SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Archive for the ‘venture’ Category

23 Great Websites for Entrepreneurs: Plus Some Radical Advice from an Entrepreneur-Bootstrapper

Posted by Bob Warfield on September 24, 2014

advice_bad timeI recently came across two giant lists of websites for entrepreneurs, courtesy of Jason Lemkin (whose blog is listed in both):

Inc.com 50

Forbes 100

Now for some radical advice: the vast majority of the sites listed in those publications won’t help the vast majority of entrepreneurs at all.  In fact, many of them will be counterproductive in the extreme depending on what your goals are.

I can already hear the refrain:

Whoa, hold it right there Bob–them’s fightin’ words!

True, to a certain extent, but hear me out before you pass hasty judgement.

The vast majority of the sites listed, and I went through both lists carefully, are of interest to those entrepreneurs that are dead set insistent on going the path of Venture Capital.  Nothing wrong with that–I’ve been down that road on the majority of companies I have founded–3 were VC funded and 1, my latest is bootstrapped.  But I always ask every would-be entrepreneur I meet why they want to do a VC-funded startup and I wish I had gotten around to bootstrapping a lot sooner than I did in my life.

I’m not here to sell you on bootstrapping versus VC.  I have other articles that talk about my bootstrapping experiences and there are certainly many who will talk to the virtues of each.  But what I will tell you is this–Venture Capital does not equate to success for entrepreneurs, you can be wildly successful without it, at least unless you need to do a deal that is tremendously world changing or that makes you hundreds of millions of dollars.  If millions of dollars and running your own show will suffice, bootstrapping is an easier and less risky way to get there.   Most of the good VC’s, the ones you’d want on your board, that I talk to will freely admit this.  They encourage lots of entrepreneurs whose ideas and companies are not suited to the VC model to carry on without VC.

When you show an idea to a VC, they are predisposed to see it in VC terms–would it be a good investment for their portfolio?  A lot of their advice is going to boil down to pushing the idea in a direction that makes it a better investment for VC, and this is not necessarily a direction that makes it a better investment for the entrepreneur.  Because of that, I think you, my entrepreneurial friend, need to figure out whether you want to do a pure bootstrap or bootstrap your way into a VC deal as early as possible.   Ideally, you want to figure it out from the start.  If you’re going to do a pure bootstrap, take those long lists of websites for entrepreneurs and cull them carefully.  Most of the blogs written by VC’s, while they can be fun to read, have no bearing or guidance to speak of for your venture.  You know, the one you’re funding out of your own pocket that can’t afford to get a bunch of eyeballs now and figure out how to monetize later.  There are sites listed that want to walk you through all sorts of legal things and other artifices that are really only relevant when there’s quite a lot of money in play.  Not necessarily money in the form of revenue, but money invested and the expectation of Big Money in the future.

So forget most of the VC authored blogs.  Forget blogs that seem to be mostly telling you how to raise VC.  If you don’t have the real deal, you can’t game the VC’s well enough to fool them and you’ll regret it if you do fool them.  Forget most of the blogs by guys who were successful VC founders who want to tell you what worked for them or what they think about everything.  Most of it is too high level and many first time success stories have no idea what they did right versus what was luck.  Forget the inside baseball and gossip rags. AllThingsD and Techcrunch have almost nothing to tell you if you’re not doing a VC-funded startup.  You don’t care who got funded for how much or who bought what for how much.  You don’t care about the latest Culture du Jour piece.  Forget the musings of rich guys who’ve forgotten more about being an entrepreneur than you’ll ever know.  Their vacations to Lake Cuomo may be fun to hear about, but how is that really helping YOU to succeed?  And skip the self-help pump-you-up pieces.  If that stuff works for you, great, but attitude is not enough, and if you don’t really have the eye of the tiger deep down, you better get it before you start down the entrepreneurship road.  You get the idea of what I want to leave out from those big website lists.  Yes, it’s radical and harsh, but what should be left in are sites that give you real actionable insight into how to grow your business.

Let’s face the other thing–the vast majority of small businesses that start up in the world don’t have the luxury of VC money.  They’re restuarants, retailers, machine shops, auto garages, and a host of other things.  This is the world my own bootstrapped company (CNCCookbook) works with.  These people could care less about things that will only work if you can invest millions of dollars over time.  They don’t ever expect to be running a billion dollar company (or maybe they do and don’t want to give away most of it to their financiers).  They’re having the time of their lives starting and running their own businesses.

It is for the audience of those people (having the time of their lives running their own businesses) as well as for any Venture-funded businesses that are interested, that I have put together my own high octane feedstock of sites that will help you build your business.  These are tried and true sites that I read religiously because their insights are actionable and they make me think.  You want deep strategy and tactics that can be made to work for any business, not just VC businesses.  They are in no particular order, so here goes.

Saastr

I have to give Jason the nod here.  After all, he did put me on to writing this article and I do read his blog religiously.  There are many ideas there that are only suited to VC startups, but there are also ideas that I’ve found actionable for my own business.  Jason is a VC, but he did a number of startups before that and it is his operational knowledge that he largely shares.  We go back and forth and I often disagree, but it is always interesting.  Do a search here on Smoothspan for “Jason” and you’ll see some of what I have written about his thinking.  Better yet, just subscribe to his blog in your reader.

Seth Godin’s Blog

If you don’t read anything else, stop, do not pass Go, do not collect $200–read Seth Godin’s Blog!  The daily posts are short and pithy.  Taken in total they constantly explore every aspect of Godin’s unique tribal approach to marketing.  He understands marketing at its core in the way the every small business needs to understand it.  Read his stuff.  Let it provoke your thoughts.  Let it seep in constantly.  It will do you no harm and probably a lot of good.

Firehose Press

This blog is a total unknown.  It’s unadorned and has no editorial content of its own whatsoever.  It’s one of my blogs.  I list it early in this list, because it is a shortcut of sorts.  You see, Firehose Press is what I’d call a “clippings” blog.  I post a brief excerpt of every blog article about building a business or marketing and sales that was valuable to me on Firehose Press.  Believe me, I have a couple of hundred blogs in my reader and having somebody curate all that for you can save a lot of time.  The only question you need to ask is whether my taste in curation results in articles helpful to you.  The answer is easy enough–go look at it and decide.

Signal vs Noise

These guys have some of the original great material on Bootstrapping that really got me fired up to do a Bootstrap.  They are not as prolific on the topic as they once were, but they’re still a good read.  Aside from bringing Ruby on Rails into the world, they’ve built a great company and lifestyle for themselves.  All entrepreneurs should be so lucky.  If you’re on the road to VC and read blog’s like AVC, the corollary for the bootstrapper would be blogs like this one.

Techmeme

I deleted so many other blogs of limited value to me (Techcrunch, ReadWrite, and many others) simply because Techmeme catches and serves up their best stuff.  I scan the headlines quickly and frankly delete most of it.  But at least if I’m off to lunch with a fellow Silicon Valley cohort, I will have heard about the trending topics.  And frequently, I latch onto a whole new source of the really good stuff because it popped on Techmeme.

Totango

These guys are on to some radical thinking.  They want to tie marketing (of a sort) with the customer experience as it unfolds pre- and post-sale.  Being able to do this well is one of the many things that I think will really separate the awesome products from the also-rans.  Read it and think about what they’re doing and how it applies to your software.  I certainly did!

KissMetrics

Analytical marketing insights and ideas.

The Buffer

Productivity hacks for marketing and social media.  My business doesn’t get great value out of Social Media, though I have experimented with it a lot.  Having a resource that helps me squeeze a lot out while investing as little as possible is helpful.

Succesful Software

Andy Brice is a fellow bootstrapper who often has some great insights for that life, at least for software bootstrappers.

Moz Blog

When the Gods of SEO speak, it usually shows up here.  As a dedicated content and inbound marketer, I hang on their every word.  Seriously, SEO is easier than you think and you can do it yourself without a high paid consultant if you pay attention.

SaaS Growth Strategies

More good basic marketing for software companies.  Much of it would work for many kinds of companies.

QuickSprout

Neil Patel can have a lot of good insights to share, but I warn you in advance, you have to penetrate his wall of Marketing Spam to get there.  His site demos every trick in the book to sell you while you’re trying to dodge all those “Let me close you now!” bullets and get a little value.  It’s worth it, but don’t say I didn’t warn you!

Marketing Experiments

Sometimes I just need an idea, something quick to implement or A/B test.  You know, a marketing “snack” I can get done quickly and see if it helps.  Plenty of inspiration for that here.

Marketing Technology Blog

It’s not just about Marketing Technology–lots of actionable strategy and tactics may be found here.

Jeff Bulla’s Blog

Tons of marketing and selling ideas for small business.

Inbound Hub

I love inbound marketing, and these guys popularized it and IPO’d a company on it.  There’s good info here.  With that said, quality seems to have diminished a bit in favor of quantity.  Scan the headlines and cherry pick–there’s still plenty of ripe tasty insights to be had here.

I Love Split Testing

More A/B testing ideas to snack on.  Your business needs to constantly be trying new experiments to optimize its marketing.  Get this kind of feed stock stimulating ideas ASAP.

Heidi Cohen

Great ideas from Heidi for Content Marketing.

Digital Marketing Blog

Every business needs more growth.  Digital Marketing is the cheapest way to get there, so take in all you can stand about the subject.

CopyBlogger

More great ideas for Content Marketing.

Convince and Convert

Content Marketing and Social Media.  Great content on those topics and surprising candor about how some of these things are not always the perfect Silver Bullet.

ClickTale Blog

Take a sexy technology that tracks what user’s are doing on your site almost better than the users even realize and you get some worthwhile insights.

Smoothspan Blog

Another shameless plug for my own content.  Smoothspan frequently covers Strategy as it pertains to this world of entrepreneurship.  The thing about good strategy is its hard to come by, but it is so valuable when you can get a true strategic insight.  Or, as I heard someone say one time:

Strategy is what we do to make winning easy.

I’m a student of Strategy, so I write it up often.

Conclusion:  What’s Here and What’s Missing?

If you made it this far, you will realize that a tremendous number of those websites have to do with helping your business grow.  Many of the things on the Forbes and Inc lists had little to do with that.  They might refer you to sites with CPA terms (I kid you not) or perhaps sites that tell a small business how to secure health insurance.  These are all valuable things, I’m sure, but they’re not life-threatening for small businesses and entrepreneurs.  They’re not problems that can ultimately never be solved, only worked away at indefinitely.  Growth is that sort of problem.  It is both life threatening and a problem you will probably never solve.  You’ll always want more growth and if you stop trying to drive it, your business will likely slow down.  So get used to the idea of constantly absorbing and evaluating new ideas for growth.  It’s all part of being an entrepreneur and it is the oxygen your business needs to keep going.

Posted in bootstrapping, business, strategy, venture | Leave a Comment »

Evil VC Seeks Minions for World Domination

Posted by Bob Warfield on January 30, 2014

EvilSeeksMinionsIf we substitute “Venture Capitalist” for “Evil Genius”, the placard on the right describes the Silicon Valley Startup Culture perfectly.  Yes, you young hopefuls, your friendly neighborhood (that’d be the Sand Hill neighborhood) VC really does expect you to sacrifice your lives in a play for world domination.  They don’t care about building a nice little $100M a year software business–that’s peanuts, doesn’t move the needle on the fund.  Son, it’s just not enough tonnage.  Must be prepared to work 24-7 for fascist psychopath for close to no pay.  Yep, that’s about the size of it.  They won’t even try to hide the fact–they write about how you should accept as little pay as possible.  In 2008 Peter Thiel went on record saying the best predictor of startup success is low CEO pay.  Really?  That’s the best predictor VC’s have come up with?  Thiel is not the only VC to suggest it, not even close, and they’re largely successful at getting what they want–75% of founders pay themselves less than $75,000 a year.

What about that business of “Messy death inevitable?”

I suppose it’s a function of how you define “Messy”, but the “death inevitable” part rings true.  VC’s these days want startups capable of reaching $1B in revenue.  The reason, as one explained to me over drinks, is that they make their exit when the startup IPO’s.  But in order to IPO at a reasonable valuation, they have to be able to paint a picture for those buying public shares that the company has years of growth left.  That’s how the Greater Fool theory works–you can never let people discover they’re the last ones and the valuation has peaked.  So what happens to $1B Unicorns?  First, by quantifying things at $1B, we learn that the Utility Curve for VC’s is drastically different than for most Founders.  Offer Most People $10M after 10 months of effort when they’ve never made even $1M, and an awful lot of them will say, “Yes.”  The VC’s will resoundingly say, “No,” and they’ll tell you that anyone who says “Yes” never should’ve raised VC in the first place.  BTW, I have been through that scenario personally and I can tell you it was a harrowing experience.

Getting back to that $1B Unicorn, the odds are not at all good.  Only about 0.07% of Consumer and Enterprise VC-Backed companies become those Unicorns.  That means, Dear Impressionable Young Founder, that your odds are one in 1428.  The odds of winning on a single number at roulette are nearly 40x better, and you don’t have to bet years of your life on the roulette number.  One in 1428 odds of achieving World Domination.

That Messy End will come about because of the inevitable terms in your legal documents with your financiers and because of how the system operates.  Consider if you had worked hard to achieve a modicum of success and sold a company for millions but none of the founders or employees got anything at all out of it except a job with the buyer while the VC’s saw a positive (but inadequate in their eyes) return.  Wouldn’t that be a messy end?  The key term in your documents that leads to tears is the “Liquidation Preference.”  Supposedly the market standard is 1X but I’ve seen numbers as high as 3X in some cases.  Now let’s suppose you’ve got a company that is sold for $50M.  That’s a lot of money: many would regard that as a successful company.  But, it’s only successful to the investors to the extent it generates a return on their investment.  Suppose they’ve put in $40M and have a 1X liquidation preference.  That means they get back their $40M right off the top.  Now there’s $10M left to split between the investors, founders, and other employees.  You’re probably diluted pretty good at this time, so let’s say non-Investors are getting $4M.  Suddenly your $50M sale is getting you more like $1M than the $5M you and your co-Founder expected.  It gets worse–with a 2X or 3X liquidation preference, you get nothing.

Make no mistake–the VC’s feel perfectly justified in all of this and see it as emminently fair.  Fred’s example from that link sure sounds fair, but as some of his commenters point out, it attaches no value to the sweat equity of the Founders and employees.  They may have worked years of their lives at sub-standard pay ($75,000 a year?) and not be entitled to a dime in a scenario where VC’s are getting all of their money back.

“NO Weirdos?”

Yes, the VC’s prefer to invest in the Old Boys Club.  Minorities and women will have a tough time breaking in, not that they are Weirdos in any sense, but the homogeneity of the VC Startup Club and especially of the VC’s themselves is strong.  You need to have gone to the right school and have the right background.

The VC’s BTW, are (mostly) not really Evil.  But they have certainly done everything in their power to create a set of rules that overwhelmingly favors their own success, even at the expense of Founders.  Looked at in the cold light of reason, it’s hard to argue it isn’t pretty much as the plackard about Evil Geniuses suggests, at least metaphorically.  Why then do Founders seek Venture Capital?

After talking to lots of Founders seeking advice (I’m on my 7th Startup, have founder 4 of the 7, and have had 3 happy liquidity events), I have concluded the primary motivator for Founders seeking VC is that they want to reduce their risk.  It’s ironic.  VC’s these days don’t accept Founders until they’ve forced the Founder to remove as much risk as possible.  You have to create a Product, find an Audience, and demonstrate Traction before they’ll put a dime in.  Or, you have to give away a surprising amount of your company for surprisingly little capital if you go the Incubator or Angel route.  Yet, these Founders are largely worried about two things they believe can reduce their risk.  First, they want knowledge.  They want people who have succeeded to tell them how to succeed.  Second, they want connections.  The Incubator promises to put them in touch with the VC’s when the time comes.  The VC’s promise more VC’s, talented executives, and many other contacts.  Founders want to be part of the Network.

Experienced Founders are less about the connections or knowledge, they’ve realized they can get connections and knowledge more easily in Silicon Valley than almost anywhere in the world.  Scratch the push for connections and knowledge up to inexperience on the part of young Founders.  Experienced Founders just want the VC’s check.  They want to get where they’re going faster and with the certainty that plenty of money in the bank promises to bring.  VC’s hate to be courted simply for a check.  It eliminates their view of how they differentiate their firm and belittles the possibility they will make a contribution from the Board.  Yet, even many VC’s share the view of many experienced Founders that aside from Cash, VC’s often add negative value.  No less a personality in the VC world than Vinod Khosla says 70 to 80% of VC’s add negative value.  If you look at the impact forcing a company to take unlimited risk in the quest to becoming a $1B Unicorn has, I would suggest that many companies that could have been successful by any non-VC standards and happily profitable got pushed too far and left behind a smoking crater when they fell short of joining the Unicorn Club.

One of my favorite bloggers is Seth Godin.  He writes about this odd conundrum perfectly in his short post, “How much does it cost you to avoid the feeling of risk?”  He’s talking about the risk of putting yourself out there, and it’s no different for Founders.  The VC’s are asking you to do most of the work of creating a successful company before they put any money in.  They’re asking you to do it on your dime.  Unless you have it thoroughly in your heart and soul that  you won’t be happy until you’ve created a Facebook or Google-sized success, forget the VC.  Finish the remainder of the work to create a profitable company instead of raising VC.  That’s the real essence of reducing your risk.

Turning your happy little company into a VC Startup is the first step on the ladder of radically increasing your risk because you’re committing yourself to swinging for the fence.  No bunts, no singles, doubles, or triples.  Swing for the fence, and if you miss, you’re a failure.  Make no mistake about it:

VC’s increase your  risk.

Posted in bootstrapping, business, strategy, venture | 2 Comments »

Too Many Would-Be Entrepreneurs Are Thinking About Their Ideas, Companies, and Investors All Wrong

Posted by Bob Warfield on April 19, 2013

snake-oilAs so often happens, the serendipitous intersection of one too many notes from the same chord in a short time have prompted me to post.  In this case, I am seeing a lot of evidence that would-be entrepreneurs just don’t think about their ideas, their companies, or investors as they should.

Case in point: I recently had dinner with a friend to do some catching up.  He explained that another mutual acquaintance had an absolutely brilliant idea for a startup.  My friend really wanted to be a part of it, and he confided that they were thinking of going the Y-Combinator route.  I’m sure it’s annoying to my pals (especially the ones who are themselves Angel or professional VC investors), but any conversation that focuses more on the investors than the idea and business models immediately launches me down a set path that the recipient often finds a little bewildering if not downright antagonistic.  Despite all that, I asked my friend why he wanted to go with Y-Combinator?  Why get any invested capital at all?

He spent quite a while, too long really so it only lit my fire brighter, talking about the $30,000 they would receive in exchange for 15% of the company.  I asked him to explain what the $30,000 would allow him to do that he couldn’t otherwise accomplish on his own.  After all, $30,000 is really not very much money.  This goes to the heart of one way Entrepreneurs don’t think right about their plans.  If $30,000 seems like a lot of money to you, if it seems like an enabler of some kind, it’s my belief you’re using it to solve the wrong problems, and that in fact, they aren’t real problems to start.  You’re thinking of using it to quit your Day Job, to hire others, or to pay for advertising.  You don’t need to do any of that, as it turns out.

Let me explain–I’m a firm believer in Bootstrapping ala 37Signals.  Their formula is pretty simple–you can build a company on 10 hours a week while you keep your day job.  David HH wrote a great post on this not too long ago entitled “All or Something “.  The gist is that you don’t need to adopt an all-consuming commitment to get something interesting done.  The intro to his article is worth reading carefully:

One of the most pervasive myths of startup life is that it has to be all consuming. That unless you can give your business all your thoughts and hours, you don’t deserve success. You are unworthy of the startup call.

This myth neatly identifies those fit for mission: Young, without obligations, and few if any extra-curricular interests. The perfect cannon fodder for 10:1 VC long shots.

They’re also easier to rile up with tales of milk and honey at the end of the rainbow, or the modern equivalents, “compressing your working life into a few years” and “billon dollar waves”.

But running your life in perpetual crunch mode until the buy-out or bullshit-IPO fairy stops by your door is not surprisingly unappealing to lots of people.

In fact, what you do might even be better and more successful if you take your time by only working 10 hours a week on the idea.  I’ve seen this for myself with my CNCCookbook bootstrap.  The problem is you think you know exactly the right thing to build and if you could only get it done, riches would be yours overnight.  The reality is that nobody knows exactly the right thing to build in a vacuum.  You benefit by interacting with the market, and it takes time for the market’s message to come back to you and be properly infused in what you’re building.  You can’t infuse it at a 100 hour a week pace because it simply doesn’t come to you fast enough.  It requires a feedback loop and a little more gradual change.  This applies not just to the product itself, but to achieving a content-audience fit and then growing that audience to an interesting stage.  If you think otherwise, then you’re not being realistic.  You’re looking for that long-shot of completely unbridled demand that will seize your company and carry it in the vortex to the Land of Oz.  You’re looking for that 10:1 VC long shot.  Unfortunately, you don’t have a portfolio so that the 10 that didn’t work before the 1 that did doesn’t sink you.

Here’s the other issue–if you can’t overcome the kinds of problems $30,000 will solve without the $30K, you may not have the right idea or you may not have the right team for the idea.  Creating a successful multi-million dollar company is a big accomplishment.  If all it took was $30K, a little advice, and some networking, there’d be a lot more people with their own multi-million dollar companies.  There’s a set of skills your team must have.  There’s a set of qualities your idea and market must have.  Without them, $30,000 won’t begin to fix the shortfall.  $30K is just a convenience, not a solution.  It’s not even aspirin, it’s a vitamin pill.

So $30,000 is actually not really very useful to someone that is focused on the 10 hour a week plan.  Certainly it isn’t worth giving up say 15% of your company and potentially a lot more than that in terms of control and heartache that will still be there long after the $30,000 has been spent.  To his credit, my friend did get off the $30K after a little while and suggest that having all that networking and mentoring would be worthwhile.  That’s actually something I see as being much more valuable, but in truth, it actually isn’t all that hard to come by in Silicon Valley.  After all, the networking is one reason why we put up with so much cost to live here, isn’t it?  If you think you need an incubator to be mentored, to ask questions, and to learn how to do it, ask yourself how that’s any different than signing up for a bunch of the Anthony Robbins-style self-help seminars?  You know the kind–some flashy personality is telling you they have all the answers and they’re willing to share them so that you too can be a multi-bazzillionaire loved by everyone.  All for a price.  Guess what, this works for some people, but for most, they could’ve had the same answers without much effort.  I told my friend I’d be happy to help him understand how to launch and build a business having founded 4 software companies and been involved in 7 software startups.  I also told him the cautionary tale of those making their livings off such advice.

Hacker News is a good place to find such people, and I’m not picking on HN for it, that’s just where the paying customers are for these peddlers.  I call them the Entrepreneur’s Self-Help Gurus.  Don’t get me wrong–there are some dynamite folks out there who can and will help you, but I’m referring to a different sort of group.  These are folks who did something that if examined closely, was not an especially big deal.  Yet now they’re making more than they ever did on the not-especially-big-deal telling other people how they did it.  “I’ve got the secrets, and I’ll share them for just a small fee.”  Perhaps they created a software company in an odd little niche, never cleared more than $100K with it, but now they’re making $200K and more telling others how to do it.  To me, there is something wrong with that picture.  Just for kicks, I signed up for a bunch of the more popular pay-for-content mailing lists.  You can get them on sale all the time from AppSumo, for example.  After going through about four of them promising everything from SEO expertise to how to get 10,000 Facebook followers, I finally quit.  I hadn’t managed to learn a single useful thing from them.  In fairness, if I had been at the very beginning of my journey, they might have helped a little, but everything they had to say that was useful was available for free on some blog somewhere on the Internet that I had already read.  FWIW, I keep a clipping blog of such information I call Firehose Press.

I finally realized, that what these people were selling, was not the information, but the confidence to use the information.  That’s not something I really needed, and I hate to be a wet blanket, but if that’s what you need, are you sure you’re ready to be an entrepreneur?

One more thing on the subject of networking–you can go have coffee with so many extremely talented and successful people in Silicon Valley at the drop of a hat that it’s ridiculous.  People here are incredibly generous with their time.  Heck, if Y-Combinator fascinates you, go look up the Alumni and go ask them what they learned there and what they got out of it.  You just need to find a friend of a friend to introduce you and most decent people will share a cuppa joe with you.  Why not?  I often do.

Okay, so maybe the networking mentoring isn’t the thing.  What about all those juicy introductions to VC’s?  I have several problems with this one too, being the VC Curmudgeon and all.  It isn’t that I haven’t dealt with the VC’s.  In fact, they’ve been involved with every company I’ve been with until this latest one.  Let’s start with the intro process.  It’s not hard.  You need a CEO who they would want to talk to and an intro from someone they know.  If you have such a CEO, they can get that VC intro from someone they know.  VC’s actually want to meet people, they just want to meet people who won’t waste their time.  Same with Angels only it’s even easier to meet one of them and you might not need that CEO quite yet (but you will, so may as well find them so they can help you from going too far astray).  You don’t need Y-Combinator to meet these people.  What you need to meet a VC is pretty simple:

-  A product finished enough to be sold.

-  Real paying customers who will say extraordinary things about your product.

-  Traction.  The amount varies with the space, but there needs to be evidence that pouring gasoline on the fire will make it bigger in a hurry.

Too many entrepreneurs think investors want to give them cash to make some or all of those three things happen.  I won’t say it can’t work that way, but it works less and less that way every day in the Valley.  Y-Combinator, for example, used to invest more than $30K.  Most of the VC startups I’ve done raised a couple million dollars on a slide show and a team.  Those days are long gone.  You’re going to have to bootstrap to a greater or lesser degree (and mostly greater) anyway, so you may as well get started learning how to do it, even on 10 hours a week.  In fact it’ll be better if you limit yourself to 10 hours a week–it will teach you to focus.  The realization that I had to bootstrap to raise VC is what set me on the bootstrapping path, by the way.

Too many entrepreneurs think they need something to be able to be entrepreneurs.  They need money, advice, connections, confidence, permission, or at the very least, a guru they pay to tell them how it’s done.  But here is the amazing thing: you don’t need any of those things.  You can do everything that needs to be done in 10 hours a week to build a very successful multi-million dollar a year company.  Do that first, ahead of worrying about investors, and you will be 10x better off.  Because, here’s the thing, if that company explodes with a growth rate beyond your wildest dreams and you need a lot of capital right now just to keep the site up and running, that’s not a crazy home run extraordinary case for the VC’s.  That’s what they expect to see.  That’s what they’re looking for to get their checkbooks out.  That’s table stakes and we’ll see where it goes from there, whether you can monetize it, whether you’re the right ones to run it, and whether it is a passing fad.  If you have a deal at that stage, congratulations.  You’ll have to beat the VC’s off with a stick, and you’ll be able to dictate your terms.

But what if you don’t have one of those?

Don’t despair.  Remember:  an Enterprise Software Company that puts together a steady-but-not-sexy business and manages to get to $100M in revenue and an IPO is often seen as a failure in VC portolios.  They want the $1 Billion deals.  But you?  Heck, you’d be thrilled to be the 100% owner of a $15 million dollar a year software business with 20 employees that was throwing off cash like crazy and whose customers loved you.  That is unless you are that rare Zuck/Gates/Ellison/Brin type that really does care more for power than money or lifestyle, of course.

One last reference to recent influences that spurred this post.  I saw Jake Lodwick’s post in Pando Daily, “An Acquisition is Always a Failure.”  I understand exactly where this guy is coming from having had 2 of the companies I founded acquired.  Surpass was acquired by Borland and that was the Quattro Pro product and Integrity QA was acquired by Pure Atria.  Surpass was a great acquisition.  I joined Borland, we sold over $100M of Quattro Pro the first year, I moved up through the ranks to eventually run R&D for Borland in its heyday, and it was a fabulous company to be a part of.  I learned a lot.  Pure Atria was a great company too, but it didn’t last.  Six months after I got there it was gobbled up by Rational.  They already had a product with a brand that competed with Integrity QA’s product and it was based in Boston, not Silicon Valley.  Despite Integrity’s product being one of the most innovative things I have ever worked on (Genetic Algorithm-Based Software Testing), it basically never went anywhere because politically, it was stuck in a closet where there was no light.  It exists today as an IBM product called TestFactory, but it’s growth was stunted and it never recovered.

It’s fascinating to read the comments in Lodwick’s article and contrast them with where Jake is coming from.  He says:

Whereas we’d once been free to work on whatever seemed interesting, we now found ourselves in vaguely defined middle-management roles, sitting through pointless meetings where older doofuses who didn’t understand the Web challenged our intuitions and trivialized our ambitions.

That was basically my experience working for Oracle, where I learned a lot, but couldn’t accomplish much.  Similar with Rational.  Big Companies do work much differently than smaller ones, or as Jake says:

They’re another class of entity entirely, more concerned with sustaining their own rhythms and control structures than experimenting with strange ideas from acquired ex-founders. It wasn’t long before I was ejected like a virus.

Then he describes the frustration of being loose with money, but without company all founders who get acquired feel:

With a fat bank account, I was pretty set to do whatever I wanted for a long time. The sale afforded me the ability to make art, invest in other companies, and unwind. But it didn’t take long to realize that my new life was a hell of a lot less exciting than running an independent company had been.

So true.  Then we have the commenters, and as I read through them, it’s hard to see them as being focused on much but the money, whether this is an indictment of what they need to do (investors need an exit/cash out), or whether there aren’t a few examples where an acquisition made a thing far greater than it otherwise would have been (Android).  Most of them missed Jake’s message and wisdom entirely.

Here’s the thing.  At one point Jake talks about getting $50,000 checks each month.  Do the math carefully before you decide you need a VC-scale company to make enough money.  I went through one of those VC-backed Enterprise Software IPO’s, and while I made good money, it was #3 on my hit parade of exits.  Owning a business 100% that plops $50K checks on my desk each month would’ve been a much better deal, and this is to say nothing of all the deals that crash and burn because the VC was driving for a 10:1 Long Shot.  You have to live through a lot of Ramen noodles on the long shots, then maybe you’ll see that big payoff.  Or maybe you’ll have been diluted out of your mind and it won’t be such a big deal.  I’d have been much better off owning that $50K/month business that I could keep on running that doing the IPO I did.

In the end of the Day, as an Entrepreneur, you need to get crystal clear about a few things:

-  How much money do you need to get from your venture?  If $1M a year is a happy number, the chance is a bootstrap is much less risky than a VC deal.  Remember, income equates to investment portfolio about 20X.  That $1M a year income stream requires a $20M liquidity event after taxes before you can live like that without working.

-  How much control do you have to have?  Hey forget whether you’re an ego maniac.  I’m talking of control more akin to artistic control.  The control to deliver on what you do well.  On why everyone always says they love you, but that Boards, CEO’s, and Professional Managers are only too quick to override if it suits their agenda.  If that artistic control to do what you do best is important, adding people who own significant parts of your company can only dilute that control and maybe even result in your being “ejected like a virus.”  OTOH, if you want Bill Gates or Steve Jobs-style control over an industry, you’re gonna need VC’s.  If you want to change the world with Electric Cars and Private Spacecraft like Elon Musk, you’re gonna need VC’s.  Just be really honest with yourself about what you need versus what might be nice to have.

-  Most importantly, how will your venture change your life?  What does it have to accomplish to make you happy?

Too many entrepreneurs get signed up for the promise of (to quote David HH’s article), “compressing your working life into a few years.”  Sounds great, but it better be just a few years to put up with the amount of BS that kind of pressure cooker entails.  And the truth is, it is never just a few years.  It’ll be 10 long years to reach the conclusion, assuming it is a happy one.

Why not start out with a venture that makes you happy every single day you pursue it?  If it has VC potential, you’ll know soon enough and you can decide then what path to take.  If it doesn’t have VC potential, you may still wind up realizing everything you’d hoped for and more.  Even better, it may be at much lower risk.

 

Posted in bootstrapping, business, strategy, venture | 6 Comments »

Charging for Your Product is About 2000 Times More Effective than Relying on Ad Revenue

Posted by Bob Warfield on February 22, 2013

BootstrapsI was reading Gabriel Weinberg’s piece on the depressing math behind consumer-facing apps.  He’s talking about conversion rates for folks to actually use such apps and I got to thinking about the additional conversion rate of an ad-based revenue model since he refers to the Facebooks and Twitters of the world.  Just for grins, I put together a comparison between the numbers Gabriel uses and the numbers from my bootstrapped company, CNCCookbook.  The difference is stark:

Ad-Based Revenue Model CNCCookbook Selling a B2B and B2C Product
Conversion from impression to user 5% Conversion to Trial from Visitor 0.50%
Add clickthrough rate 0.10% Trial Purchase Rate 13%
Clickthrough Revenue  $      1.00 Avg Order Size  $ 152.03
Value of an impression  $ 0.00005  $      0.10 =     1,976.35 times better

Let’s walk through it.

Both sites have visitors who convert to something more.  In the case of the Ad-Revenue model, presumably it is a person who creates an account on a Facebook or Twitter-like site, thereby becoming a user.  Gabe says that conversion rate for a really strong property might be 5%.  It can be much lower, like 1 to 3%.  I went with the optimistic 5%–the model is already too hard to contemplate 1%.  In the case of CNCCookbook, the conversion is from visitor to Trial user for the software.  We have a 30 day free trial on all our products.

From becoming a User or Trial User, the next conversion rate is monetization.  For the Ad-Revenue model, I did a quick search for clickthrough rates on display advertising and came up with 0.1%.  Sure, you might get your Users to click on more than one ad over time, but let’s just keep these numbers simple.  They’re not going to click on 2000 ads to even the score, after all.  For CNCCookbook, we have a very high conversion rate from trials–about 13%.  I view that as a commentary on the high quality of our software–people like it if they try it.  I understand conversions in the 5% are more common, so you may be forgiven for deciding the ad revenue model is only 1000 times less effective than charging for a product.

Okay, given those conversion rates, we take the average revenue per transaction and multiply all that on through to find the value of an impression.  What is it worth to you to bring another visitor to your site?

In this analysis at least, it’s pretty easy to see why bootstrappers need to be charging for their products and not relying on ad revenue.  Unless you just happen to have an amazingly viral product, it’s just too hard.  You have to rack up way too much traffic to get to interesting revenue levels.

Or, to put it like 37Signals:  Charge for your products, Dummy!

Posted in bootstrapping, business, strategy, venture | 4 Comments »

A Solo Bootstrapping Odyssey: 2012 Was The Year I Quit My Day Job

Posted by Bob Warfield on January 6, 2013

For those who like Bootstrapping Case Studies, here is mine.

2012 was the year I moved on from a Day Job and started doing my Bootstrapped Company CNCCookbook full-time.  I’m not the first to do so, and certainly not the last, but I thought I’d provide a historical background and then some data on CNCCookbook in 2012 along with lessons learned so far to help those that follow.  There are a lot of other stories along these lines that range from extreme bootstrapping successes like 37Signals to smaller successes like patio11’s Bingo Card business.  This is not my first entrepreneurial endeavor, but rather my 7th.  However, the others were all venture funded while this has been the first that I bootstrapped from scratch without any outside investment.

CNCCookbook was incorporated 2 years ago in late 2010.  We sold our first software in November 2010.  The product was called “G-Wizard Calculator“, and it is a very specialized calculator for CNC machinists.  I started the company largely because the Silicon Valley VC Startup scene had veered a long ways away from my vision of what startups ought to be and always had been for me.  I wanted to have fun building awesome software that solved real problems my customers had and gave them good value.  I wasn’t much interested in Riding the Bubble, lucrative as that can be.  I was more interested in doing the sorts of thing I read about from people like Seth Godin than in building the next Consumer Internet app.  In short, I wanted to build value the Old Fashioned way, or at least that was the delusional fantasy that has sustained me on this enjoyable journey.

I quickly discovered there’s quite a lot to be learned in the course of bootstrapping, but fortunately, I found all of it to be interesting.  Some of the key problems you will have to solve to build a successful one man software company include:

-  How to take orders and charge for the orders.

-  How to control access to your software so that you can have free trials, paid subscriptions and renewals.

-  How to get people to try your software.

-  How to provide customer service by way of answering questions and dealing with all the minutiae that comes of helping customers complete their purchases and learn how to use the software well enough to realize the value they’ve purchased.

-  How to keep the business moving forward and growing at an acceptible rate.

-  Perhaps most of all, how to juggle all the balls while getting everthing done and holding down a Day Job using only 10 hours a week.  If you can’t manage your time effectively, get fired up to do more after a long day at work, and know what not to waste time on, bootstrapping may not be for you.

Back in 2010, I had a reasonably thriving web site/blog that I’d started in order to chronicle the machine tool hobby I’d started 10 years before.  2007 was the first full year the web site was in operation.  Prior to the end of 2010, I did little to the site except write blog posts that were interesting to me on an irregular schedule.  People tell me I’m a pretty good writer, and I had a substantial readership with nearly 600,000 visits in 2010.

Here’s some data on site traffic from 2007 through 2012:

CNCCookbook Site Traffic

CNCCookbook Site Traffic

From 2010 to 2011 growth flattened out because I was splitting my attention too many different ways and not producing enough content.  At the end of 2011 I instituted a rule that I would not work on marketing unless it was after 7 pm in the day.  2012 grew like crazy because I had figured out the content marketing formula and I was cranking on good content rather than wasting time on things that didn’t matter.  We did very well ending 2012 with over 1.2 million visits.  Is that a lot or a little traffic?

Look at it this way.  The market leading CNC software company is Mastercam, and SEMRush says their organic traffic is 10,810 while CNCCookbook’s is 4,032.  If a one man shop can get 40% of the traffic of the market leader, I’d say that’s pretty good.  In fairness, they count on being sales driven and using a reseller channel, but even so, that’s not too shabby.  Not only does content marketing work, but it works well.

We attract our visitors entirely via the content, whether through referrals from other sites or via organic search traffic.  There’s no paid advertising except when I am experimenting off and on with it.  As a solo entrepreneur, I don’t have a tremendous amount of time to spend on site traffic.  In fact, I have a rule that I only do marketing work after 7 pm in the evenings.  The rest of the time is devoted either to customer service or building product.  Not only does content marketing work well, it is extremely time and cost efficient, at least if you’re good at producing content that works.

Despite my marketing “curfew”, quite a lot of marketing gets done.  To give an idea, I logged 126 specific events in my marketing event log that I use to try to understand what was going on when the various analytics changed.  Events are typically things like running an A/B test of some landing page.  There are another 100 or so items from my Agile Backlog for marketing marked as completed that didn’t deserve logging as events to compare analytics to.  As another metric, I wrote 239 blog posts–about 5 a week on average, during 2012.  In addition, there was more content produced, such as detailed tutorials on the two areas of industry practices that my two software products are designed to help out with:

-  Feeds and Speeds:  This term originated with manufacturing and machine tools, though High Tech embraced it too.

-  G-Code Programming:  G-Code is the “assembly language” of computer controlled machine tools.

Content marketing aficionados will recognize these latter two as the sort of “Evergreen” content that is extremely valuable in terms of SEO and generating a solid foundation of site traffic.

Early in the process of starting CNCCookbook, I decided Content Marketing was the only way to go.  As a bootstrapper, I didn’t want a business that required lots of expensive advertising because I didn’t want to invest the capital.  I had the opportunity to try my Content Marketing theories back before they were as fashionable as they are today.  I used both CNCCookbook and my day jobs at the time, Helpstream and Hotchalk, as the test vehicles for the strategies.  They worked extremely well for all 3 companies, which is a testament given how different they are:  CNC Manufacturing Software both B2B and B2C, SaaS Social CRM/Enterprise Software, and Online Education.

I had a real leg up with the CNCCookbook web site, because I knew I had already achieved a Content-Audience Fit and that I only had to learn how to optimize the content machine further.  My Marketing philosophy was that I would give away tons of valuable content (or at least content that is as valuable as I could make it, but the numbers show my audience felt it was valuable too) with little or no marketing “spam”.  I do not spend a lot of time asking for the sale and the content on my web site is designed to attract any machinist, not just machinists who are ready to buy my products right away.  As a result, I get to build a relationship and some reciprocity debt with my audience before I go for the sale.

The sales funnel works like this:

1.  Attract people to http://www.cnccookbook.com by offering valuable content that scores well in organic search.

2.  Priority #1 is to get them signed up to the mailing list so they can continue to receive the valuable content in weekly blog post digest.  At the end of 2012, we had about 16,000 names on our mailing list.  I get very decent open rates and site visits each Wednesday when I send out the weekly blog digest.  About 1/3 to nearly 1/2 of the list will visit as a result.

3.  Visitors in this active “content community” become aware of our products through content.  We report all product progress via the blog.  When solving any problem, mention relevant related capabilities in our software.  Report periodic special offers in the blog.  They also become aware through various “ads” that appear at the top of the screen (Hellobar), bottom of screen (homegrown slideup banner), and in the navigation panel on the left as well as the “Software” menu at the top of every page and the site’s Home Page.  All of these vehicles direct users to the various home pages for our software where they can sign up for a free 30-day trial.

4.  During the trial, we use an email drip campaign to try to make sure users are coming up to speed.  The email sent is intentially kept friendly and conversational and is directly from me.  I try to avoid making it too “slick”, and I try to make sure everyone gets what they need to come up to speed and be as productive as possible during the trial.

5.  The product itself also has a number of features designed to enroll folks into the community and help them along.  I’ve discussed these in a prior blog post.

6.  The product and email drip campaign will countdown at the end and present the trial user with links to purchase.

7.   Whether or not they purchase immediately, we work hard to keep them on our mailing list.  We run sales periodically, about every 6-8 weeks, that substantially increase our close rate (some folks will only buy at a discount), but we don’t want to run them so often that people only buy at the sale prices.  I think this timing, which was worked out via testing, has served us well.

To date, about 16,000 have participated in the product trial.  13% will end up buying, a number that’s pretty high for software free trials.  The software is sold via SaaS-style subscription at $69/year, and renewal rates are pretty decent, although we haven’t been selling long enough to see very much of that yet.  Sales in 2012 were up about 120% versus 2011.

The software side is interesting too, but I’ll save the technology details for another post sometime.

Going Full Time on CNCCookbook:  Lessons Learned

I went full-time on CNCCookbook July 1, 2012, so I have 6 months into it.  The company throws off sufficient revenue that I can pay myself what I would make in salary at a startup.  Typically, my position would either be VP of Engineering/CTO or CEO, and I’d be paid at the upper end of startup salary scales, so I’m pretty happy with CNCCookbook.  Our revenue grew 150% plus in 2012, and if it keeps on like that, it’ll be a very happy experience indeed.  I own 100% of the company, and have taken no outside investments.  I started actively trying to make it a business in mid-2010, at the 37Signals recommended pace of 10 hours a week.  I went full time after 2 years, and reached salary-parity with a Day Job, or Escape Velocity as I like to call it, 2 1/2 years into the exercise.  I love the business, products, and customers and I’m very pleased with the path I have chosen, so much so, I wonder what took me so long.

I’ve just started working part-time with some developers who I hope will ultimately join CNCCookbook when we’re large enough to be able to hire them.  Meanwhile, I have a 10-hour a week plan for them to participate, and that’s worked well.

In no particular order, here are some lessons and thoughts I have for others who want to try something similar.

Things That Worked

-  I had the luxury of starting this company having already achieved Content-Audience Fit.  I knew quite a lot about my audience, I knew what content they were interested in and hence what problems they wanted to solve, and I even had quite a lot of empirical web analytics data to go on.  In hindsight, I wouldn’t call all that a luxury.  I can’t understand how to do a decent job bootstrapping a company without it.  Anything else and you’re just building a product that you’ll throw over the fence and hope someone will consume.

-  I focus relentlessly on spending my time doing things that nobody else can do for my business.  If I can buy a solution, preferably SaaS, I will do that rather than build it even if I know I could do a better job.  That means I bought my e-commerce solution (1ShoppingCart), customer service (UserVoice), hosted wordpress blog (Page.ly), and a lot of other things.

-  I’ve taken a radically different approach to the back-end of my SaaS software architecture, which I call “Fat SaaS”.  In essence, I put as much intelligence as I possibly can into the client and keep the back-end very simple.  It all runs on Amazon Web Services, is highly scalable, very reliable, and didn’t take much effort to build.  Eventually I’ll write about it.  The thing is, focus your efforts on what your customers can see and be delighted by.  The rest is just plumbing.

-  I am firmly of the opinion that our high close rates are due to not only the quality of the software, but also because we don’t use the hard sell.  The trouble with a hard sell is that while it may increase close rates for those ready to buy, it can so turn off those who are much earlier in the funnel that they won’t return when they are ready to buy.  Having seen the process at a lot of companies, frequently they’re not even measuring the impact on the later tail of prospects.  They’re only interested in what’s closing in the next 3-6 months.  I still see significant sales even 1 year after the end of the free trial.

-  We appeal both to hobbyists (B2C) and businesses (B2B).  This sounds odd and unworkable, but for the community of machinists, it works fine.  Based on various surveys I have done, we seem to have about 60% professionals and 40% hobbysists.  The professionals will pay more and require less support, but the hobbyists get the word out in the various online communities.  The reason I can serve both markets is the participants are passionate about machining.  I believe passion is an essential litmus for content marketing success (and likely bootstrapping success).  If you can’t detect passion in the audience, how can you get them interested in your content?  How can you get them to tell others about it?

-  Only having 10 hours a week for the first 2 years was beneficial.  When you’re learning what to do, having a lot more hours available doesn’t necessarily help.  It takes time for the ideas to percolate, for the right influences to be felt, and for the results to be measured.  Heck, it takes time to think of all the ideas.  You don’t have them all up front so that all you have to do is implement them as rapidly as you can.  And of course, limited resources maximizes your focus.

-  Using an Agile Methodology to run everything including the business and marketing side has been hugely beneficial.

-  I have never owned or touched a server for this business.  It’s all been in the Cloud from Day One.  It started at LunarPages, my original El Cheapo ISV, and fairly quickly migrated to Amazon.  Today, the site is entirely on Amazon.  Static pages are hosted via S3 and we use the Page.ly service to host WordPress.  My order of preference in implementing a service is:

  • Defer it.   Do you really need it now?
  • Use SaaS.  They do it for a living.  Are you really going to do a better job or is it a distraction?
  • Outsource it.
  • Build it.  Least desirable.  If I build it, it better be highly differentiated and valuable to my audience.

-  I farmed out the simple back end we use for authentication so I could focus on the machinist-specific client.

-  There is a tremendous art to using Sales (by that I mean special prices for a limited time) to enhance your revenue and close rates without trashing your average selling price.  Learn to do that as early as you can through experimentation.

-  Measure everything.  My primary measurement tool is Google Analytics.  But, I get lots of data from SEMRush, SEOMoz, SurveyMonkey, and the various telemetry I’ve built into my product.  All the key data goes into a weekly marketing report as a row in a spreadsheet.  I focus entirely on the trends and let the absolute values work themselves out over time.  If the trends are right, you can’t lose.  There’s no more powerful force than compound interest.

-  Drive the business with the metrics.  If you can’t measure it, it isn’t real.  If you don’t have an Analytics + Metrics + Decision Making Machine, you don’t really have a scalable strategy, you have a bunch of gut ideas that may or may not work.

-  Taking on 3rd party software to resell.  See my note below about the Road Ahead.  This has worked extremely well for us and added about 30% to our top line revenue for very little effort.

Things I Wish I Had Done Differently

-  Our first product was easier to build, but was too cheap.  At $69 a year, you need a lot of customers before you can quit your Day Job.  Being able to charge even a little more would’ve accelerated the process, assuming we could still get it sold.  One of the problems is that being a solo bootstrapper, there were real limits to what I could produce, especially while having to learn all the other non-technical jobs.  A bootstrap team of 2 or 3 could attempt a much more ambitious first product and probably get to full-time viability sooner.

-  The scalable formula for growing a Content Marketing effort is simpler than I thought.  Over time, Google has made it harder and harder to play SEO tricks.  The more I wanted to find the Tricky Secrets, the more time I wasted.  This is one reason why I eventually limited myself to working on marketing after 7pm at night.  In mosts cases, only three things have mattered:  Doing good keyword research.  Doing enough A/B testing.  Producing great content.  Figure out what formula works for you, and as soon as you have a scalable formula, focus on scaling it.  Save time for a few experiments, but not too many.  You don’t have enough attention to split too many ways.  There is such a thing as Minimum Viable Marketing and it is just as important as Minimum Viable Product.

-  I made some bad choices on various services I signed up for.  This was mostly a function of being largely review-driven and not having a clear enough idea of my long-term needs.  The heart of the commerce platform for CNCCookbook is email.  Initially, I chose a service called 1ShoppingCart because it integrated everything I thought I would need in one package.  1SC turned out to have a very poor set of API’s and was better suited to sales of physical goods than SaaS software.  I’ve made it work, but at this stage, mostly as a shopping cart.  After having looked at a lot of email platforms, and gotten a pretty deep false start with Constant Contact, I am finally happy with MailChimp.  I would’ve saved myself a lot of trouble if I had started everything from MailChimp and built out around it.  Spend time reviewing the API’s of any service you sign up for.  You never know when you’ll want to dig into them.

-  I started with a static web site for historical reasons.  CNCCookbook was originally formatted much differently than a blog so it didn’t occur to me to use blogging software.  Today, I have integrated WordPress and love it.  If I had it to do over again, I would probably have simply built everything on top of WordPress.

-  Social Media are helpful, but deliver a lot less marketing value than you would think.  Automate your use of them and let it ride.

-  I got started focusing on my mailing list late.  There was no way to sign up for the list or even get a real RSS feed until the beginning of 2012.  This was a huge mistake.  A good mailing list is as much an asset as anything else your business will have.  Treat the people on it well by not wasting their time and you won’t be disappointed.

-  Our products are not a pure SaaS model.  When the subscription expires, the product continues to deliver considerable value, though far less than if the subscription is paid up.  The jury is still out on whether I gave away the cow instead of selling the milk on that deal.  I am happy with renewals, and it may be that without this feature I would’ve had far fewer sales to hobbyists, so I can’t truthfully say I would do this differently.  But, it is something I think about a lot.

The Road Ahead

CNCCookbook’s biggest problem is lack of product.  We have a fantastic readership, traffic is growing steadily, and the word of mouth around our first product and the web site is great.  It’s become the de facto standard and we’ve even signed up a bunch of big name manufacturers who use it.  Our problem is not having enough software to sell into this channel.  As soon as I realized this, I went in search of 3rd party software I could resell to this audience and was successful with a couple of packages during 2012.  I would guess they added about 30% to our revenues.  2013 will be the year we ship our second product, and hopefully also our third and our fourth products.  My suspicion is that this will radically scale the business along every dimension and I’m really looking forward to it.

I was pleasantly pleased to discover that once you have a one man SaaS business, you can run it from virtually anywhere in the world that has a decent Internet connection.  All my servers are in the Cloud, and all my tools will fit on a laptop.  Consequently, I’ve had the pleasure of being able to run the business from the cabin of my Alaskan Cruise Ship, from a rented condo on a dive trip to Cozumel, Mexico, and from my hotel room in Waikiki.  It’s been a real blast and I’m eagerly looking forward to what comes next.

Posted in bootstrapping, business, strategy, venture | 13 Comments »

Converting Content-Audience Fit to Product Traction

Posted by Bob Warfield on December 18, 2012

tractor-pullJason Lempkin has a new post out about gaining traction after your product ships.  He says it’s hard, much harder than building the 1.0 product which was already hard, and he makes some concrete suggestions on how to go about gaining traction:

-  Finish hiring your core team.  Presumably you’ve left the sales and marketing until post-1.0?

-  Get attention for your app:  “Whatever you can possible do.  Go to every conference.  Speak at any possible event you can, no matter how small.  Win every award. Try to get every blog to write about you.  Reach out to anyone and everyone in your space.  Be respectful, but totally, utterly, shameless here.  Do whatever you can possibly think of here.”

-  Hit the pavement and get early customers and partners

-  Lavish attention on every single customer and lead

-  Plan your next release carefully–it may be your last

Wow, put that way, the job seems really tough!

After reading the account, I do have memories of startups that had to solve the traction problem through brute force and shoe leather.  They were painful and very scary.

The thing is, success is about being prepared (with a healthy dose of luck, though chance does favor the prepared mind).  As I tell my kids, “It doesn’t matter how smart you are, if the other guy already did the homework and knows the answer while you’re still trying to figure it out, he looks smarter.”

So it is with achieving product traction.  This is why I wrote my earlier post about achieving what I call “Content-Audience Fit” to tell Founders it has to be their first priority, even ahead of building a product.  Possibly even ahead of knowing what product you will build.  I say this for two reasons.  First, if you don’t know your audience, you can’t build a great product anyway.  While you might think you know your audience, how can you be sure until you have Content-Audience Fit?

If you have Content-Audience Fit, the following things are true:

1.  There is a reasonably large audience that is steadily growing and is consuming your content.  They care about what you have to say in the market you’re interested in.  They are subscribing to your mailing list, following you on Twitter, liking you on Facebook, or whatever other Social Medium works for your market.  Consequently you know what Social means to your market.

2.  You are part of the Conversation taking place on the web for your chosen market.  You are posting in their online communities.  You’re on the blogs of the key influencers (you do know who they all are, don’t you?) commenting.

3.  You are so familiar with the commercial players in the market that you’ve helped the Market Audience understand some of them better.  You’re commenting on their blogs too.  That establishes you as an agnostic authority in the market.

4.  Because of your participation in all the right conversations, and because of the quality of the content you’re producing, Key Influencers will recognize your name.  You are beginning to get folks asking you unsolicited questions as a recognized Expert.

There is a not-so-subtle difference between this Content-Audience fit and “Get attention for your app”.  It’s because you’re getting attention for your content.  You’re establishing yourself as an expert, not a guy shilling your products and company.  Because your content is very high quality and it’s being given away freely, you’re invoking the principle of reciprocity, which is a powerful force when marketing and selling.  You’re laying the groundwork to present your selling proposition from a position of strength, after your prospects have already decided you’re the expert.

Imagine being able to validate your product vision, and eventually early versions of the product with that kind of Audience insight.  It’s invaluable.  It should be a requirement.  Yet so many companies build the product first and consult the Audience afterward.

Second, you need a strategy to make this business of gaining Product Traction easier.  I love the definition that strategy is what you do to make winning easier.  If you ever needed a strategy, it is when you launch your 1.0 product!

So how do we convert Content-Audience Fit to Product Traction?

Back up.  Let’s get the timing right first.  You don’t want to start trying to achieve Content-Audience fit after you’ve built Product 1.0.  That’s way too late.  Here’s a mini-case study:

I took Helpstream, a Social CRM startup, from being invisible to having a successful blog that had achieved Content-Audience fit in about six months.  At the end of the six months, the key influencers knew who we were and were starting to write about us.  For example, Paul Greenberg, the “Godfather of CRM”, wrote a short passage that perfectly signals good Content-Audience fit:

A few weeks ago, I had a discussion with fellow Enterprise Irregular Bob Warfield, who is the EVP of Products for a company called Helpstream. I have to admit, when I saw Bob’s rather cogent commentaries on the Enterprise Irregulars site, I became curious as to what he did and what the Helpstream company dealio was. I asked him and we set up a demo and a conversation between me, Bob, and Anthony Nemelka, the President and CEO of Helpstream and a long time industry veteran.

That second sentence telegraphs where we’re going and why Content-Audience fit is so critical to a product launch.  Because of my “cogent commentaries”, Paul asked us for a demo.  Imagine Content that is so good, the key influencers are coming to you, rather than you going to them hat in hand trying to get a meeting.  I would budget a minimum of 6 months and perhaps as long as 12 months to achieve your Content-Audience fit.  Sounds like you need to get started at the same time you start the Product, right?

This is an insight that is missing from many startups.  In fact, many want to do a stealth launch and keep everything secretive.  Feel free to keep your product aspirations a secret, but you’re nuts if you’re not belting out super high quality content for your audience from Day 1.  That means as you sit around the table with your fellow Founders, and you ask the question, “Who is spearheading our drive for Content-Audience Fit and who is writing all that content?”, there had better be a good answer.  That marketing guy you partnered with who has never actually done a blog, he has just simply hired people who did blogs?  We might be past the evolution in how marketing is done for that to be a good idea.  First question I ask any marketing candidate at any level is, “Show me your blog?”  If the response is, “Huh?”, the interview is not going to go well.  It’s no different than asking any question about marketing deliverables.  Would you hire someone who had never had any contact with advertising of any kind?  Content marketing is so critical to small companies, how can it be an afterthought?

As an aside, I recently came across a bootstrap business called, The Wirecutter.  The Founder achieved Content-Audience fit before they ever started this little company by writing for Gizmodo, Wired, GadgetLab, and MaximumPC.  How about grabbing one of the big name bloggers in your space as a co-Founder?  How about at least as an advisor to help you get to Content-Audience Fit?  Have them brutally critique your content until you get it right.

BTW, people like Paul Greenberg have extremely high standards.  There is a reason they get nicknames like the “Godfather of CRM”.  They are trusted and they didn’t get there by being dummies or shills.  If your content doesn’t have something really meaningful to say, you’ll get nowhere with this strategy.  But if you get the meeting because your PR firm pounded hard enough on doors, and then in the meeting you still have nothing to say, you’re going nowhere anyway.  So:

It is critically important to do the work of achieving Content Audience Fit!

That’s it.  Full Stop.  End of Sermon.  Don’t.Mess.It.Up!!!

Okay, now imagine you’ve got that fit, as defined by the 1,2,3,4 list above.  Let’s use it to produce traction.  This is done in the following ways:

The Audience that’s ready to Jump Now is ready.  Invite them in.

There are always those influencers who get an edge by working harder to learn than the others.  Always those prospects who are ready to buy now and want the new new thing.  If you have achieved Content-Audience Fit, all you need do is announce the availability of a product and any of these people in your audience will be likely to check in.  Start with  your Beta Test.  You can keep it as controlled as you like, but put the announcement out through your content channel and be sure to communicate at least your value proposition well enough so people will want to jump in.  If you don’t have a big enough audience yet that having 5% of them answer your invitation, you don’t have Content-Audience Fit.

Give the Early Adopters an Amazing Deal and Make Them Heroes

You don’t need revenue yet, you need credibility.  You put out the call to action, and the right people have self-selected by coming forward.  They like you or else they wouldn’t have come forward.  They’re active in the online world or else they’d have no idea you existed.  They’re raising their hands to tell you they care.  Make it easy for them to feel like that was the best decision they ever made.  Focus your spotlight of attention entirely on them.  Save your bandwidth so you can give them completely unreasonable amounts of it.  Make them heroes and they will make you a star.

You need to charge them a little bit or it isn’t a real transaction.  Give them the best deal you will ever offer in your corporate history and make sure they know that in the nicest possible way.  Give them attention and services that will never be available to others in even a year’s time.  Plug every member of your team into the success of these early customers.

When that fire has caught, you can ask them for a favor.  You can ask them to help you get the word out.  At the very least, you need them to be a willing and able reference.  Next step up, you need them to be a case study.  Grand Prize:  you need them to be a source of referrals.  Try to discreetly make sure when you sign them up that they’ll be able to do some of this, at least serve as references.  You can’t ask for that favor up front, but you can find out if they’ve ever been involved with early software, done references, yada, yada.

Earn the Right to Raise Your Price and Sell Bigger Deals

The company I mentioned earlier, Helpstream, had nearly every marketing automation company as customers for our Customer Service Social CRM product.  I remember calling each of these CEO’s, who were all entrepreneurs like myself, and asking them what Helpstream could and should do going forward.  Phil Fernandez, CEO of Marketo, shocked me by telling me, “Bob, I don’t know if I should be saying this, but you should raise your prices.”  Even more shocking was that Phil wasn’t the only one to tell me that.  So we did, after carefully making sure to grandfather existing customers with appropriate agreements so that they were taken care of.  There was virtually no pushback whatsoever, and it helped the business tremendously.

What had happened is we had earned the right to raise our prices by delivering on our promises and raising our credibility.

The ability to price higher comes most from credibility.  Sure, you might have the world’s greatest product, but nobody knows that if you don’t have the credibility.  Can you see where having good Content-Audience Fit is the first step on the credibility journey?  Beyond that first step, it is your conduit for telling your customer’s stories and continuing to build that credibility.

The next step is being able to tell your Early Adopter’s stories.  In terms of closing business, there is nothing like being able to have a prospect talk to a customer that gushes about your product.  At Callidus Software we used to invite prospects to our User Conferences precisely to maximize the exposure to that kind of sentiment.

Startups are enaged in earning the right to raise prices and to sell bigger deals throughout their history.  Successfully getting your first 5-10 reference accounts is just the first rung on that ladder.  Each company you sell to would like to know that they’re not the largest deal you’ve ever sold.  Raising the size of your largest deal earns you the right to sell even larger deals.  Accumulating this asset of referencibility is your primary deal closing accelerant until you’re large enough to point to being the market leader or perhaps to being a public company.  Gordon Moore’s Chasm Crossing can largely be seen as the process of establishing the credibility needed before those who are not Early Adopters will buy.

All along your journey, your Content continues to establish your company’s expertise in its chosen field.  You never walk away from that–you just keep building on it.  If your references are your Sales Accelerant, your successful Content is your lead generation accelerant.  Establish your web properties as the go-to spots to learn about what your customers care about.  All the best marketing startups like Hubspot, SEOMoz, Marketo, and Eloqua are working this way.  Maybe that’s a clue for the non-marketing startups that this is how marketing is done these days?

Lead With Content for Competitive Skirmishes and Insights

Competitors are great for startups.  If you’re the only one in a market, you have to undertake to grow that market all by yourself.  With competition, the cost is shared and the market can grow much more quickly.  In addition, picking a fight is a sure way to add passion to your content and help drive more traffic.  You can’t agree with everybody, but you need to agree with the position your key audience want you to stake out.

Take advantage of that with your Content strategy.  See which conversations your competition are dominating and wade into those conversations with your own viewpoint.  That viewpoint has to carry substance, but when it does, if you win the audience’s hearts and minds who are watching the conversation, they will come your way.  You can’t win them all, but this is where you start stacking up the different value propositions.  This is where you carve up the market into micro-niches that are looking at things each a little differently.  Here’s where you find out which micro-niches matter, and which ones are dead ends best left to the competition.

Passive sonar gained by just passively consuming the content from your space is great, but so much more can be learned through active pinging of the landscape.  See how they respond to your messaging, analysis, and insights.

Conclusion

There’s a lot of work required to achieve traction.  But, if you subscribe to my Content-Audience Fit idea, you’ll begin that work Day 1 at your company.  When you’re ready to enter Beta Test, you’ll have a lot more going for you than your sales guy’s contact lists and willingness to burn through shoe leather.  You’ll have an audience that wants to come to you, embrace your product, and help you spread the word.  FWIW, Helpstream wasn’t my first or last experience with Content-Marketing Fit.  My bootstrap company, CNCCookbook, thrives on the notion today.

Posted in bootstrapping, business, Marketing, saas, strategy, venture | 2 Comments »

The Very First Thing a Founding Team Needs to Do: Achieve Content-Audience Fit

Posted by Bob Warfield on December 10, 2012

Audience3DA lot of entrepreneurs,  when faced with the question, “What’s the most important thing to do first?”, would answer, “Build a product.”

Big mistake.

The most important thing to do first is to find an audience.  It may be that building a product is an integral part of growing your audience, but you’re not ready to build a product or grow your audience until you’ve found the right audience to start with.

How will you know you’ve found your audience?

There are some important signs.  For example, you can participate in their communities and be well received.  An even better test is you can get their communities to consume your content.  Before you’re going to have much hope of achieving Product-Market Fit, you’d better achieve Content-Audience Fit.  When you have that fit, when traffic to your web site is growing steadily and you’re starting to get some big spikes in traffic from particularly compelling content, you’re close.  When you can measure growth in the audience’s commitment to your content, for example, when your mailing list for your blog is growing and people are clicking through the weekly digest to get to the actual articles, you have achieved some degree of Content-Audience Fit.

Content-Audience Fit is a surprisingly high hurdle.  It is higher than getting a bunch of random people to sign up to try a free software product, for example.  The reason is that there is less value being offered by the content.  People actually have to be willing to spend some of their attention on your content simply because it is that good.  They do it because you’ve demonstrated you understand what they want and that you have something worthwhile to offer.  There are tons of people that will play with some free piece of software for a short time, and you’re probably not even set up to measure how hard they played with it yet.

With Content, all you need is a blog to deliver the Content from and Google Analytics to measure its impact.  Maybe augment that with a MailChimp account so you can actually start to aggregate some followers to your Tribe and use the Analytics there to tell how committed they are.  Anyone who is willing to undertake the hard work needed to consume your Content and decide they like it well enough to want to keep consuming it is a valuable member of your Tribe.  The more you can grow the Tribe, the more voices there will be to help you get your message out, to tell you what problems they need to have solved, and to guide you in the next phase of your journey:  achieving Product-Market Fit.

To be a successful Bootstrapper, you’re almost certainly going to have to be a Content Marketer anyway.  Advertising is typically going to be too expensive before you get some capital and a following.  So do yourself a favor.  Forget the product for a little while.  Focus on achieving Content-Audience Fit.  When your past striking flint and blowing on the tinder, you’ll have a little fire glowing.  It’s a big accomplishment.  So far it’s just kindling, but soon you’ll be ready to throw a real log or two onto that fire.  That’s when you build your product, as soon as the Content Kindling has caught and you can see some actual flames.  The timing will be perfect, because your costs will go up and your available attention for producing product and content will go down as soon as you ship your product.

You can’t afford to be just starting to look for Content-Audience Fit after the product is ready to ship.  That’s too late.  And it’s a terrible time to discover your market has no passion for what you’re trying to do.  That bit of news was tragically knowable with a lot less effort if you had only started out finding an Audience.

Extra Credit Note to Investors:

If you find a team that knows how to create a product, we both know that’s not enough.  You’ve raised the bar on that some time ago.  But if you find a team that has achieved Content-Audience Fit, they’ve demonstrated a critical marketing skill.  At the very least, you know that this team can present compelling content that draws a significant audience.  Combine that Audience Insight and ability to compell the Audience with a decent Product and that’s the essence of a startup that will grow.  I am surprised every time I walk into a startup and ask who in Marketing is a hard core blogger and hear back that basically nobody is and they’ve outsourced that task to technical writers of one kind or another.  Those startups are proceeding on a wing and a prayer that they actually understand their Audience.

Posted in bootstrapping, business, Marketing, strategy, venture | 8 Comments »

The Series A Crunch: One More Reason to Bootstrap and Skip Venture Capital

Posted by Bob Warfield on November 29, 2012

I’ve talked a lot about bootstrapping on this blog–I am a total convert, and I’m enjoying every minute of bootstrapping my own company.  There are many reasons for my enthusiasm.  Investors these days are going to make you take most of the bootstrap journey before giving you a dime being one of the biggest.  You’ve got to build a product, you’ve got to get customers, and you even have to show some kind of decent momentum.  No more raising money on a slideshow idea and a team.  No more just build a cool product and get money.  You really do have to go quite a ways on your own nickel.

Yes, there’s a little bit of seed money to be had, but what are you really getting for that?  What is that transaction all about?

In the end, it’s about getting very meager wages in exchange for handing over a lot of equity and control to some strangers you’ve just met.  Are you really that concerned about a job?  Should you really be calling yourself an entrepreneur if you are?

I like the 37Signals take on the whole bootstrap thing.  They simply ran a consulting business to pay the bills and agreed amongst themselves they would each contribute 10 hours a week to their startup and they’d make sure it was a solid 10 hours.  By following that journey they produced not only the Basecamp product but Ruby on Rails as well.  Yeah sure, not everyone is as brilliant, but that’s not bad for having paid the bills through consulting.  Why do you need to raise capital again?

Whatever your thoughts on needing the capital, Sarah Lacy delivers one more crushing reason to find another way:  the Series A Crunch.

Folks have been talking about the coming Series A Crunch for a long time.  There simply is not enough later stage VC to support all the thousands of seed companies that have been started.  Lacy says that people she’s talked to suggest only about 20% of those seed companies will get another round.  And trust me, not a heck of a lot more will get the Series B after that.  There’s never enough money for the next stage simply because that’s how the plan works.  The plan is to provide as little capital as possible, get as much control as possible, cut off anyone who doesn’t produce phenomenal results, and then double down on a the very few that are left.  Rinse and repeat until you get to IPO’s.  Growth less than 2x a year is not tolerated.  3X is about right and more is better.  You will be stack ranked against the other deals the investors have seen constantly.

Mike Maples says that every year there are 10 awesome companies created.  John Collaghan of True Ventures says there are about 2000 companies a year getting seed money.  Let’s run the numbers.  For a Consumer Internet play, we’re talking perhaps 5 years and for an Enterprise SaaS play let’s use 7 years.  Further, let’s say we raise enough for 18 months each time.  This is an easy problem to set up in Excel, but I will save you the trouble.  To go from 2000 to 10 in 5 years means 4 18 month rounds and only 17% of companies are getting funded each round–that’s pretty close to the 20% Lacy quotes.  To go from 2000 to 10 in 7 years means only 35% are getting funded.  I’m not surprised, it’s easier to show steady progress in an Enterprise SaaS deal whereas Consumer Internet is more of a hits business.  What you have to keep in mind is the winnowing rate is going to be much worse on the early rounds.  The VC’s have a much lower sunk cost, it is concentrated with fewer investors, and you have a lot less to show for it.  At the later stages it’ll be a lot easier to argue the company is just fine tuning for some minor challenge or other, but that the market and product fit for that market are well proven.

BTW, whichever path you take, you are signing up for a lifetime of clearing some amazing hurdles.  What’s telling is that when asked about what happens to the companies that are merely “Good” and not “Great”, according to Lacy, Maples response is, “Screw ‘em.”  And that’s the problem for the entrepreneur.  Unless you are building a $1 Billion revenue company, and you’ll get the acid test with every round you raise, you’re going to work very hard for low wages and wake up one morning to discover you’re done.  The VC’s won’t put any more in.  The doors are closed.  Note that despite making the Founders millions, and continuing to pay off, with no Board to answer to, 37Signals is merely a “Good” company.  The VC’s would shut the doors on it or sell it off without a second thought.

Welcome to the “Unsustainability of Hyper Growth VC Startups” as I called it in an earlier post.

It’s a crazy world indeed where you can do a fantastic job building a “Good” company and have it be judged inadequate.  If you’re unlucky, you’ll be one of those companies that got to profitability and needs no further investment, but the company just keeps going and going, unable to pay out to the Founders like a true Bootstrap can and unable to achieve a Liquidity Event that satisfies the VC’s appetite.  They’ll be after you to sell the silly company out where their preferences will put most of that return in their hands or to take some extreme risks in order to pivot and have a shot at one of those $1 Billion opportunities.

Here’s a radically different way to think about the capital:

1.  You need to go most of the way through Boostrapping to start.

2.  If you wind up with the kind of wildly successful company that just might qualify to a VC as one of the 10 “Great” companies, you can always raise the money later.

3.  If you are measuring everything the way you should, you will know if you could’ve been “Great” without having to spend the money.  Remember, the VC’s were going to dole it out pretty slowly anyway.  Your biggest obstacle is you won’t have the capital to make it on an advertising model or to give away your product for years while you ponder possible ways to monetize it in your Ivory Tower.  Good luck with that stuff right now anyway.  Andreesen Horowitz VC Chris Dixon says 10 million users is the new 1 million and Fred Wilson says the late stage world is switching to Enterprise which isn’t ad-driven anyway.  Having to actually charge for your product is a small price to pay.

4.  Given all that, you’re not talking about an awful lot of personal investment to just build the company until it pays your bills.  If need be, you can follow the 37Signals plan and invest 10 hours a week.  You’re going to be either spending your savings or your spare time, but let’s face it, are you really an entrepreneur if that bothers you?

5.  Fast forward down the road.  You’ve done extremely well.  You paid your bills by year 2 like many Boostrappers have.  You have a company that has doubled beyond that every year for 5 years.  Maybe you did even better.  You’re sitting on a company with less than 20 employees (probably 10 or 12) that’s doing $6 or $7 million a year.  If you have something that could be “Great” in the VC sense, you’re probably doing $10-12 million or more.  Now if you really want to swing hard for the fence, go raise VC money.  Do it like the Github guys did.  Take down $100 million in capital.  Cash out $10 million for yourself and put that in the bank.  Keep running for that brass ring and be secure knowing whatever happens, you not only have the $10M, but you built the company the way you wanted without a lot of interference and you’ve had to give up far less equity because you waited.  Or, forget the VC’s.  Keep putting several million of the company’s $10-12 million a year in your pocket.  Keep doubling every year.  Don’t wait for them to say, “Screw ‘em” because yours is just a “Good” company.  Now you’re the one who can say, “Screw ‘em”.  And remember, the more successful you get, the more easily you can raise money or sell the company to a larger player.

It’s not bad work if you can get it.  Come on–you really going to take those Two Aces (a “Good” hand) and turn them in because you hope for a Royal Flush (a “Great” hand)?

Posted in bootstrapping, business, venture | 4 Comments »

Kickstarter Says they Don’t Ever Want to IPO or Sell. Good Luck With That.

Posted by Bob Warfield on November 5, 2012

Kickstarter CEO Perry Chen says he doesn’t ever want to IPO or sell Kickstarter.  He wants to build a company that lasts for generations and stays small.  At the same time, his company is funded by VC’s like Union Square Ventures, Betaworks, and others, as well as by numerous angels.  Both AllThingsD and GigaOm published the story, but neither one asked the difficult question:

How do you plan to get an exit for your investors if you never IPO or sell?

Is this one of those deals where they just keep selling to other investors like Facebook did until they finally have so many they have to go public?

I think Kickstarter is very cool and have backed a couple of things there, but I just have to wonder at a CEO making a splashy claim like never IPO’ing or getting acquired when he has a Board to answer to that consists of some number of people that have every intention of IPO’ing, getting the company acquired, or finding some other way to show their own investors they made a profit on the capital invested.

Good luck on not showing those investors an exit.  And, if you have reinvented the game in some way so you can show them the exit without an IPO or acquisition, please tell us more.  Lots of companies could use that new model to good effect.

Postscript

Fred Wilson responded to a comment of mine that Union knew about this going in and that, “there are more ways to get a return than selling out.”

I don’t recall seeing a company that found an alternative, but I’m sure many entrepreneurs would love to hear how that’s done and responded to Fred along those lines.

Posted in business, venture | Leave a Comment »

Entrepreneurship and Leadership is About Eliminating “They”

Posted by Bob Warfield on November 2, 2012

Something to think about for Bosses, Boards, and Workers:

“They” don’t think we ought to be in that market.

“They” won’t give us the budget for that program.

“They” insist we focus the next release on mobile and have it out by Christmas.

“They” believe we have to focus on attacking the competition.

“They” are skeptical about whether we deserve another round.

“They” are replacing our manager, Jim, with someone they’ve worked with before.

If you’re constantly dealing with “They”, “The Boss”, “The Board”, or some other nebulous force in your organization, one whose edicts are executed not because they’re right and make sense but simply because they are “They”, you are not an entrepreneur.  You are an employee.

Even if “They” exist, if you charge ahead and get it done without waiting for “They” to decide how or if, you are an entrepreneur.  If your organization won’t tolerate that, you’re still an entrepreneur.  Many don’t fit in.

If, on the other hand, you are given the opportunity to participate in the decision making and be bought in, but you choose to let “They” decide without putting yourself out there at risk, then you are also not an entrepreneur.  But you could have been.

Too many are too concerned about making sure “They” get to make the decisions without regard to the effect this has on those who have to execute.  It doesn’t matter how right you are, if you can’t make them entrepreneurs who are eager and not waiting on you, you’re not a Leader.  You’re just a Manager.  You are one of “They”.

Posted in business, strategy, venture | Leave a Comment »

 
Follow

Get every new post delivered to your Inbox.

Join 323 other followers

%d bloggers like this: