Archive for March, 2007

Questions That Sell By Paul Cherry

Written by Theresa Shafer. Posted in Books, Tools for Startups

I had promised to check out and report back on “Questions That Sell: The Powerful Process For Discovering What Your Customers Really Want” by Paul Cherry, which was recommended by Jennifer Vessels at Next Step’s workshop “How to Sell the Real Value of Your Solution” on Thursday, November 7, 2006.
This is a good book, with useful advice on how to have better conversations with your prospects. Three of better ideas for me were:

  1. Ask “Expansion Questions”
  2. Understand Your Prospect’s Perception of Risks and Rewards
  3. Understand Your Prospect’s Internal Customers, External Customers, and Competitors.

I will go into a little bit of detail on “Expansion Questions.” They are conversation openers that ask a prospect to share their perspective with you. They begin with phrases like “Describe for me…”, “Walk me through…”, “Can you please explain…” that don’t admit of simple yes, no, name, or number answers. The following three questions

  • What are the criteria for making this purchasing decision?
  • What is the time frame or deadline for the decision?
  • Who owns the decision and who is involved in making it?

can just as easily be captured by “Can you please walk me through the decision making process?” which is a nice way to uncover issues that more pointed questions might not elicit. At 180 pages the book is a quick read with a number of thought provoking suggestions for improving your ability to have a conversation with prospects and customers. There are a number of useful short articles on Cherry’s Performance Based Results site that will give you a flavor for the practical approach the book outlines.

Applying the “Agile Manifesto” to Software Startups

Written by Sean Murphy. Posted in Rules of Thumb, TwoWeekSaaS

What follows are some quick thoughts on how to apply insights from the “Agile Manifesto” (see also Martin Fowler’s excellent essay on “The New Methodology” for a nice overview of what agile development entails) to early stage software startups.

Value This More In Preference To
Individuals And Interactions Processes And Tools
Working Software Comprehensive Documentation
Customer Collaboration Contract Negotiation
Responding to Change Following a Plan

Principles behind the Agile Manifesto

Agile Principle from Manifesto My Comments for Startups
Our highest priority is to satisfy the customer through early and continuous delivery of valuable software. “early and continuous” are the two key adjectives here. Startup needs to move fast and be able to continue to adapt, refine, and improve subsequent releases.
Welcome changing requirements, even late in development. Agile processes harness change for the customer’s competitive advantage. Ultimately your value is to contribute to your customer’s competitive advantage.
Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale. I think for Saas this is going to work out to be one to two weeks between releases. 
Business people and developers must work together daily throughout the project. Co-Evolution of Business and Technical Plans
Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done. Essential in a startup.
The most efficient and effective method of conveying information to and within a development team is face-to-face conversation. Certainly where there is  a need to get emotional calibration you need at least voice (telephone, VoIP) but face to face is the highest bandwidth.
Working software is the primary measure of progress. If only because it’s the easiest thing for customer’s to judge. But a sales pitch that accurately represents what will be delivered is as necessary, and should in fact precede working code in the early days of a startup. Sell, then Build.
Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely. This is a “no finish line” model that assumes you will need to continue to tune and evolve your offering rapidly after it’s introduction.
Continuous attention to technical excellence and good design enhances agility. Especially if you can measure what you mean by excellence and keep score transparently for the whole team.
Simplicity–the art of maximizing the amount of work not done–is essential. Simplicity forces you to focus on customer’s key needs and minimizes the work needed for the next release. Giving the customer software to work with speeds their understanding of their true needs faster than almost anything else (if you start by observing their actual behavior in their environment).
The best architectures, requirements, and designs emerge from self-organizing teams. This to me seems a little to IT or development centric. Many times visionary customers will supply critical insights on architecture and requirements.
At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly. Wynton Marsalis advises that “the humble improve.” You need to balance regular celebrations with an appropriate amount of both internally driven and customer solicited evaluation of quality and productivity (yes your customers are making an assessment of how productive the team is and how quickly you can understand, master, and deliver on emerging needs).

More to come on this, in particular what one to two week release cycles mean for how you organize and execute as a software startup.

SaaS Requires Excellent Support Not Upselling to Proliferate

Written by Sean Murphy. Posted in Startups, TwoWeekSaaS

Rich Mironov profiles Replicate Technology (a current client) in Service Revenue and Upsell Marketing” and mischaracterizes–in our opinion–their strategy as upsell marketing. Replicate’s services are sold as a test lab: when a new customer is just starting out and only needs to test one or two configurations they get by very cost effectively. As the customer’s needs become more complex, or their development staff grows, in the same way that they would need to add to a physical test lab, they can instead add more virtual lab capacity. Besides scaling up with them as they grow, Replicate offers several key benefits that Rich Mironov identifies:

“By offering this as a service, Replicate saves 90%+ for customers versus licensing and running virtualization software in-house, with:

  1. An instantly working solution
  2. No need for customer to hire or train skilled virtualization engineers
  3. No need for customer to buy, maintain or manage dozens of servers
  4. No upfront capital expense
  5. Ability to add capacity (servers, configurations, storage) when needed
  6. Easily sharable test resources for geographically distributed teams
  7. Ability to “snapshot” systems with software defects and “replay” the defects for software developers”

Software Demo: Are You Showing The Last Thing First?

Written by Theresa Shafer. Posted in Events

Create and Deliver Surprisingly Compelling Software Demonstrations is an interactive workshop we are presenting jointly with Peter Cohan of the Second Derivative on March 29 at the Moorpark Hotel (Saratoga/280) in San Jose.  Sign up and bring a copy of your software demo: you can present the “executive attention span” version and get feedback.

Guy Kawasaki mentioned one of Peter’s mantra do the last thing first in his “How to be a DEMO God” (talking about the DEMO conference, where naturally you give a demo):

“Do the last thing first.” I stole this from my buddy Peter Cohan who is a demo maven; he teaches people how to do a great demo. What he means, and I second, is that you have about one minute to captivate your audience, so don’t try building to a crescendo. Start with “shock and awe”–the absolute coolest stuff that your product can do. The goal is to blow people’s minds.

Attendees will also receive a copy of the latest version of Peter’s book Great Demo!

SDForum Startup SIG: Interim CEO’s featuring Mark Lazar

Written by Francis Adanza. Posted in Events

Tonight I attended the SDForum Startup SIG, featuring Mark Lazar. Mark is a highly experienced chief executive with a proven record in successfully growing and managing companies in the software and telecommunication industries. Mark is usually attracted to opportunities where a company needs help in accelerating growth or turn around. Mark holds both a BA and an MBA from Stanford University.

From Mark’s talk I learned:

  • Tips on how to avoid being replaced as CEO of your company
  • What to do if you are replaced
  • When VC’s make executive changes

The best way to avoid being replaced is by being completely honest with your investors. Do not try to hide anything from your investors. If bad news arises, the first person you should call is your investors and brief them on the incident. Another way to avoid being replaced is by talking to your co-founders, management team, and advisers. Ask for their feedback, they will tell you where you need to improve. You can also avoid being replaced by managing your board productivity. CEO’s often make the mistake of giving decisions back to the board. This is why you are the CEO, you make the decision and back it up with documented proof to substantiate your reasoning. Finally, if your investors hint that someone on your management team is not doing their job, you must fire them or vouch for that persons reliability. If they have to make the same hint more than once, they have already lost faith in your ability to take action.

If you are replaced, the best attitude to have is “how can I help and what can I learn.” Do not fight your investors decision because it is inevitable. Also, do not antagonize the new CEO otherwise you will be fired. In most situations you will still have a seat on the board and play a significant role in every decision. There is so much you can learn from your replacement. You know your strengths, so figure out your weakness and do everything you can to make the transition as smooth as possible for everyone. Remember you are building a company, something bigger than yourself, so don’t let pride and ego get in the way.

VC’s usually make executive changes too early or too late. Often the change is made when a name brand executive is available. A few signs of a struggling company that can indicate a CEO change includes: executives leaving, not growing fast enough, or investors have lost confidence. This is usually when Mark is asked to take over.

Mark divides startup business problems into three categories:

  1. Market: examples include market not big enough, lack of differentiating features.
  2. Strategy: e.g. not having a clear value proposition, is the product part of a solution or the whole solution.
  3. Execution: do you have a rationalized cost structure, team quality and mutual support, customer (dis)satisfaction, and lack of focus.

If it is a market problem, Mark informs the investors that a market does not exist for this product and that there is nothing he can do to solve the problem. If it is a strategy or execution problem and in a market that will materialize, Mark will take the offer.

CINA Blog Panel Wrap Up

Written by Sean Murphy. Posted in Blogging, Events

I had the pleasure of being on a panel on blogging last night as a part of the CINA Technology/ Innovation Program. There were two other bloggers on the panel, Zoli Erdos and Henry Lu, and it was chaired by Hao Lee of Oprices.

Some quick impressions of the audience:

  • Normally CINA attracts an audience that’s 60-70% men, this one was predominantly women.
  • About 1/6 to 1/4 were reading blogs regularly (by show of hands).
  • About 1/6 to 1/4 were already blogging (also by show of hands).

It was a very interactive session with many questions from the floor and some lively interaction on the panel.

There was a spectrum of opinion on using blogs “to get famous.” My sense was that it was better to consider a blog just a better way to manage your website (almost everyone in the audience worked in a company with a website, by a show of hands more than half had not been updated in the last three months).

The panelists all agreed on the importance of writing in a way that was personal and authentic, but mindful of your reputation. As the Roman poet Horace advised “Littera scripta manet” (the written word remains). Nothing is as hard to throw away as electronic text (except when you don’t want to, then it can be gone before you know it) and your words can always come back to you at a later time.

Two references I suggested for background during the panel were:

1. Markets are conversations.
2. Markets consist of human beings, not demographic sectors.
8. In both internetworked markets and among intranetworked employees, people are speaking to each other in a powerful new way.
10. As a result, markets are getting smarter, more informed, more organized. Participation in a networked market changes people fundamentally.
11. People in networked markets have figured out that they get far better information and support from one another than from vendors. So much for corporate rhetoric about adding value to commoditized products.
12. There are no secrets. The networked market knows more than companies
17. Companies that assume on-line markets are the same markets that used to watch their ads on television are kidding themselves.
18. Companies that don’t realize their markets are now networked person-to-person, getting smarter as a result and deeply joined in conversation are missing their best opportunity.
19. Companies can now communicate with their markets directly. If they blow it, it could be their last chance.
20. Companies need to realize their markets are often laughing. At them.
61. Sadly, the part of the company a networked market wants to talk to is usually hidden behind a smoke screen of hucksterism, of language that rings false­ and often is.
62. Markets do not want to talk to flacks and hucksters. They want to participate in the conversations going on behind the corporate firewall.

Getting Started

CINA Panel on Blog: What It Can Do For You

Written by Theresa Shafer. Posted in Blogging, Events

Sean Murphy is on a panel at the CINA Technology/ Innovation Program tonight (Thursday March 15, 2007). He joins expert bloggers Zoli Erdos and Henry Lu in discussing how to use blogs to benefit your professional and personal life. They will share with you their successes, walk you through the maze of online blogs, and provide tips for developing a plan to start blogging.

Blogs

Blogs are now ten years old. Some early tools were Xanga (96), OpenDiary (98), Pyra (99) LiveJournal (99)

What are they?

  • A blog allows anyone to create and update a website without having to learn HTML or hire a webmaster.
  • Normal organization is reverse chronological (most recent at top) with permalinks (links that don’t expire or get overwritten with completely new content).
  • Blogging systems allow you to reedit or update an entry, the permalink stays the same but content is updated.
  • Blogging systems also encourage asynchronous conversations by allowing readers to comment on an entry and by tracking what other blogs have referenced or commented upon an entry (ping/trackback)

Uses for Blogs

  • Websites for small firms or consulting firms
  • Intranet departmental and project sites
    • These are a useful alternative to e-mail for audiences inside your firm.
    • Each blog entry comes with a permalink,
    • You can include by reference instead of copying text from other e-mails
  • Nonprofit and open source sites
  • Caveat: every successful system invites parasites; you must install comment spam blockers.

Tips on Blogs

  1. Seth Godin outlines what makes a good blog post:
    “An appropriate illustration, a useful topic, easily broadened to be useful to a large number of readers, simple language with no useless jargon, not too long, focusing on something that people have previously taken for granted, that initially creates emotional resistance, then causes a light bulb to go off and finally, causes the reader to look at the world differently all day long.”
  2. Map out a calendar of subjects to cover. Just planning one or two a week for the next 2 months will help you avoid writer’s block. This still leaves room for “inspired” work but can give you some structure.
  3. Tie it to something topical. Write about events you have attended:  talks, conferences, seminars, trade shows, etc.
  4. Read blogs for several weeks before you actually write one. Some good places to look for good blogs include
  5. Pick a set of topics that are relevant to your business and stick with them. Create a second personal blog if you want to offer non-business related writing. But keep your blog focused on your business and topics that are relevant to your customers and prospects.
  6. Shorter and more frequent is better than longer and less frequent: 200 to 400 words is a useful length. A shorter post that just makes three points is also useful, providing there is a connection to an issue that’s relevant to your intended audience. You should try and post at least once a week.
  7. Add your own insights and point of view. Don’t just rehash other articles, blog posts, news stories; add your own perspective and provide context. Compare and contrast other perspectives. Stay practical.
  8. Titles are important: keep them short, use words familiar and relevant to your readers
  9. Always provide links for your references and citations where possible. This increases your credibility and makes your blog more useful. Remember that you are writing hypertext, and it’s quicker for your reader to follow your link to an article than have to go to the top of another site and search from there (or re-enter text into a Google search).

See also Ten Tips For a Better Weblog ( http://www.rebeccablood.net/essays/ten_tips.html) by Rebecca Blood

Upcoming Workshops

Peter Cohan’s Create and Deliver Surprisingly Compelling Software Demonstrations Thursday, March 29 8am-12noon, San Jose $120
This is an interactive workshop with Peter Cohan. Bring a copy of your demo and be prepared to present it.

SKMurphy’s Getting More Customers

Wednesday, April 18, 2007 8am-12noon, San Jose early bird $160/ After April 3 $200. We will cover a variety of proven marketing techniques (including blogs) for growing your business: attendees will select two or three that fit their style and develop a plan to implement them in their business in the next 90 days.

Selling Around IT in Larger Firms

Written by Theresa Shafer. Posted in Consulting Business, EDA, Startups

Large firm IT departments are “gatekeepers”. Their job is to keep the enterprise network computing infrastructure safe and operational. New software from a new vendor is almost always viewed as a threat. Most of the time, they will say NO to any new software. Most of the time our clients have to sell around them. Here’s five tips for doing that:

  1. Provide a service (deliver the results of you running your software) instead of selling software.
  2. Package your offering as SaaS at a price that’s below the radar of IT.
  3. Leverage an existing partner: Who else is your prospect buying from?
  4. Find someone who is in a lot of pain whose needs have been ignored by IT.
  5. Find someone whose needs span more than one IT administrative boundary, so that no single IT group views satisfying the need as their obligation.

A related article “Selling Around The CIO” which is well worth reading to understand what likely counter-attacks from an IT group will look like. In particular we advise clients to prepare for three audiences in a sales presentation: business, end user, and IT. The objective of the IT oriented presentation is simply to neutralize as many potential IT roadblocks as possible. It can be given directly to the IT folks or supplied as ammunition for your internal champion if needed.

Another blog entry worth reading on this topic is Ori Weinroth’s summary from the 2006 Office 2.0 Conference on “Is IT the Enemy of Office 2.0

Building A Great Product Roadmap: Eric Walczykowski, Deloitte Ventures

Written by Francis Adanza. Posted in Events

Today I enjoyed an SVASE Startup-U SF discussion on product roadmaps. The guest speaker and facilitator of the discussion was Eric Walczykowski from Deloitte Ventures. Eric explained to us that his role at Deloitte Ventures would require him to speak at various engagements. In order to find an interesting topic relevant to entrepreneurs, Eric conducted a survey to CEO’s of venture backed startups to determine their top five goals for 2007. The number one goal was product roadmaps, thus he is here today to speak about the topic.

Three classic mistakes that entrepreneurs make while developing product roadmaps include:

  1. Trying to do it themselves.
  2. Not talking to potential customers.
  3. Boiling the ocean.

Eric recommends that if you have no experience in developing a roadmap, find someone who specializes in that area of expertise. You can waste a lot of time trying to figure it out by yourself through trial and error. Eric recounted a situation where he was brought in as an interim executive. The first thing he did was find someone who could help him with a product roadmap. He found someone who had great references and a track record of three successful product roadmap outcomes.

Designing a product roadmap has nothing to do with investors. Many entrepreneurs get this confused because investors always ask about the roadmap. Product roadmaps are entirely driven by solving problems for your customers. Investors want to see that you can substantiate your roadmap milestones with customer pain. All roadmaps begin with asking your customer, “how can I help you?” In fact, many roadmaps begin as consulting jobs. Once you have identified a common pain you can begin to productize your solution.

Often times engineers try to solve too many problems at once. This usually happens because the inventor never stops programming. You need to get out and talk to potential customers. They will tell you their problems and help you focus on solving the most painful ones. Solve their problems one at a time to build credibility. Do not waste time programming and developing a solution that does it all. Customers want to buy from a company that is focused and can explain how their product will evolve over time to meet their needs. Solving too many problems becomes complicated and hard to explain. Your customers will not buy what they do not understand.

March Silicon Valley NewTech Meetup

Written by Francis Adanza. Posted in Events

Last night I attended the Silicon Valley NewTech Meetup. Below is my opinion of the companies, the presentation, and my attempt to capture the content from the questions and answers.

The first presentation was given by MyThings, a website that allows you to catalog your belongings on-line. The site was first used as a service called Trace (www.trace.com), an online database of used and stolen valuables. Primarily for the fine arts community–of auction houses, dealers, insurance companies and law enforcement–Trace was a service which allowed people to check if items are registered as lost or stolen. Now the idea behind MyThings is for everyone to better manage their belongings, not just report lost or stolen information. Users can catalog, photograph, share, value, and leverage useful information about their things from the websites community.

  • Audience Question: Who are the experts that evaluate the things?
  • Answer: We have structured deals with experts in art, china, sports memorabilia, furniture, jewelry, and other special collectors. The beauty of the website is that it allows any individual to share insight not just our partner professionals.

The second presentation was given by MerchantCircle. I believe this company has a very compelling value proposition. They provide a free template and hosting services for businesses to develop their own website. It appears to be extremely easy to use with additional value added services. Some of the free features included are the ability to manage blogs, customer reviews, and critic awards. This is perfect for small business because it is easy to manage and free exposure to potential customers.

  • Audience Question: How do you make money?
  • Answer: We make some through advertising, however our primary source of revenue is from the value added services. We offer website management, Internet advertising advice, and custom website design.

The third presentation was from Razz. The presenter was well rehearsed, energetic, informative, and clearly demonstrated the users experience. Razz offers three products. First is the Razz Mixer, a web hosted device, that allows you to create custom recordings comprised of beats, music, character quotes, just about anything. The second product is the Grab & Go Razz. It is a list of recorded jokes, blurbs, messages, that you can add to any website. There are plenty of social networking websites out there, and I believe people will use Razz’s technology to express their identity and personal creativity. The third product is the Razz Mobile. The software allows you to interject any of your recordings by pressing a number on your cell phone.

The fourth presentation was given by coRank. (No Comment)

SDForum Quarterly Venture Breakfast with PWC’s: Seed Investments

Written by Francis Adanza. Posted in Startups

This morning I attended the SDForum Quarterly Venture Breakfast with PWC’s Seed Investment Report given by Steve Bengston from Emerging Company Services (ECS) group at PricewaterhouseCoopers. In the United States, last year the reported amount of VC investments totaled to $25.5B. Of the 25.5B, 1.2B was invested at the seed stage across 311 companies.

Moderator Allison Leopold Tilley, Pillsbury Winthrop

Panelists

Moderator question to the panelist: Are Steve’s numbers correct?
Bill: Steve’s numbers are accurate, however it only captures the reported data. Most early stage investments are made by families, friends, and unorganized angel groups, all of which do not report their investments. I am not sure what the exact number is, but I estimate that there are 2-3 times more dollars and deals that were not reported last year. The majority of companies are funded by non institutional non traditional capital.

Larry believe Bill’s assumptions are true given there are more than 500 social networking sites alone and only 311 deals were made last year. Larry also believes that the failure rate of companies funded through non institutional capital is incredibly higher.

Moderator question to the panelist: What is the definition of Seed/Early stage investments?
Jim: Seed investments are made into companies in their infancy stages. Usually do not have a flushed out management team, product is not finished, and teams working within their garages. Playing the game this early is hard. 80% of seed companies die and never secure another round of funding. We are swinging for the fences, trying to hit home runs. Thus we need to invest in many companies, to diversify our risk. Teams that do not meet their milestones get cut lose.

Bill: The days of pre-product, pre-prototype, pre-revenue are over unless you are a brand name executive with multiple successful exits. The best way to convince an investor is with paying customers. Do not waste time on a business plan telling us what you are going to do. Build your credibility and substantiate your offering with customers. We look for guys who can sell.

Audience question: From first point of contact, how long does it usually take to secure funding?
Richard: From the very first time we meet, we begin an evaluation of you. How you present yourself, how you articulate your vision, your credibility of being able to execute on your plan, etc. This is the beginning of what is known as our due diligence process. On average, it takes 12 months before a check is cut.

Startup Epicenter Offers Intensive Workshops, Challenge & Festival

Written by Sean Murphy. Posted in Events, Startups

Startup Epicenter has just announced two back to back entrepreneurial education events that together offer an intensive program designed to help you prepare for the grueling demands of an entrepreneurial journey. SKMurphy is a sponsor for the events.

The program on March 29 starts at 2 in the afternoon, which leaves your morning free to attend the Compelling Demos Workshop that we are presenting with Peter Cohan of the Second Derivative.

The final program hasn’t been announced but they have already previewed an impressive line-up of VC’s (and Angels).

  • Clint Chao, General Partner, Formative Ventures
  • Dan Grosh, Partner, Nosal Partners
  • Ken Elefant, General Partner, Opus Capital
  • Carol Sands, Founder & Managing Member, The Angels’ Forum / Halo Funds
  • Jim Simmons, Entrepreneur In Residence, Draper Richards
  • John Steuart, Managing Director, Claremont Creek Ventures
  • Rich Simoni, Partner, Asset Management Company
  • Richard Redelfs, General Partner, Foundation Capital
  • Will Price, Principal, Hummer Winblad

Apply here to take part in the intensive workshops. Send a 1-2 page executive summary and at least two of the following items to be considered for one of the openings for this program.

  • web page – secure view acceptable
  • link to product demo
  • blog link
  • video on YouTube,etc.
  • Customer Referral/Testimonial(s)
  • 1-2 paragraph description (your 30-45 sec. pitch)
  • Financial Estimates
  • PowerPoint funding pitch presentation

Please do not send: Business plan

E-Mail to Applications-at-StartupEpicenter

It’s a rolling admissions process that starts tomorrow, March 2nd.

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