Persistence is omnipotent

There's a lot of talk about "be persistent" in traditional business literature self help books.  And the advice is sound -- but the meaning is often missed. It's easy to say "be persistent" but being persistent at the point when it matters is really freakin hard.  I was reminded of this fact when I met with the entrepreneur, Scott Golembiewski,  behind tuneyfish -- a how to video site that is now focusing on the automotive vertical.  He started the company over 2.5 years ago and has almost bootstrapped the entire thing to date.  He's been completely under-capitalized, built the site on a shoestring, doesn't yet have enough traction to be interesting -- but I'd say he's now just at the point where he understand what he needs to do to be successful and is starting to that in a small way. He's tired. He's broke. He hasn't received a pay check in forever.  Being persistent is hard. That said, if he does persist -- somehow -- I bet he comes out a winner. The persistence that the business books write about is the hard persistence -- not the easy stuff. 

Trust your gut: avoid scummy online transactions

I was talking to Rahul Pathak, CEO of Lookstat, about ways to increase the number of sign ups for his analytics product. He wrote a blog entry about Microstock RPI and image formats (why it'sn not as cool as you think to be square). This blog entry has gotten lots of traffic because photographers can get some actual data about what formats to shoot in -- very useful data for photographers.  I asked Rahul if he thought about "hiding" or cascading the conclusion of his report until after the user submitted an email. He told me that he had a negative visceral reaction to the idea of scummy online transactions -- I told him that meant he shouldn't do what I was proposing. We laughed. Seriously though -- my instinct to try to figure out a way to get a relationship with people who found value in his blog entry was good. My idea on how to do that was bad -- Rahul's gut reaction was good. This lead the two of us to a few very interesting engagement ideas that Rahul is going to be rolling out over the next few weeks. Stay tuned for good, interesting analytic candy -- and be sure to sign up if you want to have a direct relationship with the CEO who has a gut to avoid scummy online transactions. You rock Rahul. Trust your guy and stay awake. 

The Rise of Agile Organizational Development

There’s lots of buzz in the startup community about agile software development; there are software programs, books and seminars on the topic, and even huge firms like IBM are now touting their "agile
development solutions". The general idea is to create a team and a software process that is flexible, quick and adaptive to feedback from the market. Put stuff out there, collect feedback on what works, kill what doesn’t, improve what does, rinse and repeat.

But there's a parallel trend occurring in the early stage technology market that hasn't been talked about much.  Programs like TechStars, Y-Combinator, and Founder’s Co-op have been pioneering what I like to
call agile organizational development.  These “initiator” organizations provide founding entrepreneurs with an incredibly compressed calendar of iterative feedback on all aspects of their company. The feedback comes from a broad network experienced entrepreneurs who serve as mentors in these programs, and it comes often, regularly, and relentlessly.

Mentors in these programs provide feedback on the startup’s team, 30second pitch, fund raising pitch, positioning, product, pricing – on just about every aspect of the organization. Some of the feedback is
contradictory - just like market feedback can be. The TechStars program even has a name for the confusion that results from conflicting advice: "mentor whiplash". But the net effect of all this
menot input is a set of organizations that adapt to market feedback much more nimbly than startup organizations of the past.  This feedback cycle and the entrepreneurs' response is what I’m calling agile
organizational development and my bet is that the companies that embrace it are much more likely to succeed than those that don't.

These programs are all relatively new, and there aren't any books or seminars on the topic yet – but I'm betting there will be.

This blog post has been published by xconomy

Friday's advice for wannabe MBA entrepreneur

A 25 year old MBA student called me from MIT. I'm always happy to help an alum.  She had already demoonstrated the ability to do a little bit of research and reach out to people and introduce herself.  I told her that's a good skill to have.  My career advice was :

  • Meet with the constituents of the start-up scene in Seattle
    • Entrepreneurs
    • Press
    • Investors
    • Big companies
  • Strive to start your own company before you're 30 -- doing it while your young gives you great exposure, great learning, and you're not encumbered by life's expenses yet.
  • Consider working at a big company for 4 or 5 years -- learn an industry and learn a function. I've never done this before -- so it's a bit of do as I say not as I do. My career has been small company after small company. It's useful to have experience working at one of the big tech companies.  

You're not young forever. Take advantage of it. Now that I'm forty -- I'm learning that I have some perspective of time. Sometimes that's useful....sometime it's an impediment. I'd gladly be 25 again. :-) 

TechStars is in Seattle Nov. 4 -- Seattle angel investors should attend

TechStars is a mentorship-driven investment program in Boulder and Boston. They fund 20 new startups every year from over 600 that apply, and have been operating for 3 years now in Boulder and one year in Boston. TechStars is like a "boot camp" for those companies highlighted by some amazing mentors. Somehow they let me on that list and went to both Boulder and Boston this summer to help these companies, and had a blast doing so. TechStars companies have achieved some notable exists such as Intense Debate (to Automattic/Wordpress), Socialthing (to AOL), and Brightkite (to Limbo).  

Every year, the TechStars companies get together for a reunion in a different city. This year, I'm excited to tell you that it's happening here in Seattle! As part of the reunion, TechStars reserves a part of one afternoon to have some of their companies that are still raising money pitch investors. About 75% of the companies that come out of TechStars have been angel or ventured backed historically, so this is a great chance to see some interesting early stage companies and to check out what TechStars is all about. In addition to the company presentations, there is a panel on angel and venture investment trends that I'm on along with Brad Feld (co-founder of TechStars and Managing Director of The Foundry Group), Greg Gottesman (Madrona), Stephen Hall (Vulcan Capital), David Cohen (co-founder of TechStars and angel investor), and Chris Sheehan (runs CommonAngels in Boston). I'm really looking forward to it and if you're a Seattle area VC or angel investor that is interested in attending, please contact me and I'll get you an invitation.

Reflections on Craigslist, Twitter, and Facebook

I co-teach a class on entrepreneurship at University of Washington. Yesterday's class was on social marketing. I'll make the following anecdotal observations:

  • Craigslist still rules in my opinion -- hands down it's the most impressive company next to google online. 30 employees and over 100MM in revenue from approx 5 cities.
  • Twitter -- has the most potential to change the web.  BUT -- many people don't get it, don't use it, try it and stop. What makes Twitter interesting is despite these things -- it's moved the web into real time and has the potential to really change marketing online.
  • Facebook -- 5 years in and they still don't really have a business model. They spend 150MM per year and are just reaching cash flow break even. I think they're secret sauce should be in the virtual goods area and not in advertising.

The 12 step program for unignited startups

This is a simple program aimed at start up addicts who find themselves in their company that is not meeting up to their expectations. 

  1. Admit you have a problem
  2. Figure out if the problem is you or the market (or both) -- Note: you can't change the market just your approach and behavior in the market
  3. Make a list the things you can control vs the things you can't control
  4. Prioritize the list of things you control and make a 90 day to do plan
  5. Hire a coach to assist you in hitting all your 90 day goals -- buy them dinner for payment
  6. Get out of your comfort zone
  7. Assess what skills and characteristics are preventing your business from succeeding -- acquire those skills 
  8. Buy the 7 habits of highly effective people. Read the book and do all the exercises in it.
  9. Subscribe to Tony Robbins on Twitter.
  10. Get everyone aligned behind hitting your company 90 day goals
  11. Stay positive. One foot in front of the other.
  12. Ignite.

Preparing for a board meeting

My biggest tip for a successful board meeting is preparation. I usually start the process for a board meeting 1 week in advance and write down the one or two questions that if we do nothing else that I want input on from my board members. Board meetings are for investors -- but in an early stage company they're more a way for management to attempt to step out of the day to day details and see the forest for the trees. I usually put the questions I want input on down on the first slide and then build my presentation around those questions. I like to include financial information, a quick cash flow break even (or out of cash forecast) analysis, and a list of items from the last board meeting. Moreover, I always try and sometimes succeed in getting the presentation out to board members two days in advance of the meeting. Try it -- it works for me.

What to do when the hockey stick doesn't happen on your timeline?

It's been almost 2 years since we sold Judy's Book for a loss.  Recently, I've been reflecting upon the experience with the benefit of hindsight and of time. 

In the past, I've already blogged here about mistakes I made at Judy's Book : the failure of aggressive customer acquisition, poor market selection, and too ambitious of scope in categories and geography. All these factors led to a local web site that lacked necessary critical mass.

As a reminder, there were two parts of Judy's Book --
i) as a company we were a local reviews social network for 24 months and then,
ii) we shifted directions and we were a local deals site for 12 months.

As I look back on the business decisions I led during that time, I see a company that was early in a market, executed pretty well, but didn't have the perseverance or patience it needed to succeed.

I remember looking for a hockey stick moment and when it didn't happen on MY timeline, emotions kicked in. I got down on myself, the company and the opportunity.  Emotionally, I became depressed and that led to greater impatience. The daily emotion toll of unmet expectations clouded my business judgment and prevented me from appropriately evaluating the situation  -- it undermined my assessment of the value of assets we had created.  You know when you feel like shit, everything tends to look like shit and reinforce the feeling.

What I should have done

  • Personally:
    I should have taken a minimum 2 week vacation. Yep -- totally counter-intuitive. But I should have gotten out of the storm to gain perspective.
  • Business wise :
    I should have downsized the local reviews site and let it grow organically with at most two developers rather than trying to convert the entire thing into a local deals site. 
    I should have gone back to the original documents and revisited the initial theses of starting the company. I likely would have been re-focused on the social network and viral acquisition strategies that had us excited about the opportunity in the first place.

A business that changes directions is fine -- but comes at a great cost of TIME to a founding team and to investors.

Remember that perseverance is critical to success. Success rarely happens in a straight line and the emotional toll on entrepreneurs is HUGE. Don't underestimate this. Exercise a lot. Take a break and then come back and kick some ass.

The parallels between a start up and a new born baby

I got his update from one of the CEOs we're invested in. I thought I'd share it with all of you. e

It is always funny to me that in the startup world we have a tendency to measure our success and our failure by the minute.  It's a bit like being a parent of a newborn when every smile, coo, and dirty diaper are analyzed, studied, read into and the news of each is distributed to any friend or family member who will pretend to care.  I recall sitting next to my perfectly healthy daughter's crib for hours listening to ensure she was still breathing and then turning around and blogging about it ("Stayed alive through the night!  Success!").  Now that she's twelve all I have to do is log into Facebook to find out what she's up and and to make sure she's still breathing (there's a bit more to this whole parenting thing, but you get the analogy).  

I fully understand that success will be measured by what this company becomes three to five years from now, but that won't stop me from acting the paranoid parent for now and assessing and analyzing everything our little company does in these early stages.  And it is in that spirit that it drives me crazy that we appear to be about a month behind plan.  That "plan" was by no means scientific but it is a benchmark that we have and will continue to hold ourselves up against.  So we will fight like hell to get that month back, but a month behind is where we are at this point.

Where's there business opportunity on twitter?

I met wtih a young entrepreneur this morning who is trying to answer this very question. And he's trying to do it quickly.  The business has about 100K in cash, is burning about 20K per month, and is broadly in the marketing services for twitter space.  He's closed a couple customers that are paying him but he's really trying to fgure out two things:

  1. What can generate short term cash
  2. What is the best business for him to be in in 12 months

He's a smart capable entrepreneur who has already learned a lot about bootstrapping. He's taking immediate action on #1 -- and is both trying to sell services and to run some interesting tests on twitter. I think that's smart -- the challenge of these two competing tensions (above) in a small company is that the entrepreneur will end up going where the market is today and miss the opportunity 12 months from now.  That said, cash is king and doing tasks for the market and collecting payment allows you to be in business in 12 months. It's simple strategy -- but effective :-)
I've seen various forms of the tension of these two directives in our portfolio. The nice thing about focusing in on what generates cash is that it forces the young company to find out where the market is now. The thing to watch out for is getting too scatter by different needs and thus missing real market trends.

Having a steady hand on your business tiller

I was recently reminded of the time when I was in my twenties and worked on financing abuzz (purchased by NYT in 1999). I used to freak out about every step of that companies financing. I was calling all the vcs every day as if they had nothing better to do other than to tell me that nothing had happened since yesterday.  I'd ask them -- did you talk to my references, what's your thought on the market, did you review the financials, is there anything else you need from me?

 I was reminded -- because I've now met entrepeneurs who remind me of me then. It makes me smile -- urgency and anxiety are good things -- they're motivators that help entrepeneurs push through financings.  My only comment is to try and keep the anxiety in check -- because they can have you push too hard and the perhaps screw things up. Even if you're not screwing things up, you're wasting lots of energy on useless activity.

Updates to investors

We've become huge fans of weekly updates by our entrepreneurs.  Not all of the entrepreneurs are doing this yet....but in time I expect (*hope) all of them do.  The weekly updates have the following benefits:

  • Require the entrepreneur to process their thoughts and their progress toward goals regularly.
  • Assist investors who care about the success of the advisor to feel emotionally connected to the company
  • Enable investors and advisers to proactively make suggestions and proffer guidance 
  • Make commitments of milestones (i.e. sales and revenues) to many people. The more people you say you're going to do something the more likely you are to do it -- if you don't do it, you have more egg on your face!

We suck less (as a business book title and other book titles I could write)

I have no intention of writing a book. This blog is as close as I get to being a writer. However, I do feel qualified to write a book. If I were to write a book, it might have one of the following titles or themes:

  • The guerrilla entrepreneur's guide to starting profitable businesses online
  • Choose your organization dysfunction
  • The tie-die millionaire
  • The art of angel investing and poker
  • Great lines to open a company meeting : I had a great weekend and yes, I got laid (by my wife)
  • 1,000 ways companies die
  • A sack of start up advice
  • Why self-awareness is critical to success
  • How the dishwasher saved my marriage
  • The frugal entrepreneur or the scrappy entrepreneur

Entrepreneurial Huevos and Steel Underwear Moments

The following was written by a good friend  -- it is good advice (author to remain nameless).

What makes entrepreneurs special and successful is how they navigate tough situations.  It’s the hidden “barrier to entry” for many start-ups and entrepreneurs:  not everyone has what it takes to take the real risks necessary to be innovative in building a company (risking your investors’ money, risking your income, risking pissing people off, risking other people’s livelihoods (ie, your staff, etc)).

You have to have the “huevos” to be able to wade into the tough moments with just the right BALANCE of strength and humility, courage without cockiness….and most importantly vision.  Vision is what allows you to realize that you cannot build any business when you are beholden to third parties (your company and your customers being the first two parties) – in other words, if an agency could/would be able to prevent its contributors from using your product (by preventing your access), then you never had the right strategy/vision in the first place.  Take strength and comfort from that last sentence, and let it guide your emotions – you will be successful so these kinds of moments are like “tests” of the strategy.  Kind of confusing, but hopefully, you know what I mean.

I had many moments like this at my previous company – and I always got through the “steel underwear” moments just fine by being honest, transparent, enthusiastic, humble and strong all at the same time.

Ask dumb questions....remind yourself of important answers

I recently was talking to a friend of mine about Cooler Planet and he asked me some very simple questions about the business like:

  • Who is your customer?
  • What's their buying process like?
  • What's the market size and your market penetration?
  • What's your renewal rate?

The questions were simple and the answers -- and the conversation with him reminded me of the core components of this business. Very, very useful exercise to do for each one of our companies!  If you (or someone you know) asks simple questions, the answers may surprise you and result in re-thinking priorities.  

One of the things that became particularly obvious was that it had been some time since we had looked and analyzed our own business data. My friend reminded me that this data often is easily obtained and is critical in terms of driving decision making. I know this -- it's like business 101 -- but it took his dumb questions to remind me!  Maybe they weren't such dumb questions!