Here are three tips for minimizing misunderstandings among co-founders: get clarity on the problem before arguing over solutions, maintain full transparency about spending, and work from a one-page operating plan.
Archive for January, 2008
Last week I had lunch with Mike Lanza, a serial entrepreneur, who I met at the SDForum Startup SIG in September ’07. He gave a thought provoking presentation on his entrepreneurial career, bootstrapping a company, and working with VC’s, which I blogged about here: Mike Lanza: Starting Companies Without Venture Capital. I thought a more in depth personal analysis of his “Lessons Learned” would be a great addition to our Founders Story series.
Q: What are your thoughts about partners compared to going at it alone? Did you have co-founder(s) for any of your companies? If so, how did you find them?
I have seen several approaches to starting a company. Some founding teams are formed before they think of the idea. A group of really smart people join forces, brainstorm a bunch of ideas, pick one and then go. I think I am more of a visionary, so I like to think of the ideas first and then assemble the team. I believe the idea is the core of the business and that you need the idea to attract the right people.
I have built companies with and without partners. Once I come up with something, I start off by informing all my contacts about my idea and plans. Then I ask them to spread the word to see if anyone is interested in joining the team. At first, I always try to find partners, but if I can’t find partners I hire doers. In the early stages, its more about execution and follow through. If you have too many senior people on the project, nothing ever gets done because its all strategic.
Unless I happen to find the perfect partners, I like to hire more mature junior personnel rather than experienced veterans.
Q: For those looking to hire ambitious junior personnel, can you share any tips on recruiting, retaining, and managing them?
When you interview them, figure out whether they can take a particular project tomorrow and make a big impact right away, without a lot of supervision. These are the ideal first employees. I call them “heat-seeking missiles.”
As for retaining and managing them, people like this thrive if they are constantly given new challenges. Don’t give them challenges that are too big – give them things that are a bit outside of their comfort zone, and let them knock down success after success. If you’ve got the right person, you’ll find them growing tremendously in a very short time.
Q: After you figure out the idea, develop the team, and hire the necessary people, how do you start building a company?
Most important thing you can do is manage your time. In early market exploration, I believe most of your time is spent evaluating the market and incorporating customer feedback into your product development efforts in order to get a purchase decision. Reference customers are key. After you have identified a target market, figure out who in the market will serves as a reference to other potential prospects. Make sure your first reference customers are not too big. Big reference customers take a long time to close, beat you up on price, require additional services, and extra support. They will consume all your resources and you won’t even have the time to use them as a reference for new prospects. You don’t want a big brand name, otherwise you will get killed on the deal.
A good reference customer is usually a company that is roughly the same size as you. They will help you refine your product and your technology will play an important role in their success. For as much as you put in for them, you will get out in return. They will vouch for your offering and put a name behind the testimonial. Another strategy I use is what I call a “throw away customer.” This is a prospect whom you have a lot of bargaining power. Consider walking away from the deal early but come back later when you get a favorable price.
You need to realize that you’re not going to do a very good job with that customer initially, so you want someone who is a cutting edge enthusiast, familiar to you and understanding when you fail to deliver perfectly. There’s no away around the fact that you’ll learn a lot from servicing this first customer, so you don’t want to do this first project for the largest potential customer in your market.
Q: What was the hardest decision you had to make in any of your ventures?
At 1 View Networks I realized that a bubble was forming and it was a good time to get out of the business. Word got out that the company was going to be acquired. There was a group of employees that approached me and threatened to quit if they were not given more stock.
At the time I had a convertible note from investors that were pleasant to work with. I had a short window of time to issue them stock so that they could participate in the acquisition benefit. I was basically juggling a group of disgruntled employees, trying to sell a company, and do good for some investors who I wanted to do business with in the future.
I did not want the employees to quit because it would look bad to the acquiring company. However, the three that were threatening had all been there less than six months, so I felt that they had not even earn what they were asking. Ultimately, I gave in to the blackmail. It was one of the toughest decisions I’ve ever made, but it was the right one. Unfortunately, my most loyal employee resented me intensely for this. So, I got no love from anyone for this decision – the blackmailers just took the stock and ran, and the person closest to me ended up hating me. However, we closed the deal. Welcome to the loneliness of being a CEO…
Q: What were three things that worked from Just In Time Solutions that you implemented into 1View Network?
- Sell to big, fat customers that don’t have adequate internal resources but have big budgets. Then, go “crazy” to satisfy them, but bill for every minute you spend.
- In the sales discussions, tell them exactly what you think they need. Don’t give a “here are our capabilities – we can do whatever you want” presentation. Remember – you’re trying to build a company, not a one-off project, so you need to sell a product vision that works for your entire market.
- Always be true to your ideals, even in the most tiring of management situations.
Q: I am sure there are many problems, but if you could just pin point one thing you learned from Just In Time Solutions that you made sure to avoid in starting 1View Network, what would it be?
I would avoid raising venture capital as long as possible. Most of the time the founders get replaced. Also people associate raising capital as a form of success. I have seen founders raise capital and then set the speedometer on cruise control. People begin to spend money carelessly. If money is around, companies tend to start spending it and relax a bit, even if their largest challenges lie ahead of them.
Q: What are you up to now?
Right now, I am working on a project that is more of a cause than a business. Who knows, it might turn into a business, but I right now I am having fun and doing something that I have always wanted to do. I am developing an online community for parents who want their children to go outside and play, but are frustrated with the lack of opportunities in their particular neighborhoods. It’s called Playborhood.
Our goal is to reach out to people who seek better play-based communities and neighborhoods for their children. So many families now have structured play all the time and neighborhoods where they don’t feel safe letting their kids play outside unsupervised. We’re lucky to find the rare place where they can. So Playborhood aims to become a great community resource where parents can go to find the right neighborhood for them and engage others in that neighborhood in the process of creating a safe, inviting Playborhood.
The founding team for a startup typically provides the basic intellectual capital, and frequently the initial seed capital. But a young team often has to rely on advisors for social capital–existing relationships based on mutual trust and prior shared success. These relationships act as points of departure for market exploration and social navigation to early customers.
One early example in high technology is Fred Terman‘s role in the formation and early success of Hewlett Packard. In “The Engineer Who Jump-Started Silicon Valley” a 1997 Business Week article by Joan O’C. Hamilton it’s clear that he provided the founders with considerable social capital:
Packard’s recollections complete the picture: “We built the first production model by Christmas, and I clearly recall having [the first oscillator production unit] sitting on the mantel above the fireplace,” he wrote in “The HP Way.” “There we took pictures of it and produced a two-page sales brochure that we sent to a list of about 25 potential customers provided by Fred Terman. We designated this first product the Model 200A because we thought the name would make us look like we’d been around for awhile.”
Social navigation, or the ability to navigate in a population and gain cues and guidance from individuals both directly and by their actions, is a key skill that founders must develop. As much as they want to focus on technology, finding prospects to validate that they are solving a real problem and that their solution is compelling is twice as important. Navigation requires that you know where you are, where you want to go, and how you want to get there. It may also involve experimentation and exploration of the market, and in many cases for a startup’s founders, one or more revisions to your destination.
Postscript: just so it’s a little clearer that a few of the names that Terman supplied became customers, here is another paragraph from same “Litton Answers the Call” section of the “Garage Becomes Workshop” chapter of the “The HP Way” the first excerpt above came from.
“We weren’t expecting much from our first mailing, but amazingly enough, in the first couple of weeks in January back came several orders…and some were accompanied by checks.”
SKMurphy, Inc., the Silicon Valley leader in customer development for serious bootstrapping entrepreneurs, will host Peter Cohan‘s Great Demo workshop on Saturday March 8. Cohan coached the latest winner of the DEMO Conference in Fall 2007: Phreesia improves the patient experience in medical office waiting rooms by automating patient check-in, generating comprehensive documentation, and allows physicians to track past visits, medications, and information recorded from other doctors offices.
“We are offering this workshop as a service to the startup community. Learning to get your point across within the first ten minutes so that your prospective customer is engaged and asking questions is critical for all startup entrepreneurs” said Sean Murphy, CEO of SKMurphy. “When I first heard Peter speak, it was an enormously enlightening and energizing experience. I have been scripting and giving demos (and presentations) for more than 20 years and here was an approach that was much better than anything I had seen.”
Phreesia’s CEO, Chaim Indig, believes “the workshop is definitely worth the money!” While sitting in Peter Cohan’s workshop, Chaim thought “this was obvious, but no one was presenting like this.” After the workshop Chaim bought enough copies of Peter’s book for everyone in the company. “Peter Cohan’s Great Demo method really works. It helped us win DEMOgod, and it has allowed us to explain our offering much more clearly to prospects.”
“Phreesia has an outstanding product, and the on-stage demonstration was well rehearsed and very crisp.” said Chris Shipley, co-founder of the Guidewire Group and Executive Producer of the DEMO Conference. “A quality demo has an impact on the audience and communicates the product’s value, and does so in a succinct, limited time frame. Chaim Indig gave a clear and concise value proposition for the doctor, patient and company. He made an immediate connection with the audience.”
Peter Cohan, author of the book Great Demo!, coined the phrase “Do The Last Thing First” a recipe for creating and delivering surprisingly compelling software demonstrations. Peter’s methodology outlines a framework to create and deliver improved demonstrations and presentations to increase success in the marketing, sales, and deployment of software and related products. Whether it’s face to face, over the web, as a screencast, or as a self-running demo, the ability to present the key benefits of your software product is essential to generating prospect interest and ultimately revenue. Peter Cohan of The Second Derivative gives us the recipe for a Great Demo!
Workshop registration information is at http://www.skmurphy.com/services/workshops/
About SKMurphy, Inc. (http://www.skmurphy.com/)
At SKMurphy, Inc. we offer business development services for software entrepreneurs. We provide strategic advice on customer development, company development, product planning, and new product introduction. We develop executable plans with measurable results to grow your business. Our focus is on early customers and early revenue for software startups.
About Second Derivative (http://www.secondderivative.com)
The Second Derivative helps software organization achieve their sales and marketing objectives by dramatically improving the success rates of their demos. The Great Demo! method enables organizations to create and deliver surprisingly effective software demonstrations. The Second Derivative offers workshops, coaching and consulting with a focus on the needs of organizations developing and selling business-to-business software.
About Phreesia (http://www.phreesia.com)
The idea is simple but effective: instead of reading a magazine while waiting, patients are handed a Phreesia WebPad where they can provide their demographics, complaints, and other basic registration information. The system is free for doctors and patients to electronically store and enter health data without affecting the normal office work flow. Additionally, the portal allows patients to learn about their medical problems and participate in ongoing question & answer sessions which provide them with other relevant information.
I interviewed Dave Stubenvoll late last November as a part of our Founder Story series. I first met him at the Streaming Media 2006 show and was immediately impressed by him. Sean invited him to be on a panel at Startup Epicenter on “Scaling Up Your Product Development” and Dave made some of points there that he expands on in this interview. What follows is an edited transcript with hyperlinks added to provide context and background for some of Dave’s remarks.
Q: You’ve been through 5 startups; can you compare and contrast your experiences between them?
Three of them were independent startups: GALT Technologies, Freeworks and WOWZA; two of them were intrapreneurship projects, that is new businesses within large companies. The two intrapreneurship projects were in different companies that looked at things very, very differently. The first one was when I was at Intuit leading the payroll business application set, and we knew we were absolutely starting a new line of business, no doubt about it. The second one was when I was at Adobe and it was a skunk works project: let’s see what we can do in this area.
As far as the startups, the first one, GALT Technologies, was a website for mutual fund information. We were venture-backed, but didn’t raise very much money at all. It took less than a million dollars in total. I was not actually a founder for this one. I was the third person in the firm and was lucky enough to get a very reasonable sized equity stake. I joined in 1993 and to tell you the truth, nobody really knew what the heck they were doing. This was during the early days of the web and we kind of just built something and stumbled into some good situations. We ended up selling the company to Intuit in 1995.
The first company that I founded was Freeworks, which did not work out so well. We raised significantly more money, but it was during the dotcom bubble, and the company ultimately folded when the bubble burst. We offered an ad-supported suite of free services targeted to individuals working in small businesses. We were trying to develop marketing collateral automation for small business employees.
And now, with WOWZA, the only commercially available alternative to Adobe’s Flash Media Server, we have not taken any venture money at all. We just did it ourselves and became profitable very, very quickly. In terms of comparing and contrasting the three experiences, I definitely kept the same sort of cost methodology and management philosophy
Q: Can you please elaborate on your cost methodology and management philosophy?
For example during Freeworks, we had a Business Week interview. The reporting crew came in, interviewed us, and wrote an article comparing us to a startup in San Francisco. Honestly the reporter came in and said, “Dave, I don’t want to offend you, but this place is a dump.” For our team, this was the nicest office any of us have ever had. It’s about understanding the value of the capital that you have or don’t have. And it’s about using your capital properly to get the best people and to invest in the right projects, for example a marketing vehicle or product feature set. With WOWZA we were able to read the market, react quickly, and reach profitability: as a result we did not need to raise money.
The management philosophy was really refined during Freeworks. It’s really about letting people make decisions. It’s not all about me, it’s not all about the other founders, it’s about everyone making the best decisions that they can to move it forward. Micro managing people becomes time consuming. You have to have faith and trust that you have surrounded yourself with the best people and just let them work.
Q: Your cost methodology and your management philosophy make a lot of sense. Besides raising money, what were some of the things you made sure to avoid in starting WOWZA?
One thing that we work darn hard to avoid is running out of runway, which is wrapped up in a number of other things. It’s about making sure that the company is going to be here for the long term and that we are not going to be dependent upon any specific event or any other single party.
Many people tell us constantly, “You know you are building this to sell.” Part of my response is, “if I was dependent upon the sale of this company to some single entity, I probably wouldn’t survive.” If their comments were true, I would be doing things to sell as opposed to doing things to make sure that the business is around next year and the year after, and the year after.”
At WOWZA, we’ve taken a much more pragmatic approach. It begins with, what do customers want? What do customers want today and what are they willing to pay for now? The number one job is making sure we have products people want to buy. Then layering on top of that, what do we think they are going to want to buy two years from now? How can we gauge where the market is going? The number two job is having a really good architecture for our products and aligning our product roadmap with our customers’ objectives. If we do this successfully, we can assume that the company is going to be around years from now.
For example, we are porting our Pro offering to the new Amazon virtualization servers, Amazon EC2. We are going to host our product there. As we are developing it for beta, which will be released shortly, we will run the standard evaluation questions. Can we do this? Should we do this? What are our options? Which one is more flexible? Which one is going to constrain what we can do in the future? Which one is going to let us do more in the future? Since it’s also about gauging the market, how good do we have to be to start the beta? It doesn’t have to be perfect for the beta, because we really don’t know what people want. But it does have to be good enough.
Q: It seems like you have had a clear sense of priorities with WOWZA?
With WOWZA our focus is on three key things: making sure that we will be around, making sure that we are meeting customer needs today, and staying flexible enough to meet customer needs for the future.
Q: I talk to many entrepreneurs who take a “if I build it they will come approach.” We met just over a year ago, before you had even launched. Can you talk about the amount of preparation, the strategies, and your implementation plan just to get ready for launch?
This time with WOWZA, launch was sort of a crazy thing for us. We basically started the company because we wanted to explore the possibilities for new applications that emerging media technologies enabled. Originally, we never actually expected to make money with what we built. Not really your typical way of starting a business.
My co-founder and I had prototyped a hybrid video blogging system. It was this unholy hybrid of WordPress, the Adobe Flash Communication Server, and then Flash Media Server. While messing around, we found out that Adobe Flash Communication Server, Flash Media Server was just not good enough. The product wasn’t stable enough, it was unreliable, it had lousy performance, it was ridiculously expensive, and it just was not good enough for us. So, we decided to write our own, and we put that into our product.
Prior to launch we did all the standard things like press releases, some advertising, having reference customers, having customers ready to buy on the launch date, and building up the market. However, we did not pour boatloads of money into the initial marketing. For two reasons: first we figured we would get it wrong at the start, and second we felt that this was a one off product. Our primary intention was to establish the company and build a reputation. We want to be the guys who know what they are doing, tell you the truth, and deliver a damn good product. The truth is with a one off product there are going to be problems, no doubt about it. We went ahead and launched in February 2007, got out there, got press in a couple of places, people came, and we made sales.
Our first sale started with a twenty minute phone conversation where I sold our first customer the ability to license our server for fifteen hundred dollars a month for a maximum of seventy-five connections. It was ridiculously expensive compared to where we are priced today. Our server was performing phenomenally well, and we exceeded our forty-five day sales goal, which was insane. So far it’s working out well, in October we revised our estimate for our 2007 revenue. That was six weeks or seven weeks ago, and then yesterday we reached that goal. It could be that I’m a really poor forecaster, but we are extraordinarily pleased.
We continue to evolve both our marketing and the product. Our focus is on three things; market development, product development, and organizational development. We are finding that if you take an evolutionary approach to organizing yourself to ensure survival, performing enough trials so that no one mistake can kill you, you get stronger.
Q: Can you elaborate on this evolutionary approach? What led you to start the company?
My founding partner, Charlie Good, and I enjoy working together. We were working with a venture capital firm, Kleiner Perkins, on some projects they were incubating and we decided to explore video blogging. We created the corporate shell so we wouldn’t put our personal assets at risk.
There is a great book, “The Origin and Evolution of New Business” by Amar Bhide. It’s a very dry academic tome that talks about how small businesses get to be big. He looked at the Inc 500 instead of the Fortune 500–which I think is a more accurate approach than looking at a big business–and wondered “how did it get that way?”
What Bhide found was that there are basically three sources of new businesses: large businesses creating new businesses, venture backed startups, and the crazy entrepreneur. What was surprising was that you get the greatest returns from the crazy entrepreneur hitting it big. Large businesses only invest in other businesses that are guaranteed to be large: think about Toyota investing billions to develop and introduce a new car. Venture capitalists invest millions in a startup but only if they believe their return is going to be large: they have to see a billion dollar market from the beginning. With so much money at stake they can’t take large risks.
When you look at the businesses created by entrepreneurs–which include Cisco, Intuit, and arguably Google–it wasn’t with the expectation of a large return but structured for survival. These entrepreneurs didn’t quit their day jobs. They took an evolutionary approach that spread a large risk over many small experiments. When Google started, Yahoo owned search. Who in their right mind would start a search company? I haven’t met the founders but they are certainly very smart and they created something that was interesting and ultimately compelling: when they made it available people were clamoring for it. They wouldn’t have received Venture Capital funding if that hadn’t happened, right? They were able to prove success on a shoestring just with their interest. Then they had to decide whether to build the company or finish their doctorates. That’s what success looks like: you can consider quitting your day job because your side project has taken off to the point where you can make that decision.
Q: So, do you compare what you are doing with WOWZA going up against Adobe’s Flash to what Google did to Yahoo?
Ha, that’s a good question. I’ll put it like this, if you asked Larry and Serge when they started writing the algorithm if they were going after Yahoo, they’d probably say no, we just think this is kind of interesting and I have no idea where it’s headed. We started out just to meet our own need. We created the server because we needed it to get our little video blogging application working.
Even today as WOWZA Media Systems, still a very small company, we are not trying to take on Adobe, just pursue opportunities as they present themselves. I don’t think it’s a valid to compare us to Google except that we started this venture doing things that we wanted to do, and found out that other people were interested in it. We were not and are not trying to take on Adobe. That said, we are able to fit into what many people want.
I believe this is a common thread for software startups. It’s pretty rare when someone sits back and says, “I’m going to create this new market.” OK, a few people say it, and it might make all the sense in the world, but most of the time it doesn’t actually happen. Look at Intuit’s QuickBooks business. It is a huge, phenomenal business. Do you know how it started? They had Quicken, a personal finance manager, and found out that many of their customers were actually using it for their own small businesses. So they designed a new product that’s focused on small business instead of just household checking. And the customers loved it. It’s about reacting flexibly when you get nudged by customers, keeping your eyes open to a new opportunity, and making sure that whatever you do is isn’t going to kill you.
I like this “Do Not Run Out of Runway” approach. However, I have also heard fail fast. How do you fail fast if you never run out of runway? How do you measure progress?
Our approach is fail fast and fix. It’s an evolutionary approach where you tolerate a lot of mistakes, but you make sure that none of them are fatal. The truth is, this methodology of infinite runway is really hard to do. Fundamentally it’s based upon not quitting your day job until you are certain you can cover your living expenses. It’s hard to do these things when you quit your day job. The team has to be able to invest time in the idea and not rely on outsiders to get it up and off the ground.
If you are a lone entrepreneur it’s better to team up: far, far, far better to team up than to do something alone. With two, you both can commit a certain amount of time to it, but keep your day job. Slowly this side project develops and you just keep plugging at it, plugging at it, plugging at it. Eventually, if you are reasonably smart, you’ll find something. Listen to the market, be aware of opportunities, and make sure nothing you do absolutely kills it. It’s hard to do. It takes a lot out of you, but it’s definitely possible.
Q: You mentioned how valuable it was to find partners and team up. How did you find your co-founders?
Well, the GALT guys found me. The two founders asked me to join, which was wonderful and worked out well. There were three of us there, and we sold the company to Intuit. Then Freeworks was founded by me and three other guys, two of whom were with me at GALT. The fourth person was part of the department that GALT merged with at Intuit. The four of us made a great team and had great chemistry. I still believe Freeworks had a chance, but bottom line is we ran out of runway. At GALT, I took a chance because I really didn’t know the founders well. I got lucky, but be careful because after six, eight, ten dinners with someone and you think you know them and you don’t; you just don’t.
By the time we started Freeworks, I knew these guys well. I knew them all for years, and that was a good thing. We were all very comfortable working together. People change over time and all that, but we had the type of relationship where we didn’t hold back, everyone was brutally honest with each other. We just got along well, we could yell and scream when we disagreed on something, and then go out to lunch and have a great time. We understood how each other worked; we understood that it was okay to be confrontational.
Now, with WOWZA, Charlie and I have known each other for several years. We met at Adobe and ended up working on a Marketing Collateral Automation project. He turned out to be a guy that I certainly trust. We are very similar in a lot of respects, but our skill sets are very different. So, we fit very well together as a team, and I think it’s vitally important that you don’t go through this alone. If you’ve got to start something, you need to get a buddy.
Q: WOWZA sounds like it’s starting to take off. What do you see as the significant challenges ahead?
Our product focus today is Flash centric; the WOWZA Pro is a Flash streaming server. When you mention Flash most people think of Adobe because they acquired Macromedia the inventor of Flash. We have a cordial relationship with Adobe, frankly because we are still way too small for them to worry about us. They need to pay attention to and react to Microsoft. But streaming media is becoming more and more important; it’s becoming a bigger industry, which raises the stakes. Adobe, Microsoft, and others continue to make significant investments in the space.
It’s hard to believe, but we were selected as the number three player in this space. The 2007 Streaming Media Magazine readers’ choice poll voted Adobe, Microsoft and WOWZA as the top three choices for streaming media servers. Behind us were Apple and Real, who are both much larger companies.
If you look at all four of the major players–Adobe, Microsoft, Apple, and Real–they all care more about other things than their streaming media server. They care about particular codes, particular clients, operating systems, and all of these other things. We are the only independent streaming media software company out there, and we think that that’s a significant opportunity as this market evolves. Our mantra as we enter 2008 is any code, any protocol, any device, any client. Going forward we plan to deliver the necessary components to wherever the customer needs to stream content, whether it’s the desktop, a mobile device, or the living room. We believe we are in a unique position to be able to provide that.
Q: It’s been quite a journey for you. What advice would you give to others, so that they can avoid any of the challenges you encountered in your experiences? Any words of wisdom, tips, gotchas?
I think the two biggest pieces of advice would be: (1) get a partner you can trust. (2) figure out how to get things rolling without quitting your day job. I know people don’t want to hear that second one, but it’s that infinite runway that is your absolute, absolute greatest strength. It allows you to fail fast and fix.
Pierre Khawand of People-OnTheGo and I were on a panel at GABA in October of last year on “Communication Today: Blogs, E-mail and More” and we had a great conversation on blogs and wikis. He has invited me to speak on “Wiki Use Case: Managing Team Meetings: Agendas, Minutes and Tasks” at today’s Lunch & Learn webinar.
You can sign up here at GoToMeeting.
Here is a brief description of the topics we will be covering
Project management tools are great for managing and presenting the highly structured elements of a project: resources, milestones, time-line, and budget. But they are not as effective for managing the unstructured information and the their inter-linkages: documents, notes, meeting agendas, and specifications. Wikis provide an on-line workspace for a project team to store and manage unstructured documents that’s browser accessible. Learn tips on how wikis can cut the time needed to reach consensus on project deliverables when a deadline looms. You will leave with a practical understanding of usage models that leverage the distinct strengths of wikis for global project teams. This session will be presented by Sean Murphy, CEO of SKMurphy Inc. (http://www.skmurphy.com).
More background on what we will be talking about can be found in our article on “Using Blogs & Wikis for Better Collaboration.”
Afternoon update: this was a lot of fun. I was very impressed by Pierre’s method and approach. I have listened to a number of webinars where one speaker talks for 20-30 minutes and then another one talks for 20-30 minutes and invariably each runs out of steam a few minutes into the talk, their voices become less animated and finally monotone, and you lose a sense of connection. We had a mix of Q&A, short 2-4 minute presentations on some prepared topics and then a number of questions from the audience as well as an interactive demo of Central Desktop. I still miss the non-verbal cues you get from facing your audience but this was a lot of fun. I am glad Pierre invited me to take part.
People-OnTheGo also offers workshops on “Accomplishing More With Less” in addition to the free Lunch & Learn series.
Join us at SDWest 2008 March 3-7, the conference offers with both business and technology tracks and has an interesting mix of sessions for software entrepreneurs. In addition to the technology oriented sessions you would expect, the conference has added a “Business of Software” track that should prove valuable to folks in–or planning to be in–a software startup. As a part of the business track, Steve Blank is speaking on Starting and Running an Entrepreneurial Company: Customer Development and he is always worth listening to.
Come visit us at Booth #318 and see our Startup Resource Center.
Steve Blank gave a great tutorial last August at TIE on his “Customer Development” and “Customer Validation” methodology. These are the first two steps of “Four Steps to the Epiphany,” his textbook on how high technology startups should approach the marketing and business development challenges they face. His slides are here (note that this is a PDF file) http://www.tiesv.org/TGS/EM/manageEvent/presentationDocument/471_790
Blank outlined the default high tech startup process and key phases for engineering team
- Seed Stage: develop concept
- Product Development
- Alpha & Beta Test
- Launch – First Customer Shipment
and then looked at how other customer facing functions contribute (note Seed Stage omitted because customer oriented typically not involved).
|Engineering||Product Development||Alpha / Beta Test||Launch /
First Customer Ship
Answering his own question “What’s Wrong With This?”
- Embeds premise of “Build it and They Will Come” that only works for life and death products like a cancer cure.
- Ignores real risks for most new technologies
- NOT Can we make it work?
- Will Customers Accept it?
- Will Markets Adopt
- Has Everyone Chasing the First Customer Ship as the Goal
- Sales & Marketing costs are front loaded
- De-emphasizes Learning & Discovery to Focused on Execution
- Execution & Hiring Predicated on Business Plan Hypotheses
- Heavy spending hit if product launch is wrong
- You don’t know if you’re wrong until you’re out of money.
His prescription for the fact that most startups die from a lack of customers not a product development failure is to propose a customer development process that runs in parallel to the product development process. In fact, this is what most bootstrappers do, they focus on customers and markets from day one because they don’t have enough resources not to.
In addition to the slides Steve has one of the best books for product development management in a startup called “Four Steps to the Epiphany” that outlines in excellent detail his customer development methodology.
Postscript: I went to buy a couple copies of Steve’s book and found that they were $10 cheaper on CafePress, so if you are thinking of buying a copy, compare the Amazon link above with Four Steps to the Epiphany on CafePress.
Some tips on forming an advisory board that assume you are currently bootstrapping and will be soliciting advice and feedback from a variety of sources: friends, former co-workers, other entrepreneurs, customers, and partners.
For my third post in the “First office” series, I wanted to learn about alternative office options to incubators. Earlier this month I sat down with Ed Correia, founder of Sagacent Technologies, to learn about his experience in finding the right first office.
Sagacent Technologies specializes in business technology management services. Clients benefit from highly skilled professional service resources utilizing a proven methodology for assessing challenging IT environments or implementing complex technical solutions. Sagacent Solutions are carefully tailored to meet the specific business needs with strategic and farsighted planning. Below are the question and answers from our conversation.
Q: What were your three biggest concerns in finding the right office?
Location was the most important concern in finding the right office. We wanted something that was central to our current client base and close to our target market. One of the things that differentiates us from some other IT management firms is that we not only do remote monitoring but our staff spends most of the time in the field at different customer locations. Driving time for my employees and heavy traffic hours was definitely an issue. We are not a store, so being close to the road or in a strip mall was irrelevant. The look of the building and the surrounding location was the second biggest concern. I did not want to be in a run down building or in a questionable neighborhood. We wanted something that was aesthetically appealing and in a professional office space so that we didn’t undercut our credibility. I would say our third biggest concern was security.
Q: In terms of getting started, when you made the decision to move, what was the first thing you did?
I called a broker from California Properties and then developed a map of Silicon Valley. The broker and I figured out where our current customers were located and then determined where our target prospects are located. Then we outlined a tight circle of locations that would suit our needs. We looked at 20 properties before I decided on the ideal office place and location.
Q: How did you measure or assess the quality of the office?
I looked at the facility to see how well it was maintained. Then I spoke with some of the other tenants to understand their impressions of the place. Finally, did I like the building manager? Was this someone I could work with?
Q: How long did the whole process take from making th first call to moving in and being functional?
It took about a month and a half to see all the properties and then another month in a half to move the essentials over to become fully operational. However, the place was a mess and was not presentable to visitors. It took a total of 6 months to paint, gather furniture, and organize everything before we invited people to our headquarters.
Q: How big an expense was furniture for you? Did you find a store or other source for good used furniture?
We put the word and were surprised at the number of people who had a surplus chairs, tables, or desks they were happy to part with if we would do the hauling. We spent hardly any money on furniture as a result.
Q: Was this a frustrating search? At one point you thought you had found a good location but the deal fell through.
We knew it was a big decision for us so I wouldn’t say that it was frustrating. At one point we had signed a contract and I thought we were done. I took a few days off for vacation with my wife to celebrate and when I came back our prospective landlord had left a message that they had gotten a better offer and were rescinding our deal. So at that point I realized I wasn’t just picking an office, I needed to take a harder look at the landlord. I had been looking at a lot of “objective measures” of the office, but that experience made me realize that leasing an office is the start of multi-year relationship with your landlord. And you want to select one who will be a good business partner whatever happens to your business.
Q: Even with a surplus of office space you were surprised that a number of landlords didn’t want your business?
Yes, I was shocked that IT firms have a bad reputation among landlords. I don’t know if it’s lingering fallout from the dotcom crash but several times they would immediately lose interest in working with us when I described the basics of our business.
Q: What were the three biggest surprises you discovered in your search or after you moved in?
The biggest surprise was the amount of paper work involved in negotiating the lease. There are all kinds of hidden fees and tenant responsibilities in the contract. I recommend that you have your attorney read over the contract for you. The next surprise was the poor quality of building’s DSL line. We ended up having to install our own T1 line. The third surprise was being able to rent more space. Our business doubled less than a year after the move. We are already looking to rent an additional 1000 sq ft. Our property manager has been great in helping us plan for the expansion.
Q: What has the impact of the office been on your business?
I have been pleased at how our getting an office has allowed us to communicate our professional approach. We have always been committed to our customers in the way that we do assessments, in our thorough proposals, and our contracts. But for many prospects who have visited us in the office, it’s been another proof point in their minds that we are committed to the business and are growing. We have also done a number of open house events that have made new prospects aware of our services and let our current customers come by and give us informal feedback.
Update Feb-29-2008: Ed Correia was profiled in a San Jose Business Journal article “Sagacent Grows by Helping Small Business Avoid IT Woes.“
If your New Years Resolution is to speak more, you might be wonder where to go. One type of group that is always looking for speakers are local user groups. User groups offer an informal network and forum for the exchange of ideas, tips, and gotchas. With user groups I also include professional group because the members usually are faced with the same set of problems and challenges and are willing to share problems and solutions. They can be a source of direct leads and referrals — from folks who have interacted with you and substantiate your reliability and character — once you have established yourself as a solid member not just a tourist.
Besides speaking, there are many other ways you can contribute. Here are some suggestions. Think about what can you offer?
- Training Workshop
- Write Articles for Newsletter
- Be a Speaker
- Plan Something Fun
- Contribute to Group Forums, Bulletin Boards or Discussion Groups
- Sponsorships & Prizes
It’s OK to visit a group meeting once or twice to see if it’s the right group, but you should make a personal commitment to regularly attend for a year or so if you want to join the group. Trust is built over time and finding small ways to meaningfully contribute will improve your legitimate reputation in the community.
Provided you can be patient, and abide by the community standards and unwritten rules, user groups offer you opportunities for good face to face discussions (often supplemented by an on-line forum or e-mail reflector) and speaking.
The Idea to Revenue Workshop scheduled for January 19 is now sold out and no walk-ins will be accepted.
These workshops are a lot of fun but are lot of work for attendees. We actually send a preparation package (“homework”) out about a week in advance to attendees and create an individual on-line workspace with all of the workshop materials for them to work in to complement the paper workbook. We then follow up four times over the three months after the workshop to see how the planning process is progressing. The workshop is highly interactive so we have to limit them to a dozen people to be able to get through all of the exercises in a half day.
The downside to this approach is that many people (us included) seem to decided whether or not to attend an event in the last 24-48 hours (in the case of the Bootstrappers Breakfast events some folks even decide late the night before they will get up early enough (or perhaps just stay up) to be there at 7:30am). So if you would like to come, please let us know and we will accommodate you, but it will have to be after this Saturday.
Last night I attended the monthly PATCA dinner. The featured speaker of the evening was Kevin Dean, a certified Internet marketing consultant, from WSI (We Simplify the Internet). It was an interactive question and answer session in which Kevin covered “Search Engine Optimization Best Practice Basics.” Kevin’s key point was that SEO is easily misunderstood: no one should believe that SEO alone will allow you to close business, it’s just one aspect of your overall marketing mix.
Here are some helpful tips to increase your web presence and make your website more relevant to search engines.
- Content is king. A search engine has never purchased anything, so do not substitute tacky headlines and searchable jargon for pure, unfiltered, original content. Write to your target readers, use good sentences, and get to the point. Try to keep key content/messages to no more than three per webpage, so as not to dilute the keywords for SEO.
- Key phrase selection is important. Phrases that have two or more meanings can increase your competition and confuse searchers. Key phrases are primarily the verbiage picked up in the titles and descriptions. When you choose key phrases, make sure you describe yourself the way people would remember what you do. A good way to figure this out is to ask your customers what they think of your offering.
- Understand how your page structure is read by the search engines. One thing you should be aware of is pictures and images cannot be read by search engines. Be sure to create subtitles or add an alt tag to the picture/image in a way that relates to your business.
There are over thirty components that make up SEO. If you would like to see how relevant your website is visit http://www.websitegrader.com. The free tool diagnoses your website and shows you many of the components you need to improve.
We get asked “Will you sign a Non-Disclosure Agreement?” fairly often, to the point that we are proactive, suggesting that a prospect take a look at our Mutual NDA [PDF] and sign it if it would increase their comfort level.
A Non-Disclosure Agreement (NDA) allows us to have a deeper and more useful discussion. We will normally have an initial conversation where the prospect can simply decline to answer certain questions but we can have a high level exchange of information.
This surprises some entrepreneurs who are used to Angels and VC’s telling them that they won’t sign NDA (and sometimes being counseled that they were stupid for asking). You can ask a VC them to sign an NDA as a part of their Board of Director seat since they now have a clear fiduciary obligation to the company, but the number of business plans that yield you a VC on your board is perhaps one in 200.
But we are neither VC’s or Angels, aspiring instead to be trusted advisers on strategy and business development. And it seems to me if you are going to provide strategic advice, you have to be willing to sign and honor NDA’s. Since the start of the year we’ve signed three, and will sign two to four a month on an ongoing basis. Obviously it takes more than a piece of paper to inspire trust, but it’s a start.
That being said, I believe that execution is far more important than the idea, and that good execution means that you need to continue to evolve your initial idea.
Symphony Consulting is a manufacturing outsourcing, procurement, and supply chain consulting firm that helps original equipment manufacturers and their supply chain partners in three key areas: revenue, assets, profitability. I talked with John Holton, co founder of Symphony Consulting, about his experience of finding his first office after looking at a number of Silicon Valley business incubators. Below are the questions and answers from our short discussion.
Q: What were your three biggest concerns in finding the right office?
A: Our three biggest concerns were location, IT infrastructure, and professional appearance. We wanted something that was easily accessible by major highways and close to our clients (technology companies). IT infrastructure is expensive, so the incubator system was an attractive proposition. We also wanted a place that looked professional. Plug and Play has a professional appearance from the outside and great facilities inside.
Q: What were three things that surprised you after choosing your office space?
A: There are about a hundred companies in this incubator so I appreciate the amount of energy from other entrepreneurs in the building. However, I must admit, the noise from the other people can sometimes be distracting. I knew I would be more productive in a regular office setting but I was surprised by how much more I can focus on tasks important to my business.
Q: What specific benefits does your office leaser offer as a part of their service?
A: Plug and Play Tech Center has really nice conference rooms, cafeteria with good food, and 24 hour coffee. The administrative assistants and staff are helpful. The cubicles come furnished with desks and chairs. Finally, there is plenty of parking.
Q: How do you measure or assess the quality of the facilities you looked at?
A: Basically, we just judged the place by the location, the appearance of the building and its interior, and the amenities it offered.
Q: Is there anything else you would like to comment on or make suggestions to others looking for their first office?
A: I think it was a good investment. It makes the business seem more professional and credible. I also think it makes me more disciplined and productive.
In a SaaS world where tools are more integrated and customizable, are VARs going away? How do SaaS companies reach customers? How should we compensate sales people? As a sales person, how will I make money if I work for a SaaS company? At this roundtable discussion we will exchange tips and gotchas and provide a look at the impact on business models, teams and product development.
Tuesday April 8 2008, 11:30 – 1:00 pm
Plug & Play Tech Center 440 N Wolfe Rd Sunnyvale, California 94085
Cost for lunch: $20 After April 2 $30
click here to Register080408
About the Roundtable Leaders
At SKMurphy, he provides consulting for Software Startups focusing on Early Customer, Early Revenue
- Reviewing and defining product release and test strategies
- Developing test and development sandbox environments focusing on automated regressions and system level testing
Prior to SKMurphy, Anthony was a Director at Cisco Systems. He managed the growth from 1 test engineer to a division of 280 employees in multiple sites, and 20,000 sq ft of test labs. Anthony holds a BA in Computer Science from University of California at San Diego.
Sean Murphy has taken an entrepreneurial approach to life since he could drive. He has served as an advisor to dozens of startups, helping them explore new options and bring their businesses to new levels. His firm, SKMurphy, Inc., focuses on early customers and early revenue for software startups, helping engineers to understand business development.
Prior to SKMurphy, Sean worked in a variety of areas including software engineering, engineering management, application engineering, business development, product marketing and customer support. He has worked at Cisco Systems, 3Com, AMD, MMC Networks, Escalade and VLSI Technology. Sean holds a BS in Mathematical Sciences and an MS in Engineering-Economic Systems from Stanford University.
Let’s hope the New Year finds us all healthy, surrounded by loved ones, and living up to our potential.
A quartet of quotes from Mignon McLaughlin to help kick off 2008
The time to begin most things was ten years ago.
Courage can’t see around corners, but goes around them anyway.
Every day of our lives we are on the verge of making those slight changes that would make all of the difference.
Don’t be yourself–be someone a little nicer.