re trying to cultivate.

The second had to do with how much time you really have to pitch.

Every single startup founder and VC partner stressed the long-term nature of the VC-startup relationship and likened it to a marriage (or family in some cases). The idea is that you’re in this relationship together for the long haul, so choose selectively. Founders will mistakenly focus on valuation or the term sheet and the brand name of the firm ignoring components like the stature of the individual partner within the firm, their capacity, domain expertise, individual track record and their potential to build rapport with you. This isn’t a marriage solely for economic gain. This is a marriage you are entering “soberly and advisedly” where the capacity of the partner to build trust and to guide and mentor you, the startup founder, is hugely valuable and not to be underestimated.

surveillanceIn bed with your VC partner

And you’re going to be in bed, so to speak, with your VC investor for a long time. As this Forbes article pointed out, according to the National Venture Capital Association, the median time to IPO exit since first funding for VC-backed startups was 3.1 years in 2000, and 7.4 years in 2013.

The second takeaway has to do with how much time you really have to communicate your new idea. The reality is that even though many VCs leave their laptops and phones outside the door (to show the startup that they have their undivided attention), they have their pad of paper…and they are human. More importantly, most VCs will cop to having some form of ADHD: they’ve got all their current portfolio companies as well as the ones they’ve recently met with that they’re considering funding. And they probably have three more meetings after yours. So there are a lot of places their mind can go while they nod at Slide 28 of your presentation.

You booked an hour, but you’ve only got 10 minutes

Therefore, even though the meeting you’ve booked is 60 minutes long, you should plan on 10 minutes of attention. (Sequoia Capital partner Aaref Hilaly advises founders here to plan to hook your audience in the first 5 minutes of the meeting.) The point is that you need to engage quickly and powerfully and leave plenty of time for discussion. Pro tips:

  1. Make the meeting more a conversation than a pitch. Check in with the VC early in the presentation (as early as the 5-minute mark) to ensure engagement.
  2. Lead with the opportunity for the VC—not the dreaded ‘About Us’ or ‘Market Share’ slides. Why should they invest—what’s in it for them?
  3. Plan on bringing your product to life with visuals, screen shots, maybe a mini demo.
  4. After you’ve established that the market opportunity is Trumpian “yuge”, keep the detailed market metrics in the appendix

For more insights into the “pitch and the ask”, stay tuned for our upcoming book described here. Pre-order now!

 

 

Posted On July 26th, 2016 by Crowded Ocean

How much money should a startup founder raise?

Guest Post by Vito Palermo, Managing Director, 38 Degree Advisors

There are many variables that go into answering this question. One is the attractiveness of the market category of your company. Then, there are factors such Screen Shot 2016-07-25 at 12.58.30 PMas the current funding environment; the experience of your team and the stage of development of your company. However, in general, the earlier the stage of development of your startup, the leaner your funding plan should be; and the later the stage of development, the larger the rounds should be. It’s not uncommon to raise 6-12 months of burn rate at the seed or startup stage, 12-18 months at the product development and early customer interest stage and 18-24+ months at later stages of customer acceptance, business model viability and rapid sales growth and international expansion.

The Lean Startup strategy for fundraising

For early stages, one of the common themes is a “Lean Startup Strategy”, which emphasizes establishing the product-market fit before spending a lot of resources on sales and marketing trying to sell the wrong product. Lean startups launch as quickly as possible with a “minimum viable product” and then continually and incrementally refine the product features while not investing in scaling the business until they are sure the solution matches the market problem. Applying this approach to funding leads to a lower amount of funding required and a lot less dilution for the founders.

Screen Shot 2016-07-25 at 1.17.45 PMFundraise for specific stages of company building

Therefore, at early stages you should think about how much money your startup requires to get to specific stages such as proof-of-concept/prototype, first revenue, a proven business model, etc. and make sure you have enough funding plus some hedge to achieve those goals. The benefits to this approach include: reducing the risk for investors; lowering dilution and maintaining a lean and focused startup culture from the beginning. The risk to this approach is that you may miss milestones and run short on cash so be sure to give yourself a margin for error.

Fundraising to scale your startup

In later stages you now have lots of stakeholders involved such as customers and employees to be concerned with. At this stage the business challenge is often more focused on building sales and marketing, expanding internationally and scaling the overall business infrastructure. During this stage, the competition is often more acute so be sure to give your company a bigger margin of error and maintain a bias towards raising more money, not less. While the focus should be how much money you need to raise to get to profitability, it could also be on how much capital you require on the balance sheet to make sure more conservative customers and business partners are comfortable with your long term viability. To address these questions it’s not uncommon to see $20 – $100M late round financings.

Bottom line, your business objectives and market requirements should define your funding requirements. It’s imperative to be able to crisply determine and communicate your aggregate cash needs and monthly cash burn rate. For example, statements such as “We need $1M to complete development of our product in order to get to market” or “with $2M we can prove out our business model” will help establish your credibility and transparency with investors while also presenting them with a roadmap that is measurable and often investable.