Category Archives: Best Practices

Posted On June 20th, 2017 by Crowded Ocean

The Overlooked Startup ‘Office Manager’

One of the staples of news coverage of the early days of Silicon Valley was the story of the original ‘office manager’ at ________ (Name your hot startup) who got stock options along with every other early employee and, years later, was able to retire early and wealthy when the company went public.

In the early days of Silicon Valley, this Office Manager was typically a woman who served a vital role as a “jackie of all trades” keeping the place running, operationally, culturally and psychologically. She was an intrinsic part of the company culture and the resulting success and deserved every share (and resulting dollar) that came her way.

Over the past two decades the importance and visibility of the Office Manager has waned, in some cases considerably. While the position is now gender-neutral, it’s also junior in nature, often given to a first-time employee with promise. That person then graduates to a position such as Sales Operations or Marketing Coordinator (usually focusing on events) and is off and running with his/her career.

Yes, a Chief Culture Officer

But we counsel our startup CEOs to take the position seriously and to hire someone who is not only comfortable staying in that position but who can leverage their experience across the company to “own” and nurture the company culture. We believe that in this new era, the Office Manager is so important that they should become the company’s ‘Chief Culture Officer’, someone who not only helps the founding team develop the company—its brand, values, talent and culture—but can speak truth to power when the company goes off-track in any of these areas.

So, as you build your company, determine the importance of the role of the Office Manager and hire accordingly.

 

Posted On June 13th, 2017 by Crowded Ocean

Four new terms in startup-land; one inspired by Trump

Prebuttal: a pre-emptive rebuttal, a prebuttal is familiar to anyone following politics and the circus that is President Trump’s administration and Washington D.C. these days.

Neurotech: an emerging field that combines neurology, neuroscience, neurosurgery and the hardware of smartphones is changing the lives of people with innovations like deep-brain stimulators.

Neural lace technology: a hardware innovation of billions of tiny brain electrodes that “may one day allow us to upload and download thoughts,” according to Elon Musk.

FAANG stocks: the giants of technology stocks are closely watched and often trade up and down as a block. That’s FAANG, which stands for Facebook, Amazon, Apple, Netflix and Google (Alphabet).

 

 

Posted On May 25th, 2017 by Crowded Ocean

How startup chiefs work with a demanding BOD

One of the most delicate—and important—parts of a startup CEO’s job is how to manage your Board. If this is your first startup, it may feel like they’re managing you, and you might feel like that’s the way it should be. But repeat startup CEOs will tell you that, if you manage your Board properly, you’ll have a valuable ally, a strategic resource—and you’ll view BOD meetings with something other than the fear that grips first-timers.

Find out (and then set) expectations early

In researching our book, The Ultimate Startup Guide, we talked to over 25 VCs and a like number of founders. One of the key components that emerged from these interviews was that most VCs will tell you that their CEOs over-prepare for BOD meetings. And if VCs could see what we see—companies virtually shutting down (at least the management team) for a week or two prior to a BOD meeting—they’d be even firmer in their convictions. But first-time CEOs want to have all bases covered, so they try to anticipate, then prepare for, each question or objection. Either offline or in the first real BOD meeting, CEOs should raise the topic—find out what the VCs want and how they want it presented. Many of them will tell you they want topics raised and discussions—rather than complete presentations—on each. If so, hold them to it and run more relaxed, collegial sessions.

Respond, don’t react

The best advice we can give is this: when it comes to dealing with your Board, be responsive, not reactive. Your Board members are experts in the business of running a startup and cracking a market, but they don’t know your market as well as you do (in most cases) and they’re not as good in marketing as they think they are (in almost all cases).

But like all of us, VCs and Board members want to know that they’re being listened to and respected. To that end, we recommend that in each BOD meeting there is someone tasked with taking notes and recording every point raised by a Board meeting. Then, once the meeting has concluded, get the internal team back together and consider each of the major points and what your response is. Then craft a concise email to the Board summarizing your decision (or pending action) on each point. It shouldn’t be the day after the BOD meeting—it will look like you’re intimidated and that you haven’t given these topics enough thought—but it should be within the week.

Will this turn your Board from a bunch of intrusive know-it-alls into purring, pliable kittens? Hardly, but you’ll earn some respect, you’ll get them off your back (to an extent) and you’ll get more time to run your company, rather than over-preparing for the next BOD meeting.

Posted On May 16th, 2017 by Crowded Ocean

Building a startup: ten startling facts

High growth startups are very different from other businesses. And they die remarkably young. In fact, nine out of ten startups fail within their first 24 months of operation.

Since our founding in 2008, we’ve worked with more than 50 companies and 45 startups. What makes startups so unusual? Let’s take a closer look:

  1. 25% of startups were started by immigrants  Source: Reuters, 2016
  2. By 2013, the median time to IPO was 7.4 years  Source: NVCA, 2014
  3. By the time startups raise the third round of financing, 52 percent of founder CEO’s have been replaced  Source: New York Times, 2012
  4. More than half of U.S. unicorns – startups valued at $1 billion or more – have at least one immigrant founder  Source: Wired, 2016
  5. VC firm Andreessen Horowitz funds about 20 startups a year out of 2000 warm referrals  Source: The Macro, 2016
  6. The Y Combinator accelerator is more exclusive in its acceptance rate than Stanford University  Source: The New Yorker, 2016
  7. Only 20% of the Inc 500, the fastest growing private companies, raised outside funding  Source: The New Yorker, 2016
  8. Americans in their 50s and 60s make up a 24.3% share of entrepreneurs who launched businesses in 2015, up from 14.8% a decade ago. And, 70% of startups founded by people age 50 or older last longer than 3 years, versus 28% for those younger than 50  Source: Wall St. Journal, 2016
  9. The majority of startups die after an average of 20 months and $1.3 million in financing  Source: New York Times, 2016
  10. In a 2016 survey of 700 founders, 31% said they didn’t intend to IPO and 69% expected to be acquired  Source: First Round, 2016

Posted On May 10th, 2017 by Crowded Ocean

Consider 3 Levels of Startup Blogs

Prior to launching, a startup may have a few blog postings, most of them either commenting on the industry at large or trying to recruit new talent by either profiling the company culture or giving potential employees a glimpse of the underlying technology. But it’s at and after launch that it’s time to get serious about blogging. And to our clients we recommend a 3-tier approach.

A tiered approach might sound like overkill for a young company, but keep in mind our two goals: 1) create the broadest image of the company, and 2) distribute the responsibilities of blogging across the entire company.

Business-centric blogs

The first tier business-centric. This is the purvey of the CEO (and perhaps one or two others on the management team). It’s a look at how you see the industry, market and technology trends, global issues, and where the pain points and opportunities are within it, and what you plan to do about it.

Combine business and technology

The second tier is a high-level approach to your technology, methodology and architecture. The authors are the CTO, head of Engineering, even the head of Products. It is technical in nature but is targeted at a C-level decision maker, and so has a blend of technology and business.

Deep dive into tech

The third level if for the troops. It can be a deep dive into the specific feature or technology that they’re working on—which shows both the excitement of working there as well as another glimpse into the technology—or it can be a note about the culture (Forget daily donuts: we have gaming lunches every Tuesday and Thursday.)

It’s up to Marketing to build and administer this schedule, but if you do it right you’ll have a rolling 3-month calendar without taxing your writers more than once during that period.

 

Posted On May 3rd, 2017 by Crowded Ocean

How Decisions Are Made Shapes Startup Culture

In his annual letter to shareholders, tech titan Jeff Bezos, Amazon CEO and founder, described his practice of “high velocity decision-making” that help sustain the growth and competitiveness of his company. The article published last week by Quartz summarized Jeff’s guidelines (including the unusual observation that “many decisions are reversible”).

Decision-making style shapes long-term success

One of the major predictors of long-term success is this: how decisions are made and communicated to the company. Not only are these initial decisions critical from a business and technology perspective, they establish a cultural tone at the same time.

Ask any employee and he or she will say that they not only want to be involved in these early decisions, but due to their investments in the company—time, reduced salary and quality of life issues—they deserve to be involved in these decisions.

Startups are always on, always moving: it’s a pace and environment not given to deliberation or self-analysis. It’s an over-used analogy with startups but making decisions is like changing a tire on a moving car—it would be better to pull off the road and do it right, but who has the time?

Disagree and commit

In his letter, Jeff Bezos emphasized the value he places on the phrase “disagree and commit” to propel swift action by his team (and to overcome any bias for consensus.) In the spirit of Jeff’s focus, we would emphasize the following tenets to make your style of decision-making a strong component of your startup culture:

  1. Get as much diverse input as possible. It’s been proven that the more diverse your group—in background, ethnicity, and gender—the better the output. If you’re smart, you’ve already got a diverse team; now is the time to reap the benefits.
  2. Instill “ownership” across the entire team to motivate employee engagement. Ownership is a trait that startup leaders need to foster and reward, but only if it’s genuine. Even if a CEO is seriously top-down in his/her decision-making, we encourage them to find areas of genuine ownership, however narrow, for each employee.
  3. Over-communicate to the entire team what you’ve learned in customer forums or open forums (even team lunches or celebrations) with all employees. Be sure to communicate back to the company in another open forum–creating the sense that employees been active participants in the process all along. It’s the founders who have to be active communicators to glue their team together.

 

Posted On April 25th, 2017 by Crowded Ocean

Tweets versus coding: lessons for startups

When we meet with a startup led by technical founders, it’s common for us to discover that the majority of the team have profiles or pages on channels like LinkedIn but they are far from active there. In fact, if they have a Twitter handle, it’s probably dormant. Consequently, we never assume that social media is considered by the team as a channel to engage with customers. And startup teams are typically so busy coding and wooing customers in the early days that social media—even if it’s viewed as important (and many tech startups don’t share that view)—is considered a priority for another time. So, what are the lessons for startup teams about when and how best to employ social media?

Taking a phased approach to building your social media program

There’s a phased approach to building smart social media habits that’s very doable and productive. As we outlined in Chapter 14 of our book, The Ultimate Startup Guide, we recommend that during the early days startup teams appoint a single owner of social media. Just as a startup needs a Chief Content Officer to really “own” (but not necessarily produce) all content, your startup needs someone to own your social presence. Choose someone on your team who already has a natural affinity for communicating and connecting via social channels. That’s the person to tap early on to be a rallying point, teacher and role model across your team in the early days of your startup. Remember that it’s temporary. With growth (and revenue!) can come additional staff, a PR agency resource or a dedicated contractor to staff your social media program as you grow.

Name an owner of your social channels         

After appointing an owner, step two is to determine your goals and your audience. And then, step three, prioritize the social channels that will support your goals. The top three channels for many startups tend to be: Twitter (for connecting with prospects, partners and influencers), Youtube (for sharing rich media content_ and LinkedIn (for recruiting new talent and for connecting with customers.) And, down the road, maybe you’ll want a couple of flat screen TVs – one in the lunchroom and one in your lobby – to display tweets and posts in real time to keep your team connected to your customers.

 

Posted On April 18th, 2017 by Crowded Ocean

Lessons for startups from social media grenades

It’s rare to find a B2B startup founder who is fluent in social media. The nonstop demands of company building diminish the time that can be devoted to social channels, whether that’s Twitter or Facebook or Github or you-name-it. And besides, as the theory goes, that’s a task best delegated to the marketing or customer success team.

For consumer-facing startups, however, it’s a different story, because an unfiltered tweet or video from an unhappy customer can be punishing to a consumer brand’s reputation and market valuation. (Just ask UAL CEO Oscar Munoz.) That’s why those companies have entire teams of employees devoted to staffing and responding to dialogue on the social channels of consumer brands.

Tweets can be brutal

Even so, the move by the new CEO of the company that owns Carl’s Jr. and Hardee’s restaurants took social media engagement to another level. One of the new CEO’s first requests, according to this New York Times article, was to install screens at company headquarters to display real-time social media conversations about its brands for all company employees. That’s a bold move, but a pragmatic one in the wake of recent, so-called “social media grenades” hurled at Pepsi and United Airlines.

It used to be that if you wanted new execs to get close to the customer, they could join the call center team staffing customer or tech support and listen in to learn common customer complaints. Today, a single negative comment or tweet by an unhappy customer can quickly spread to thousands, or even millions, of other customers. Rapid detection and response is the name of the game, and that leaves no time for internal deliberation.

Duck and cover

That’s why an early stage startup needs to appoint an owner of your company’s social channels. Choose someone on your team who already has a natural affinity for communicating and connecting via social channels. That’s the person to tap early on to be a rallying point, teacher and role model across your team in the early days of your startup. Remember that it’s a temporary assignment. With growth (and revenue!) can come additional staff, maybe a PR agency resource or a dedicated contractor to staff your social media program as you grow. But appointing a temporary owner means at least you’ve got someone monitoring commentary about your brand and product and, at the very least, someone to yell “duck” if some industry wag lobs a grenade.

Posted On April 10th, 2017 by Crowded Ocean

Laying the foundation for early startup success

New Ways to Build

When it comes to actually building out your business, we liken it to building a house. This is not just some cute analogy (“Measure twice, cut once”): we’re talking about two industries (housing and startups) that are undergoing major changes and are the better for it. Think about home construction for a moment. For the past four thousand years, it’s been the same process: design the house; dig a foundation; truck your materials to the site; build outside in the elements; walk-through inspection on site; then move in.

But now, with modular and sustainable building techniques, entire homes (as well as rooms and wings) can be built off-site, then assembled at the site. Think about the benefits. Time-wise, you can now be building your house while you’re digging your foundation, cutting construction time in half. Quality-wise, you’re no longer hammering up on a ladder, squinting into the sun: you’re getting all the accuracy that comes from a factory setting. And you can see and catch mistakes much earlier in the process, holding down costs.

Now look at how startups are built today. Previous startups were mini-enterprises, with every function having to be addressed by full-time (or sometimes part-time) resources, leaving the founders stretched, mentally and financially. These days startups are dividing their requirements into three areas: what is unique (or ‘central’ or ‘core’) to their business, what functions they can virtualize, and what is commodity. On the front end of this equation is your Core – the vision, technology, product, culture that drove the founding of your startup. Core differentiates your company.

 

When it comes to virtual, you have a number of different options (see below) on how to move quickly to market by turning to a variety of best (or best-of-breed) available resources. In the beginning at least, these are functions that do not need to be on your headcount/payroll. They are essential building-blocks but also services you can outsource or virtualize to maintain flexibility in reducing your fixed burn rate and to build-in scalability or elasticity in these supporting functions.

  • Virtual or outsourced resources for marketing, engineering, sales, product testing, legal and staffing;
  • On-demand services for HR, accounts payable, customer service, eCommerce, transactions: tools that are easy to learn and can be integrated into your systems;

On the back end, you can choose commodity components for platforms like WordPress, Paypal and AWS that can handle your infrastructure.
On a related note, while these are not virtual or commodity components, startups today can also make these choices to build your startup quickly:

  • Physical community workspaces like incubators and accelerators for housing and support services;
  • Crowdfunding communities like Kickstarter and Indiegogo that help prototype and validate early products to accelerate your customer and product development

 We’re big proponents of virtualizing as much of the company as possible. The resources and expertise are there and at a fraction of what bringing them all in-house would require.
– Michael Shraybman, CEO, Cogniance

With those supporting functions in place, this new startup model frees you up from having to learn and hire for every component from HR to finance to legal, allowing you to focus on the two areas that matter most: your product and your customer. Just like home construction, where certain pioneers are leading the way in modular and sustainable building, there are three visionaries you should read and work into your planning process: Steve Blank, Eric Ries and Geoffrey Moore. The books they wrote—and the terminology and exercises they spawned—have changed the startup landscape and the thinking behind it.
‘Developing’ the Customer

In the mid 90’s, serial entrepreneur and business leader Steve Blank realized that all the formulas and paths to success for startups had to do with products and technology. And yet, he also noticed, the primary reason that startups fail isn’t because of a lack of technology—it’s from a lack of customers and the validation/feedback of customers to focus the application and adoption of innovative products. The customer development focus and methodology he created caused enterprise and consumer-facing startups to shift their focus from a laser-like preoccupation with product development to an expanded focus that included the market and customers these products were intended for. The methodology consists of:

  1. Customer Discovery: It’s a simple enough idea—find out who really wants your product, then test your hypotheses (product, problem, solution and price) with them, not with your peers or investors. The keys here: A) Get out of your echo chamber and go where the customers are; and B) Be flexible, both in your mindset and your technology, so that you can incorporate what you hear and learn. As Blank puts it: “In a startup no facts exist inside the building, only opinions.”
  2. Customer Validation: Start implementing what you learned above. Your goal here is to, by trial and error (and a lot of flexibility on your end) to create a proven, repeatable sales process. The validation is dual: the customer input to you is validated (which makes your customers feel like they’re being listened to; and your hypotheses about the product and customer are validated as well. Each sale is both a lesson and a validation.
  3. Customer Creation: This is where you move out of trial-and-error and into the mainstream. You know enough about the customer to invest in marketing and start driving demand into your sales channel.
  4. Company Building: Now—and not before— is the time to start investing in the infrastructure (more sales reps, marketing, customer support) to support your model. You’ve proven it, now it’s time to invest in it. You should have been keeping your burn rate low until now; if so, now is when that restraint pays off—with a steady pipeline of strong customer prospects.

Many startups want to deliver a broad platform. Invariably, they have to start with a point solution and then wedge out. There can be a lot of confusion if you start out as a platform and then end up collapsing back to a single tool. – Gary Little, Canvas Ventures

Startups Get Lean

There are few startup ideas as influential—or controversial—as ‘The Lean Startup’. Originated by Eric Ries, a disciple of Steve Blank, ‘the lean startup’ takes customer input to the next level. A technologist with a series of failed startups on his resume, Ries decided to forego the standard ‘locked away in a lab’ form of development and instead developed what he termed a ‘minimal viable product’. The key component in his thinking was to get this ‘MVP’ into the hands of the market early, then iterate on it often, based upon real customer feedback. It’s a concept that builds upon the agile software development approach that has been widely embraced in Silicon Valley. The concepts behind the lean startup are often misunderstood as ‘throw it against the wall and see what sticks.’ It is hardly that random or capricious: instead, its proponents (and there are many) use advanced metrics, key performance indicators and A/B testing to measure and formalize each phase of product development.

Product and people: entrepreneurs should be laser-focused on that. And be ready to change either one based on what they discover. – Theresia Gouw, Aspect Ventures

The Chasm

There was a time when Crossing the Chasm was required reading for every startup. And it’s still valuable reading. The author, Geoffrey Moore, argued that achieving early sales traction requires the recognition of a chasm that exists between early purchasers of technology (usually called Early Adopters because they’re willing to experiment with an early-stage product in the hopes of being able to influence its final form) and the ‘early majority’—the audience you need to get traction with to ultimately grow and succeed. But these are very different audiences with very different needs and purchasing processes—and how you adjust to them will determine your long-term success.

The key concept for our purposes here is the ‘early adopter.’ These are enthusiasts who love not only seeing how sausage gets made but want a say in the recipe. If you’re creating a new car, they want to be among the first to drive it. They’re willing to put up with breakdowns in return for having input in the car’s development (Their ultimate dream: to be able to point to the car and tell their friends: “See that bumper? I helped design it.”) These are the people you will be targeting initially, looking for early sales traction, but more importantly, they’ll be the ones to fuel word-of-mouth via social media channels and eager to talk to press, analysts, and other early adopters.

Combining the teaching and practices of these three, you should be proceeding well on your key fronts: cultivating your customer and learning tons about what they want/need and how that matches your product; developing that product and getting it in front of the customer early and often, gathering their feedback; then seeing how you can combine the two (products and early customers) to figure out how best to move into the mainstream.

Don’t try to do this as a hobby. You need to quit your job to do a startup, otherwise it’s like trying to build a company with just your left hand. – Juha Christensen, serial entrepreneur, Chairman of Cogniance

Before We Go Any Further: what market are you in?

This may seem obvious, but trust us, it isn’t. If you’re starting up a new business—and if you’ve gotten funding to back it—it means you’re probably doing something new and different. Which means that the companies and people you’re trying to reach probably not only don’t know that you exist, they may not even recognize they have the problem your solution is solving.

If you want to get found, you have to be somewhere that people are looking. Which means you need to establish what market category you’re actually in. This step is critical both for the experts who follow and recommend and for the early adopters who are looking for the kinds of solution you’re providing.

Here’s our first piece of advice about market category—and we can’t say this strongly enough. No matter how unique or compelling you think your product is, you don’t have enough money—or time—to create a new category. Roughly half of our startups, when we initially meet, will tell us that they’re in their own category or that they’re redefining an existing one. The problem is: companies don’t establish new categories. Analysts (and customer adoption) do. But companies don’t.

ASIDE: There has been a lot of recent attention being paid to the idea of ‘category creation’ and the resulting winners in these categories, called ‘category kings.’ The companies that get cited include Xerox, Google and Uber. And while we admire the thinking that’s gone into this discussion, as well as the supporting science and facts, it also reflects an ‘all or nothing’ approach to a market that we don’t believe the majority of startups can afford. Our recommendation to our clients is to find their unique space in an existing market, work to expand the definitions and criteria for that market in a way that uniquely fits your capabilities, and only then try to leverage your existing success into a major play to create/define a new market category.

Category creation is more about category extension or segmentation. No matter what you do, if you can’t differentiate it’s going to be difficult. – Asheem Chandna, Greylock Partners

Case Study: We had a startup that made collaboration across different departments easier. So they said that they wanted to launch a new category: the work processor. (The founder, doubting our intelligence, helpfully explained: ‘Get it? Instead of ‘word processor’, it’s a ‘work processor.’ Get it?) We helpfully explained back: “Who at Gartner (a major market research firm) follows the ‘Work Processor’ market (since analyst recommendations are critical to shaping customer choice and market preference and a startup’s market entry)? And on which aisle at InterOp (their major trade show) would we find ‘Work Processors?’

The Work Processor’ died a quick and deserved death. (NOTE: It would have been fine to call the product ‘the first work processor’, since that’s marketing hype. But that hype doesn’t extend to market categorization, although many have tried.)

Why is market categorization so important? Because in the world of inbound marketing, it’s all about “getting found” online. Which means influencers—those guys who shape market opinion (and they can be the media, professional market analysts, bloggers, industry pundits or influential customers or partners)—need to be able to Google their problem or area of interest and find your startup’s product or service. And market analysts—the next level up from influencers—need to know which person in their company to assign to follow your company. And early-adopters—the people you really want to reach, since they’ll buy your product and help you refine it—need to be able to find you online in all of the right places – social media sites or news sites or product reviewers.

Suggested resources:
The Lean Startup
Crossing the Chasm
Dealing with Darwin
Steve Blank and The Startup Owner’s Manual
Jim Collins and Good to Great

 

Posted On March 21st, 2017 by Crowded Ocean

New terminology seeping into the mainstream

Incidental collection: in case you missed this tantalizing term brought to you by the House Intelligence Committee hearings, when the NSA wire-taps a foreigner or U.S. citizen suspected of terrorist activities, they can sometimes collect other communications. That’s NSA-speak now entering the mainstream.

Explainable AI: a field of research that, according to the Wall Street Journal, can explain in natural language how a machine learning model arrives at a logical decision.

Filter bubble: According to the New York Times, “the filter bubble describes the tendency of social networks like Facebook and Twitter to lock users into personalized feedback loops, each with its own news sources, cultural touchstones and political inclinations.”

Echo boomer: Census data indicates that there are more 26-year-olds in the U.S. than people of any other age. Like the baby boomer generation, the economic, retail and labor force of that large number of our population are expected to “echo” the influence of the prior, very large baby boomer generation.

Gaymoji: No explanation required. But if you must, check out this New York Times profile.