Archive for November, 2010

Great Demo! Workshop on April 12, 2011

Written by Theresa Shafer. Posted in Demos, Events, Sales

Create and Deliver Surprisingly Compelling Software Demonstrations
“Do The Last Thing First” — the recipe for a Great Demo!

When: Tuesday, April 12, 2010 8 am – 5 pm
Where: Moorpark Hotel, 4241 Moorpark Ave, San Jose CA 95129

Cost: $590
Before March 28: $566

This is an interactive workshop with Peter Cohan geared especially for you who demonstrate B-to-B software to your customer and channels. Bring a copy of your demo and be prepared to present it — we’ll help you turn it into a surprisingly compelling demo!

Register Great Demo

This seminar outlines a framework for the creation and delivery of improved demos and presentations to enable increased success in the marketing, sale, and deployment of software and related products. Whether it’s face to face, in a webinar, 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!

“I am confident that with the insights gained from your workshop we will land more customers in fewer iterations.”
Lav Pachuri, CEO, Xleron Inc.

“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.”
Chaim Indig, CEO, Phreesia
(See “DEMOgod Winner Phreesia Praises Peter Cohan Training“)

ABOUT THE SPEAKER: Peter Cohan, Principal at Second Derivative
Community Web Site:

Peter Cohan is the founder and a principal of The Second Derivative, a consultancy focused on helping software organizations improve their sales and marketing results. In July 2004, he enabled and began moderating DemoGurus®, a community web exchange dedicated to helping sales and marketing teams improve their software demonstrations. In 2003, he authored Great Demo!, a book that provides methods to create and execute compelling demonstrations. The 2nd edition of Great Demo! was published March 2005.

Before The Second Derivative, Peter founded the Discovery Tools® business unit at Symyx Technologies, Inc., where he grew the business from an empty spreadsheet into a $30 million operation. Prior to Symyx, Peter served in marketing, sales, and management positions at MDL Information Systems, a leading provider of scientific information management software. Peter currently serves on the Board of Directors for Collaborative Drug Discovery, Inc. and the board of advisors for Excellin, Inc. He holds a degree in chemistry.

Peter has experience as an individual contributor, manage and senior management in marketing, sales, and business development. He has also been, and continues to be, a customer.


  • 8:00 AM Breakfast & Registration
  • 8:30 AM Workshop begins
  • Noon Lunch
  • 1 PM Workshop Continues
  • 5 PM Wrap up

Seating is Limited These are intensive sessions and we ask that you arrive at least 15 minutes before 8:30AM start time to ensure you will have a seat and won’t disrupt the session once it is underway.

For more information: Theresa 408-252-9676

Quotes For Entrepreneurs–November 2010

Written by Sean Murphy. Posted in Quotes, skmurphy

You can follow @skmurphy to get these quotes for entrepreneurs hot off the mojo wire or wait until the end of the month when they are collected on the blog. Enter your E-mail if you would like Feedburner to deliver new blog posts to your inbox.

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“The time will come when Winter will ask you what you were doing all Summer.”
Henry Clay

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“You can close more business in two months by becoming interested in other people than you can in two years by trying to get people interested in you.”
Dale Carnegie

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“When anyone asks me about the Irish character, I say look at the trees. Maimed, stark, and misshapen, but ferociously tenacious.”
Edna O’Brien

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“I divide the world into three classes: the few who make things happen, the many who watch things happen, and the overwhelming majority who have no idea of what happens.”
Nicholas Murray Butler

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“Happiness consists of intense activity in congenial surroundings”
Harold Nicolson

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“Logical consequences are the scarecrows of fools and the beacons of wise men.”
Thomas H Huxley

I have used this quote a in a couple of blog posts on prudent risk taking and managing the logical consequences of your actions:

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Much ingenuity with a little money is vastly more profitable and amusing than much money without ingenuity.
Arnold Bennett

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“Knowing trees, I understand the meaning of patience. Knowing grass, I can appreciate persistence.”
Hal Borland

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“Happiness consists of intense activity in congenial surroundings”
Harold Nicolson

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“Finding satisfaction in the achievements of others is the key attribute of a real ‘community organizer.'”
Richard Fernandez in Competing Visions

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“We can only see a short distance ahead, but we can see plenty there that needs to be done.”
Alan Turing

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“Not everything that is faced can be changed; but nothing can be changed until it is faced.”
James Baldwin

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“Successful people rarely confuse a can-do attitude with a smart plan. But they realize that one without the other is unlikely to get you very far.”
Seth Godin “We Can Do It

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Keeping Your Customers’ Trust

Written by Sean Murphy. Posted in Books, Consulting Business, Rules of Thumb, skmurphy

Consulting is the art of influencing people at their request. People want some sort of change—or fear some sort of change—so they seek consulting, in one form or another.
Gerald Weinberg in “Secrets of Consulting

I think B2B software is often purchased by firms hoping to achieve–or avoid–some sort of change. Like consulting, software is the promise of an ongoing business relationship.  The two essentials in a mutually satisfactory business relationship are trust and an exchange of value. Weinberg offers 11 “Laws of Trust” in chapter 13 of  “Secrets of Consulting” that I believe are also very applicable to software startups trying to establish and maintain successful business relationships with their prospects and customers. I have added my own notes as bullets after each Law where I felt I could add some ways to apply them more directly to software startups.

  1. Nobody but you cares about the reason you let another person down.
    • It’s tempting to spend time on excuses that would be better spent on anticipating and preventing poor performance and unsatisfactory outcomes.
    • See also “Conserving Trust In a Downturn
  2. Trust takes years to win, moments to lose.
    • If you do something do make a customer doubt your firm’s integrity or commitment to shared success  it’s often an unrecoverable error.
  3. People don’t tell you when they stop trusting you.
    • You have to listen for what’s not said.
    • If your customers are not asking you for help, it’s possible that you have a rock solid product. It’s more likely that they no longer have any confidence in your ability to help them.
    • It’s also critical to establish and maintain trust among founders, see “Three Tips For Minimizing Misunderstandings Among Co-Founders
  4. The trick of earning trust is to avoid all tricks.
  5. People are never liars—in their own eyes.
    • Weinberg elaborates: Always believe that your prospects and customers are telling the truth—as they see it, and as they think it would help me to hear it.
    • Especially in the beginning of a business relationship it takes time to earn trust; prospects in particular are not going to be entirely candid until they have confidence in your ability to help them.
  6. Always trust your client—and cut the cards.
    • Always be collecting data. Always be collecting multiple perspectives.
  7. Never be dishonest, even if the client requests it.
    • It’s better to be viewed as uncooperative than a cheat. And once you establish a willingness to bend or break rules in the customer’s mind you will get asked to do it again.
  8. Never promise anything you are not sure you can deliver.
    • Especially with early customers you are asking them to take a risk in working with you, only make commitments you are confident of keeping. This often argues for a phased approach or contingent pricing so that you are only paid after you have delivered a result.
    • See also “Honesty in Negotiations
  9. Always keep your promise.
    • This is true even for beta customers (or those that have purchased your early “minimum viable product”). Too often beta or MVP is used as an excuse for non-performance:  “We told you it was beta software.” Don’t be those guys.
    • See also “Experiments Vs. Commitments
  10. Get it in writing, but depend on trust.
    • The primary reason to put things in plain English is to make sure that both sides clearly understand their mutual expectations and requirements, which will help to prevent a lot of misunderstandings.
    • Keeping your business operations clear to  your employees employees also fosters trust, and is an important component of maintaining your customers’ trust with you startup where anyone can be customer facing as the situation dictates.  See also “The Business is Everyone’s Business.”
  11. Do unto others as you would have them do unto you.
    • Weinberg simply calls out “The Golden Rule” to complement his first ten.

“People usually feel weak and vulnerable when they retain a consultant. Small wonder that the consultants they retain are first and foremost the ones they feel will not hurt them. Consultants who are looking for work should think less about price and learn more about trust.”
Gerald Weinberg on “Price and Trust” in “Secrets of Consulting”

I think this also applies to software startups. In our “Engineering Your Sales” workshop we stress that your prospect won’t act on your offer until they both understand your product and believe in your benefits, and that requires establishing trust.

Weinberg’s wrote Secrets in 1985 and I have purchased a half a dozen copies since it first came out, buying new ones when I wanted to re-read it and could not remember who I had lent it to last. It’s a great book.  It’s now out as an E-book on Smashwords and well worth the $9.95. The print version has a nicer layout but all of the content except for his final list of rules (the last three pages) is in the E-Book. And you can’t grep dead trees so in some ways it’s more readable.

My Interview With Peggy Aycinena

Written by Sean Murphy. Posted in Customer Development, EDA

I was interviewed by Peggy Aycinena about six months ago and she subsequently published it in July on the GabeOnEDA site as “Business 101: Art & Magic of EDA Marketing.” Peggy has always appreciated that the technology is nothing without the team and it’s the people you need to focus on and understand if you want to fully appreciate what changes are coming in the semiconductor/EDA markets. She has done more to help profile the players than any other journalist in electronics in the last decade. I was delighted to sit down with her and offer her my perspective on marketing, sales, business development issues for EDA startups. I have added some links for context that are not included in the original interview.

Q – Given that engineers are particularly cynical about marketing BS, isn’t it better to just get out there and talk to the engineers, bypassing the whole ‘marketing campaign’ thing?

Sean Murphy – In the early market for a new product it’s always about serious conversation; good marketing engineers listen as much as they talk. They can also take part in on-line conversations in places like the Verification Guild. All of the major vendors, and many of the smaller ones, also put on serious user conferences that are very effective at both educating the users about new offerings and the vendors about real customer problems.

Q – What’s special about marketing in EDA versus other sectors in technology?

Sean Murphy – There are a couple of special aspects to EDA marketing. Semiconductor firms are driven by Moore’s Law; if you want to sell to them you have to keep up. What doesn’t change is that you’ve always got extremely complex and expensive projects that require a number of different technical disciplines collaborating to produce results.

There are at least six-to-eight primary disciplines gathered around any project table, and a number of additional experts involved for a portion of the project, each with their own specialty tools and requirements. This leads to several dozen different niche markets in EDA.

Q – What are the implications of those many niches from a marketing perspective?

Sean Murphy – Niche markets require technical sophistication and customer intimacy. They are rarely amenable to the consumer marketing techniques that sometimes get tried – certainly for new product introduction.

There’s little value in a splashy product launch unless there are customers up on stage. For example, when Magma launched they had engineers from Sun and several other customers up on stage to establish that “we’re real and we are in production at these places.” So case studies and testimonials from current customers are critical.

Q – Which do you think have been the best and worst marketing campaigns in EDA over the last 3 years?

Sean Murphy – There are two campaigns which stand out as very good.

First, I was delighted by the Certess launch 2 or 3 years ago. They told a story that their CTO could explain in very simple terms – surprisingly enough to his younger sister – describing various problems in verification.

He said things like: Here’s the problem with current verification approaches, and here’s how we’re going to attack that problem. He was able to focus on the customer’s current problem and make fun of some of his earlier mistakes, which was extremely effective.

Too often technology entrepreneurs tell themselves, “We’re bringing fire to the savages,” believing that they’re smarter than their customers. The problem is that most of the people they’re selling to are pretty damn smart themselves. Certess did well by taking a more peer-to-peer approach.

The second example of excellent marketing would be Mentor’s Wally Rhines. Recently, he’s been giving a series of talks that look out ahead, 5-to-7 years in the future. They really seem to be a ground up analysis of what’s going on. At one point during the EDAC CEO panel in February, Wally rejected [Panel Moderator] Jay Vleeschhouwer’s question about consolidation so articulately that it was replayed and elaborated in an interview with Forbes.

Wally’s approach combines a lot of data with humility, or the willingness to go where the data leads him. Other EDA CEOs may be more technically visionary, but nobody has better command of the facts than Wally Rhines.

He’s clearly far less concerned with sharing with his audience how smart he is, and far more concerned about marketing the Mentor message. Plus, he’s got a great crew of people backing him up, who spend the time and effort needed to stay current on statistics and circumstances in the industry.

Q – When small companies can barely keep the lights on, how much of their discretionary budget should be spent on Marketing?

Sean Murphy – There are a couple ways of looking at that question, but the key question is “where are you at risk.”

For the most part, there comes a point where the technology is more or less functional. At that point, most of your risk is the market risk – finding customers who will work with you. In the last decade I haven’t heard about too many new products where I said to myself, “Wow, I wonder how they did that.”

Most of the risk is adoption risk or market risk, which means that you have to devote time and money to solving that problem. Our rule of thumb is that 20-to-40 percent has to be devoted to customer development – marketing, sales, and business development – because that’s where the risk is.

You can’t stay in the BatCave and continue to add features without contact with real design groups. I think too many startups rely on marketing communications, which is just one part of marketing. Most of these tools you sell with your ears; you’ve got to engage with prospects and have real conversations. Of course, you can’t do that if you can’t get in the door.

Q – So, how do you get in the door?

Sean Murphy – It’s increasingly a problem. For the most part, people who start EDA companies come from the industry and bring their contacts with them, but a founding team’s social capital is important.

One example is Oasys, which arguably may have a breakthrough in synthesis technology. Their early success has been due as much to Rick Carlson and Sanjiv Kaul, and other folks on the team, with deep roots in the industry. Their ability to open doors to potential customers was as important as their technology.

In the last decade it’s become much harder, there are fewer early adopter customers. If you look at the role that a company like Sun played in helping to nurture Gateway, the original Verilog company, it’s hard to find a company playing a similar role today – perhaps ST Microelectronics, perhaps Agilent, they helped Certess quite a bit. But, it’s becoming a hard problem.

Q – Another marketing-related issue: Given the huge effort required to publish newsletters and/or host user conferences, do small companies continue to value non-vendor specific newsletters or non-vendor specific conferences, such as DAC?

Sean Murphy – For a smaller company with less than 20 people–which is probably 80% of EDA firms–contributing articles to a non-vendor specific newsletter can help a lot.

I see a lot of value in the smaller conferences for these firms, especially where most of the exhibitors are in a basic 10×10 booth. For example, DVCon, the International SOC Conference, or the EDA Tech Forum events are primarily basic booths.

These events act like “stag hunts” for small firms, allowing them to create a critical mass that can attract customers for technical and business conversations. Customers evaluating new products want to see who is behind the company, because how well that team performs will determine whether the product will be a good bet. With a new product you can’t separate the technology from the team that developed it and will be supporting you.

I’m a huge fan of these smaller conferences. They’re very cost effective. You can have great conversations and make good contacts. You also learn how to get your point across in a short demo or a few minutes of conversation.

I was more optimistic about DAC two years ago. DAC started as a community of practice for design automation folks from the larger firms. But it’s increasingly academic in focus: there is a very real risk it becomes a second ICCAD. Still a valuable conference, but much more academically focused.

I went to a one-day conference recently called “Startup Lessons Learned.” There were about 300 people in the audience, and perhaps another thousand watching the live video that was streamed to more than 60 locations. The video was also recorded and available for playback the next day. Everyone posted their slide decks, so that it kicked off a conversation and shared learning that had a wide impact.

That’s what conferences are going to look like going forward. Somebody in EDA is going to figure that out and will move the ball forward in this area. It’s fundamentally a global industry, where these kinds of collaboration models are needed.

Q – How does a company conclusively prove a substantive ROI for big marketing campaigns?

Sean Murphy – For smaller companies, it has to lead directly to revenue or testimonials – things that are unambiguous indicators of customer ROI. You can look at lead generation, things like bingo cards, website visits, or email inquiries – but if these don’t turn into opportunities and then into sales, a small company cannot survive in this economy. For the smaller EDA firms, marketing has to be clearly connected to revenue.

“Getting More Customers in 90 Days” Workshop Dec-8-2010

Written by Sean Murphy. Posted in Events, skmurphy

I am pleased to be able to offer our “Getting More Customers” workshop again next month.  We will cover a variety of proven marketing techniques for growing your business: attendees will select one or two that fit their style and develop a plan to implement them in their business in the next 90 days.

  • Speaking – small groups, large groups, conferences, …
  • Writing – blogging, newsletters, articles, …
  • What Other People Say About You – referrals, testimonials, case studies, …
  • Getting Found When and Where Prospects are Looking: adwords, Craigslist, trade shows, SEO/SEM, …

As a part of your workshop registration, we will also follow up via e-mail and brief phone calls at two weeks, four weeks, 8 weeks, and 13 weeks to help you track your progress. You will leave with a one page action plan, a workbook, and 90 days of access to a private workspace with the workshop materials to enable you to execute one or two marketing strategies to bring your business more customers.

When: Wednesday December 8, 9am to 1pm (Lunch included)
Where: FortisGC, One Lagoon Drive, Suite 100, Redwood Shores, CA 94065
Cost: Early $76, after December 6, $89 SOLD OUT, No Walk-ins
Note: Seating is limited to six, this will be an intensive session that will allow you to work on your business for four hours to develop a plan for early 2011. Please plan to arrive no later than 9am

“This workshop provided great material to bounce off of. SKMurphy created a fertile space for me to think about my business and plan a concrete step forward. Thank you.”
Paul Konasewich, President at Connect Leadership

Three Tips for Small Talk and Casual Conversation

Written by Sean Murphy. Posted in 2 Open for Business Stage, Rules of Thumb

“A good listener is not only popular everywhere, but after a while he knows something.”
Wilson Mizner

One of the more challenging aspects of entrepreneurship for engineers is the need to be able to engage in “small talk” and casual conversation with strangers. I have three suggestions that go to state of mind more than tactics:

  1. Relax. It’s not a test or a contest, it’s more like solving a puzzle together: what can we discover that we have in common.
  2. Have a sense of warm curiosity about the other person. Ask open ended questions.
  3. Be forthcoming: share details from your recent experiences and your reaction to them.

“The ability to quote is a serviceable substitute for wit.”
Somerset Maugham

Some Things Change, Others Remain Constant

Written by Sean Murphy. Posted in Rules of Thumb

There is a clock on my PC, a clock in my car, and a clock on my cellphone. I keep my last watch–a gift from my father–in my top dresser drawer. I wonder if my great grandchildren will be able to understand how to read it, perhaps if they still make sundials in grade school they will at least know the hour.

I used to get three daily papers: the Wall Street Journal, the San Jose Mercury News, the San Francisco Chronicle. Now I get the San Jose Business Journal once a week and read blogs. I still see newspapers in stands in front of restaurants, I doubt I have bought three in the last year.

I learned Emacs in college and still use it almost every day.

I have a cellphone and two business lines that the business pays perhaps $200  a month for. Probably half to two-thirds of my calls are on skype, for which I spend perhaps $20 a year.

I used to think nothing of leaving the house as a boy and being out and about in the neighborhood for hours on my bike or at the library or playing ball. I used to think nothing of leaving the house without my cellphone. Now I feel naked without it and I want my boys to carry theirs if they leave the house.

I spend several hours a day processing e-mail using tools that employ usage metaphors my grandfather would have been comfortable with when postal mail was delivered twice a day.

Things change. Others remain constant. It’s hard to see the patterns when you are enmeshed in them.

When I worked in semiconductors you could predict the next decade of challenges by plotting the likely effects flowing from Moore’s Law. I probably spend more time now trying to discern the likely trajectories of various technologies and businesses but I have much less clarity.

I think we are in for a different decade ahead. I think it’s less about new inventions and more about changing the design of jobs, business processes, and business models to take full advantage of what’s already been invented. I am not saying that we don’t need more innovation, just that we have not adjusted our business practices to take advantage of what’s already here.

Re-reading this reminds me a passage from the afterward to the tenth anniversary edition of Zen and the Art of Motorcycle Maintenance by Robert Pirsig.

This book has a lot to say about Ancient Greek perspectives and their meaning but there is one perspective it misses. That is their view of time. They saw the future as something that came upon them from behind their backs with the past receding away before their eyes.

When you think about it, that’s a more accurate metaphor than our present one. Who really can face the future? All you can do is project from the past, even when the past shows that such projections are often wrong. And who really can forget the past? What else is there to know?

Ten years after the publication of Zen and the Art of Motorcycle Maintenance the Ancient Greek perspective is certainly appropriate. What sort of future is coming up from behind I don’t really know. But the past, spread out ahead, dominates everything in sight.

Three Bootstrapper Breakfasts This Week

Written by Sean Murphy. Posted in Events, skmurphy

steaming hot coffee and serious conversationWe have three Bootstrapper Breakfasts this week in Silicon Valley: the  Dublin/Pleasanton breakfast was re-scheduled a week earlier to avoid falling on Thanksgiving.

This is also our first  San Francisco Breakfast in a new location:  Sandbox Suites at 567 Sutter near Union Square.

  • Tue-Nov-16-20 Sunnyvale 7:30am register
  • Thu-Nov-18-2010 Dublin/Pleasanton 7:30am register
  • Fri-Nov-19-2010 San Francisco (Sandbox Suites 567 Sutter) 8am register

There is also a Minneapolis Bootstrapper Breakfast on Thu-Nov-18  at 7:30am

We have added two Holiday Bootstrapper Breakfasts in the week between Christmas and New Years, continuing a tradition started two years ago of running two breakfasts that week at 9am. Here is the Silicon Valley schedule for the rest of the year:

There are also breakfasts in Chicago at Cafe 300 in the Loop on Wed-Nov-24-2010 and Wed-Dec-29-2010 and in Minneapolis on Thu-Dec-16-2010.

Nomadic Entrepreneurs In Indigenous Markets

Written by Sean Murphy. Posted in 1 Idea Stage, 3 Early Customer Stage, Quotes

I came across an interview with David Mamet by Richard Covington for Salon in 1997 and was struck by how this passage could also apply to entrepreneurs entering an established market with a new product:

…come into a new situation where they aren’t particularly welcome, assess the situation as quickly as they can and make something new out of it, make a new solution that hasn’t occurred to the indigenous people because the indigenous people have been there too long.

Here is a longer excerpt for context, hyperlinks added to original.

Q: Why do you say in your book “On Directing Film” that nobody in the studios knows how to read a script?

Because it’s true. The people who read scripts, the people who go into studios, have exactly the opposite life of people who actually work in the movies. One wonderful, wonderful thing about show business is that almost everybody in it got into it when they were young and frightened. We were out on the street because we couldn’t keep a job or we didn’t want a job and we didn’t have a skill and we had to learn how to work in a world where we didn’t have any support. We had to learn how to trust each other and how to trust ourselves. The people who come into the studio system come in from a very, very different life. These are people who have stayed in school, done very well, gone to graduate school and have gone into an institution which is going to reward them for being true to the institutional ideals, and only reward them for being true to the institutional ideals. It’s like Jews and Christians, two completely different societies and two completely different traditions.

Q: You mean between privileged and unprivileged groups?

Not necessarily privilege. It’s the difference between a nomadic people and an indigenous people. The studio people are going to be there every year. They have a way things are done, and as long as they subscribe to the way things are traditionally done and please their superiors, they have a reasonable certainty of a secure life. On the other hand, a nomadic people — you could say Jews, you could say Gypsies, you could say artists — are going to come into a new situation where they aren’t particularly welcome, assess the situation as quickly as they can and make something new out of it, make a new solution that hasn’t occurred to the indigenous people because the indigenous people have been there too long.

This suggests a couple of techniques that leverage “newcomer’s eyes” for entrepreneurs considering how to approach an existing market:

  1. Identify what’s changed that the incumbents have not reacted to. If you cannot find a trend or a discontinuity to exploit it’s likely that the incumbents greater experience with status quo operation will significantly outperform you.
  2. Identify a product, technology, technique, or methodology that’s worked somewhere else that you can transplant into the current market.
  3. Determine who is not well served by the current market and focus on them to gain traction. The incumbents have likely grown comfortable selling to their existing customer base: both from habit and a natural resistance to changing what’s proven to be successful, they l are likely to ignore any inroads you make with their non-customers.

I think there is also a deeper insight for entrepreneurs.  You are not selling to customers who share your aspirations and risk tolerance. The studio executive sees a career unfolding within the studio, the B2B buyer is concerned about the impact on a corporate career from a good or bad decision. Even other founders become risk averse when analyzing the impact of your new offering on their plans: they have enough risk to manage in their own business without worrying about whether you are going to perform as promised. A clear focus on minimizing their risk by organizing your sales efforts around identifying and mitigating your customer’s risk of adoption and deployment is required.  And while you are exploring different messages for different prospective buyers, you need to be weaving proof points about your own firm’s viability and robustness into whatever features and benefits you are using as bait.

Three Quotes from Glenn Kelman on Entrepreneurship

Written by Sean Murphy. Posted in Quotes, skmurphy

I have quoted Glenn Kelman, the CEO of Redfin,  several times since I started this blog. He has a gift for language and is willing to be candid about his fears and shortcomings.  Here are three quotes that don’t fit neatly within twitter’s character limit without amputating too much of their impact:

“Business schools and conferences have institutionalized entrepreneurialism as an avocation like law or medicine when it is more often a streak of temperament, luck and inspiration. Far from a program taught by somebody else, entrepreneurialism has always been for me my only shot at being myself.”
Glen Kelman in “To Steve Or Not To Steve

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“The way that Charles Dickens once described his depression–as the child inside himself who won’t stop crying–always seemed to me to be a better description of the entrepreneur’s insatiable unhappiness with a world that could be so much better.”
Glenn Kelman in “Entrepreneur 2.0”

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“Building sustainable partnerships with low-margin small businesses is hard; it probably involves some level of shared risk, with pricing based on long-term profits rather than short-term revenues.”
Glenn Kelman in “Groupon’s Success Disaster

Related Blog Posts

How Conferences Will Persist: Rebooting DAC

Written by Sean Murphy. Posted in EDA, Events, skmurphy

There comes a moment in a roller coaster ride when everything seems to come to  a stop for an instant: you are just cresting the top of the rise and the amusement park is spread out all around you. Time stands still for a moment that seems like it might last forever.  And then slowly, but with increasing speed, you start to return to the ground.

I think the Design Automation Conference (DAC) reached that peak experience somewhere between 2000 and 2005. Complemented by a functioning trade press–when there were still folks earning a living as journalists covering the industry–and a certain amount of relief that the dotcom meltdown had spared the EDA industry, the conference still thrived.

Veterans Day 2010

Written by Sean Murphy. Posted in skmurphy

I was fortunate to have J. Brian Barry as a high school science teacher.  I have been reflecting on his life on Veterans Day am grateful for his service in WW2 and as a teacher.

He passed away last Friday at the age of 86 from  mesothelioma.  He joined the Royal Navy in 1942 when he turned 18 and served until 1960, retiring to teach  high school physics for 44 years.  He was creative and engaging as a teacher and I can recall working on experiments involving subliminal perception and a Van de Graaff generator.

Build On Your Passion With A Basic Model And Numbers

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, skmurphy

What follows is a chat transcript from an hour long  conversation I had with a  entrepreneur recently. I have cleaned up all of our typos and removed or modified some identifying information. The basic business was for a website to arrange services for travelers. I wanted the entrepreneur to move beyond his passion for the idea and come up with basic model and some numbers.

I am sharing it because I think it’s representative of a number of issues that an early stage team has to wrestle with as they translate their passion into plans for product and customer development. In particular:

  • The founders have a vision for a complete and fully functional service that has a critical mass of users, but they are having trouble mapping the path from a standing start to their end vision.
  • In particular they are having trouble putting numbers around a basic first step or viable initial configuration.
  • They see potential competitors using models that are difficult to bootstrap and are worried that they are in the wrong market or taking the wrong approach.
  • They know that a problem exists because they have experienced it personally: they are scratching their own itch. But they are having trouble determining who else may have this same problem and how to find them.

Chat Transcript (Edited)

Entrepreneur: Hey Sean – how are you doing?

Me: Good and yourself?

Entrepreneur: I’m OK – I need some advice. It’s about the business idea we had had exchanged a few emails about. I recently got to know about another company which works on the same business model in Germany.

Me: OK

Entrepreneur: For the longest time I thought that being first to market was key but after I learned about this German company I’m unsure how will the venture sustain itself initially.

I have some ideas about how to make money once I reach critical mass but the service is being offered free by that company in Germany. I was planning to have a transaction fee on the service.

Selling Ads Or Sponsorships

A friend suggested that advertising could be a source of revenue but I’m not sure that my small amount of traffic in the beginning will bring in anything substantial.

Me: With an advertising business your customer is the advertiser. It’s difficult to sell ads until you have a well characterized audience that someone wants to reach with their message. If you are bootstrapping you need a business model that requires few customers to reach break even or whose cost can be sustained by consulting as you continue to explore the market.

Entrepreneur: Does that mean there are no other options? I do not understand how the German company is supporting itself. They do not charge any money to the user to use their service. Can sponsorships be used a source to support the venture till it achieves the critical mass?

Me: Sure if you can find someone who wants to sponsor you.

Entrepreneur: That’s also a difficult sale.

Me: What did you expect?

Am I Being Foolish?

Entrepreneur: I can’t tell if I am being foolish. Aside from this company in Germany I cannot find anyone in North America offering this service. Should I persist? The only way that this will see the light of day is if I decide to just go ahead but I am not able to see a scalable business model.

Me: I never tell an entrepreneur that they cannot make something happen. But you have to have a clear step by step plan that is feasible at each step. I don’t understand how you bootstrap your business and I don’t understand how you find funding for it. This does not mean that you cannot accomplish either, just that your plan, as you have explained it to me, needs to be based on where you are. What evidence of need are you looking at? What have you
already accomplished in the past that you are building on? What unique (or rare) skill or expertise do you bring to this venture?

Entrepreneur: I am not building on anything that I have achieved in the past. Nor do I bring anything rare to the venture – it’s just an idea which I know are dime a dozen

What Drives your Passion For This Business Idea?

Me: What drives your passion for this business idea?

Entrepreneur: My own issues actually. I felt the need for this service when I was traveling.

Me: How many folks are there like you? What are they willing to pay? How do you find them? This is at least something you can build on.

Entrepreneur: This is where I am stuck, trying to find other people like me who would use this service. I have tried many things but I am having real difficulty figuring out how to find people who would use it.

Me: So building it won’t help, you have to find proof of need before you start building it. And you have to figure out how to find prospects for the service. Your likely price point is such that you will not be able to fund this on just one or two customers, or even a dozen or two, you are going to need hundreds.

Entrepreneur: Yes, I agree that I need a proof of need. So that’s why I have not started to build anything as of now. But I am getting cold feet when I try and imagine how to sustain the business initially!

What is Basic Model–Your Minimum Sustainable Configuration?

Me: What’s the minimum sustainable size or configuration for your basic operation?

Entrepreneur: I don’t have an answer to that.

Build On Passion by Putting Some Numbers In a Basic Model

Me: So you have to move beyond your passion and start putting some numbers on it. The idea is necessary but not sufficient. Please understand me, I am not saying that you cannot make this happen, just that you have not done your homework enough yet to demonstrate you have a viable business model

Entrepreneur: Honestly I’m not aware of a way to calculate these numbers. I do see the need to have answers to these questions just that I do not know to get them.

Me: You have to make some estimates or talk to folks with similar businesses. You need a simple model of what the smallest configuration would look like, don’t worry about scale.

Entrepreneur: I guess my partner and I should figure what the two of us could do: how many customers we could service. But I am still worried that the German company is offering this service for free.

Me: I guess you have to give up then. Or run it as a hobby. Or figure out how to add more value than the German operation so that you can charge.

Entrepreneur: Hmmm… I get the gist, I need to plan out the basic moving parts before I even try to change any or all of them. I need to sit down with my partner and give this some more thought.

Three Basic Questions: Customer, Channel, Minimum Sustainable Business Configuration

Me: It seems to me you have three basic questions to address:

  1. Who is the customer: how to you identify them?
  2. How do you reach your customers?
  3. What does your initial business configuration look like: in particular how much time will you need to spend on different functions.


Related Blog Posts

Fall Back 2

Written by Sean Murphy. Posted in Blogging, skmurphy

“The time will come when Winter will ask you what you were doing all Summer.”
Henry Clay

I took the extra hour I had today and  made a list of  a few key things I want to accomplish before the end of the year. Many of these I can use your help or feedback on, please feel free to contact me.

Warning Dates in Calendar Are Closer Than They Appear

There are slightly less than eight weeks left in 2010–given that Thanksgiving and Christmas take place in two of them it’s more like six work weeks–so it’s time for a kick finish if you need to catch up.

Fall Back

Written by Sean Murphy. Posted in skmurphy

Daylight savings time ends tonight in Silicon Valley: we get the hour back we lost in the Spring.

So tomorrow is technically a 25 hour day, something I wish for when I can’t prioritize.

We have eight weeks left in 2010 and there’s not enough time left to accomplish everything I wanted to this year.

Which means I have to step back and make some hard choices.

Fortunately I have an extra hour tomorrow to sit down and prioritize.

Good Decision, Bad Outcome

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Demos, skmurphy

You never have complete information, if you do it’s a choice not a decision.

You have to evaluate a decision in the context of the information that was available at the time.

“Good Decision, Bad Outcome”

When I first heard someone use this phrase it took a few weeks to sink in.

Too often we infer the quality of the decision from the results alone. This can lead entrepreneurs in time periods like 1997-2000 and 2004-2007 to think they are better at making decisions than they are and to doubt themselves too much in a downturn.

A course of action or a new initiative is often not just a single decision, but a collection of interacting decisions.

Together these decisions are like the combination to a lock, if any one of them is wrong then the initiative fails or fall far short of the outcomes you were hoping for. If it’s all possible to decompose your plan into separate, individually testable decisions you can learn faster and achieve better outcomes.

Developing a new process capability can be like learning to play a new piece on the piano.  It can be useful to start at the beginning of different passages, otherwise you get very good at the first section, where you are getting the most practice, and your performance deteriorates as you finish the piece.

Something similar can happen in the sales process where a team gets very good at giving a demo and does not practice how to close the deal or secure a reference.

When we are helping  a client rehearse a presentation we always prepare backup slides for the “How do we get started?” question.  One had gotten so good at accepting a lack of interest at the end of a demo that when the client said “this is great, let’s get started!” there was a long silence until one their engineers blurted out “Wow! No one has ever said that before!”

Up until then it had seemed like a waste of time to prepare an engagement plan and to think through all of the details for a potential capability rollout. Now they lost the sale because, while the prospect respected the engineer’s honesty, they were not comfortable proceeding into unknown territory for both sides.

Spend Some Time On How To Disprove Your Hypotheses

Written by Sean Murphy. Posted in Customer Development, skmurphy

There is a strong temptation for founders to prioritize their efforts on the basis of  “What is the simplest thing we could do here to prove this hypothesis about our product or our business?”

It’s often more fruitful to consider what evidence would disprove your hypotheses and what is the simplest thing you could do to collect it?

Karl Popper calls this falsifiability and suggested that it was basis for any sound hypothesis.. You would be surprised how many product hypotheses cannot be disproved, in particular if you can’t define when you have disproved a key hypothesis you will ultimately accumulate enough “evidence” to convince yourself that you have proved it.

For more on this see “Paul Saffo Defines Forecasting as Strong Opinions Weakly Held

What To Do When An Early Prospect is Excited

Written by Sean Murphy. Posted in 3 Early Customer Stage, skmurphy

Here is another excerpt from my September interview with Gabriel Weinberg. This one is focused on what to do when you encounter a B2B prospect who is excited about your product and this is only the first or second time this has happened with someone who wasn’t a friend or prior associate.

The short answer to what to do when an early prospect is excited: prove that your product works on their data, in their environment, in a way that gives you a deep understanding of the impact on their business and the value that you are creating for them. This normally a multi-step process that involves not only custom demonstrations and benchmarks but ongoing dialog.

Here is the relevant excerpt from the interview:

yegg: Let’s suppose the prospect is excited. How do you close the sale?

skmurphy: This is a multi-step process. If you are learning more about the prospect’s needs you are making progress. A few times in the middle of one of these conversations I have had founders, look at me and say “Well, they are not going to buy, we should leave.” It requires patience; software is the promise of relationship.

Typically, the next thing you ask for is prospect data or some way that you can demonstrate a result which is beyond a canned demo, a demo that uses data from the customer’s environment.

The normal test we tell the founders we are going to have to pass is–after a coffee break or a couple of lunch conversations—that we are going to go to somebody’s office, and in less than two hours we have to show them something that’s relevant to their business that makes a difference.  And, if you can’t do it in two hours then you have to leave with data they have given you and come back within five days with something relevant.

We’ve seen people take different approaches, but in general if you are on site more than a relatively short amount of time, you are forcing the guy to spend political capital either to get your badged in or to get your access. You want to hold off on that until you’ve unambiguously demonstrated value.

So there is normally a progression:

  1. One or More serious conversations that ensures prospect realizes he has a problem or need you can address.
  2. Standard demonstration of your solution tailored by your understanding of their needs
  3. Demonstration using the prospect’s data or parameters, sometimes a small benchmark. Typically this has to be completed in less than two hours on-site or you need to get permission to leave with the data and return within five working days.

yegg: At this point, have you introduced price or any other terms?

skmurphy: Price is pretty slippery in the early market; we are really trying to understand what the impact is on the prospect’s business or on a particular business process.

If business people are spending time for you they’ve got a real problem that they are looking for you to solve.  There is typically some real pain point that’s underneath.

Now, trying to figure how to value that, and what’s needed to solve it, is obviously many conversations and a fair amount of analysis.

It’s a complex thing.  Normally we let the customer bring up price. We will ask them how they evaluate the value we are creating for them.  I know there is the famous Steve Blank question “Would you pay a million dollars?” which I think is more rhetorical than literal. It can be risky in the beginning if you name a number that’s too high: instead of countering with their value number, they may stand up and leave the coffee table or otherwise end the conversation.

It’s typically more useful to come to a full understanding of the current impact of the problem on the business and then what your solution does to reduce it. You need to balance this against how quickly you can demonstrate convincing results and how much process change is involved in incorporating your solution into their workflow.

yegg: You ask them to give you a number?

skmurphy: Yeah, and we’ll tear that apart a bunch of ways.  We’ve been asking a lot of questions all along in terms of what’s the impact on the business.  We are trying to draw a kind of a before and after map either of a process or an outcome, and then using judgment and talking to many people to try and understand the value that’s being created here.

As a rule of thumb you can only capture a fraction of the value that you are creating.  You can’t in the abstract just say “This is worth a $100,000” or “This is worth $5,000” or whatever.

yegg: Doesn’t this process typically get low-ball numbers thrown at you?

skmurphy: Sure, and in the beginning, the other thing to understand is that the people that you working with, when they are spending time with you, you have to count that time as part of what they are paying for the product.

In our experience it’s difficult to get the full dollar value out of the first couple of customers.  That’s of less concern than being able to build a real case that you are creating value as a result of actually getting them to implement.  They are going to invest typically a fair amount of time on the part of people with real opportunity cost to get something working.

Depending upon the competitive landscape and what other alternatives are already available to them you may be able to  capture between 10 and 40% of the value you are creating.  If your benefits are not directly tied to cost savings, measurable quality improvements, or the creation of incremental revenue, then you end up capturing much less than 10% of your hypothetical value.

It’s less important that you negotiate for the best price than you act as an effective partner and you come away with a deep understanding of the impact on their business. It’s OK to leave a little money on the table if you are learning, you have a customer that’s willing to act as a reference, and you are unencumbered in your ability to sell to other firms.

Related Blog Posts:

Entrepreneurs Sign The Front Of A Paycheck

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

The essence of entrepreneurship is quid pro quo, an exchange of value that creates a satisfied customer, partner, supplier, investor, or employee.

Successful entrepreneurs remain curious about not only their customers but prospects who did not buy.

Bright engineers who become CTO’s are like beautiful girls:  at some point, sooner than they anticipate,  they have to learn how to work with other people because they are no longer the brightest (or most beautiful) person in the room.

A business needs ideas, labor, capital, and relationships to succeed.
Too many failed entrepreneurs neglect relationships.

Entrepreneurs persevere when they get a “no” from someone who does not have the authority to say “yes.”

Some useful phrases not taught in Business School:

  • I Don’t Know
  • Please Help Me Understand Your Problem
  • I Am Sorry
  • I Am Listening, Please Continue

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