Startup Stages Overview Video

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, skmurphy, Startup Stages

This is Sean Murphy for SKMurphy, Inc.  I want to talk to you about our startup stages model and understanding that risk reducing milestones that separate each stage.

We break the startup journey into five stages.  In each stage you will explore different options and converge on a key risk reducing milestone. Starting from idea or formation, moving through open for business, early customers, finding your niche,  and scaling up.

In the Idea and Formation stage you are searching for a customer need, a problem solution fit, and a team. You know you are done when you have a problem that energizes a team that is mutually accountable and jointly capable.

In the Open for Business stage you are searching for a business model and proof of value. This allows you to formalize the team commitment and make firm offers at a price.

In the Early Customer stage you are searching for proven value, and the proof is that customers actually pay you, not just tell you that they will pay, they actually pay. That’s only possible once you are set up and are able to transact business.

In the Finding Your Niche stage you now have a target customer type that you are going to select from customers that you have already done business with who reference each other’s buy decisions.  You need to learn the domain language of that specific customer set and learn how to find similar customers.

In the Scaling Up stage you are now looking for product scale. This requires that you have a repeatable scalable process, that you can identify additional niche markets , and identify additional opportunities. What was heroic has to become routine. Now you are adding employees who are specialists.

In each stage we see this same pattern of exploration and convergence. You are going to look at many options and then converge on key solutions.

Thank you, this has been Sean Murphy for SKMurphy, Inc. We help technology firms find early customers and early revenue.

Honor Customer Commitments To Avoid Poisoning the Well

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

In a small way, every talent acquisition poisons the well for future, bootstrapped startups. It erodes the confidence of users and potential customers. People put their company blog on Posterous, they add their business to GoWalla, they gave AdGrok a few hours of their time, etcetera, etcetera.

I’m not saying I would turn down the offer. But I fear the long-term effect of all these acqui-hires is my potential customers saying “No thanks. I doubt you geeks will be around in 18 months” when I market to them.”
Erik Dungan (HN: callmeed) on “Posterous Acquired by Twitter” HN Thread (bold added)

An acquisition hire means that the original service is shut down or turned into an open source project but no longer maintained by the founders.  In a thread on the Google acquisition of AppJet (EtherPad) on Hacker News  commenter pvg nicely summarized the moral hazards in the transaction:

Any early-adopter of a start-up product accepts the risk that the company behind the product might be unsuccessful. Customers like that bet, in part, on the notion that despite the statistically long odds, the company is making every conceivable effort to stay alive and succeed.

The ‘buyout-and-the-product-dies’-type exit introduces a sort of divided loyalty and misalignment between the goals of the founders and the goals of their customers – if you’re unsuccessful you might fail and we might suffer an abrupt service termination but at the same time, if you’re quite successful, we might also suffer an abrupt service termination.

My observation on HN at the time was based on the original announcement that the service would be shut down within 6 weeks.

If only they had interviewed at Google and joined the team they wanted to be on a year ago.

These transactions trade on the goodwill of early adopters. And they make it harder for other startups as potential early adopters start to assume that it’s better to wait for what Google releases instead of investing time in a product that will be scrapped either if the company fails or is successful and acquired.

[Given that many of the AppJet team came from Google] My point is that if they wanted to build their own company they should remain committed to the product they built, and find a better support model for current customers/users than shutting down without notice. I do not begrudge them making money at all.

But one reason that they have “millions of dollars worth of Google stock” is because they offered a service that people adopted and paid for. I think they have more of an obligation to customers and users than the initial announcement indicated and I worry that not taking better care of customers in the transition makes it hard for other startups.

Google ultimately relented and open sourced the code, with this announcement currently archived on )

Google recognizes the value of the EtherPad code base and has released the code as open source. For more information, see  EtherPad project on Google CodeEtherPad discussion group

This open source release has already led to many efforts to foster further development and provide EtherPad-like services. If you are looking for a service based on the EtherPad software, or want to run your own EtherPad server, see the following links (not affiliated with Google, use at your own risk):

This is not an “aint it awful” post.  It’s a suggestion to take care in the commitments that you make to customers, especially early customers who help you create your brand,  so that you honor only honor the letter of any agreement but also the spirit.  If the opportunity to solve customer problems does not get you up in the morning it’s unlikely that a “big bag of money” will let you move to a better lifetime.

More fundamentally, as I wrote in “Overnight Success

  1. If you define success as making a lot of money quickly you should go into sales and cut out the middleman.
  2. You can buy one lottery ticket and make a lot of money. You can buy many lottery tickets every day of your life and never recover the cost of your lottery tickets.
  3. Most of the time the opportunity for “overnight success” is sold by folks who are interested in making a profit on your dreams without actually fulfilling them.
  4. Of all the sources of funds for an early stage venture, revenue is the most compelling demonstration of traction. Too many entrepreneurs view fund raising as an accomplishment in and of itself.

The challenge with a startup–like many other things in life–is that you need to integrate many different inputs, your own hopes and fears among them, and negotiate a working consensus with your co-founders, suppliers, partners, and customers to be successful.

Updated Tue-Mar-13 to fix link to In a thread on the Google acquisition of AppJet (EtherPad)
h/t to Syed Naimath (@SNaimath)

Related Post Wed-Mar-14 Reginald Braithwaite‘s post “Dear Landlord” closing paragraphs:

If I move in, I’m committing my business to your place. I don’t want to read a six-page letter telling me what a great ride it’s been and how much fun you had building this place and how much you’re getting to sell out, and oh yes, the loading dock is open 24 hours to help me move my stuff the hell out before you bulldoze.

Architecture models often have these tiny plastic figurines that look like people walking around. If I’m supposed to move in before you sort out your “monetization strategy” and “exit plan,” This isn’t an office and I’m not a tenant. It’s a model of an office and you’re asking me to be the plastic figurine sitting at the foamcore desk.
Thanks, but no thanks. I’m done with that.

Bug Reports vs. Business Plans

Written by Sean Murphy. Posted in 1 Idea Stage, 4 Finding your Niche

“Unhappy users in our industry don’t continue to file bug reports; they start writing business plans.”
Michael “Mac”  McNamara talking about the EDA Industry

I was reminded of this remark that Mac made at an SDForum event several years ago as I was reading the “Who Are User Entrepreneurs?” study which summarizes findings on innovation, founder characteristics, and firm characteristics released in February of 2012. I was alerted to it by a press release from Kauffman released yesterday “Nearly Half of Innovative U.S. Startups Are Founded by ‘User Entrepreneurs‘”

Here are some interesting passages from the study, with some further commentary mixed in.

What is User Entrepreneurship? User entrepreneurship is defined as the commercialization of a new product and/or service by an individual or group of individuals who are also innovative users of that product and/or service. A user entrepreneur tends to experience a need in her life and develop a product or service to address this need, often before founding a firm. As a result, user entrepreneurs are distinct from other types of entrepreneurs in that they have personal experience with a product or service that sparked innovative activity and in that they derive benefit through use in addition to financial benefit from commercialization.

I would suspect that these entrepreneurs bring domain knowledge and often an ability to offer differentiated services based on their own inventions allowing them to bootstrap.

We find key differences among users who founded firms around innovations meant for use in a previous job or business (professional-user entrepreneurs) and users who founded firms around innovations meant for personal use (end user entrepreneurs). […]

The differences may have as much to do with education and socio-economic background and the causality may run in the other direction.

Professional-user entrepreneurs appear to have more experience along a number of dimensions than do other entrepreneurs in both the full sample of firms and the subset of firms conducting R&D in their first year of operations. Although the founders are, on average, the same age, they report higher educational attainment and more years of industry work experience, are more likely to have founded a firm before, and are more likely to have founded a firm in the same industry before. Their firms are less likely to be founded at home, less reliant on self-financing, more likely to receive venture capital financing, more likely to have revenues— and, among firms with revenues—generate higher revenues and are more likely to possess patents and trademarks than both the full sample and subset of firms conducting R&D. […]

There are certainly many “change agents” who improve the robustness and viability of the firms they work at (but didn’t found). Also called intrapreneurs or bricoleurs. These folks may set out on their own to start a new company as well.

End-user entrepreneurs appear to have a demographic profile distinct from the full sample of firms and the subset of firms conducting R&D in their first year of operations. End-user entrepreneurs are more likely to be members of minority groups: they are more likely to be female; more likely to be American Indian, Alaskan Native, or Black; and less likely to be Asian. Their firms employ fewer workers, have lower revenues, are more likely to be founded at home and operate from home five years after founding, are more heavily self-financed five years after founding, are less likely to receive bank financing, and are more likely to possess patents than are entrepreneurs in the full sample and subset of firms conducting R&D.

What are the implications

  • In fast moving fields, especially when you are selling to businesses, good user relationships are essential for encouraging enhancement suggestions that are viable and , if ignored, will lead to new competitors springing up.
  • The harvest of insights from early users can be as important as the revenue and the testimonials a business relationship generates.
  • Delivering the initial version of your product as a service looks like it may be a marker for success. Other techniques for “selling the result”  instead of the product may be equally potent (e.g. selling the holes in the wall where the customer wants them instead of selling a drill).

Pretotyping – Techniques for Building the Right Product

Written by Sean Murphy. Posted in 4 Finding your Niche, Books, Rules of Thumb, skmurphy

Alberto Savoia defines pretotyping as determining that you are “building the right product before you invest in building your product right.” His book “Pretotype It” (Second Edition available as a Free PDF or on Kindle for $0.99) lists a set of seven techniques for pretotyping on pages 39-40. This post analyzes and elaborates on the techniques from the book (bold text is from the book) and then offers five additional ones that should be included.

Seven Basic Pretotyping Techniques

  1. The Mechanical Turk – Replace complex and expensive computers or machines with human beings.
    Also known as

    • starting with a service
    • wrapping a thick protective blanket of consulting around your product so that no one is hurt by it
    • selling the holes not the drill
    • Wizard of Oz (pay no attention to the man behind the curtain).
    • Flintstoning (Fred Flinstone’s feet powered his “car”).
    • Manualating (a backward formation from automating)
    • the concierge method
  2. The Pinocchio – Build a non-functional, “lifeless”, version of the product.
    Useful for form and fit validation. Jeff Hawkins famously carried around a block of wood to get an appreciation for what a PDA might feel like.
  3. The Minimum Viable Product (or Stripped Tease) – Create a functional version of the product, but stripped down to its most basic functionality.
    A basic approach for any bootstrapper – make sure you have the simplest offering that customers are willing to buy before you worry about adding features (and delaying time to break even revenue).  In reading this Savoia is using the Marty Cagan MVP model “smallest possible product that has three critical characteristics: people choose to use it or buy it; people can figure out how to use it; and we can deliver it when we need it with the resources available – also known as valuable, usable and feasible.”
  4. The Provincial – Before launching world-wide, run a test on a very small sample.
    Start in a niche. When in doubt zoom in for traction.
  5. The Fake Door – Create a fake “entry” for a product that doesn’t yet exist in any form.
    I am not a fan of this except in very limited circumstances for B2B markets as it can be very corrosive to the trust required to built a long term business relationship. And at least with software products for business, a longer term relationship is normally intrinsic to the customer’s calculation of the value of your offering. If you start to erect “Potemkin village” products that have too many false fronts or facade items in your menus and options prospects may doubt the entire offering.
  6. The Pretend-to-Own – Before investing in buying whatever you need for your product, rent or borrow it first.
    Find a way to use tooling or equipment before committing to  a significant purchase.
  7. The Re-label – Put a different label on an existing product that looks like the product you want to create.
    Often a more complex product can have menu items deleted or entire branches of a menu tree pruned to explore whether this is a market for a simpler offering. At Cisco we didn’t stuff two connectors on a four port router and changed the paint job to create a “lower cost” model until the box could be re-designed.

Five I Think Should Be Added

  • The holodeck – simulate the effect of a product on a workflow: understand where the next bottleneck is to determine how much benefit eliminating one or more steps (or reducing one or more category of error) will actually yield. This is the default method for “system on a chip” design approaches but I suspect we will see more service workflow simulations as a part of the development of new service offerings in the future.
  • Family Tree – verify that manual implementations exist for what you plan to automate, has someone written an Excel macro (or an EMACS macro)  to solve the problem. Are people already following a checklist to prevent a category of errors? Replacing workarounds involves less behavior change (at least in terms of a customer’s view of the real problem) than getting them to try something without antecedents.
  • “What’s On Your Mind” – understand the customer’s view of the problem and the constraints your solution has to satisfy before proposing one.  This normally requires an active curiosity about the customer’s perception of their needs.  This is not the same as asking them for features and implementing them without considering the deeper implications.
  • Picnic in the Graveyard – do research on what’s been tried and failed. Many near misses have two out of three values in a feature set combination correct (some just have too many features and it’s less a matter of changing features than deleting a few). If you are going to introduce something that’s “been tried before” be clear in your own mind of what’s different about it and why it will make a difference to your customer.
  • Want Ad – ask customers to write up a job description with a focus on “results to be achieved” by your product. Clayton Christensen calls this the “jobs to be done” model for a new produce (See also Chapter 3 from Innovator’s SolutionWhat Products Will Customers Want to Buy

Savoia Adds “One Night Stand”

In workshops given after the second edition was published Savoia has added a new technique: The One Night Stand. Primarily aimed at retail innovation it says you can create “a complete service experience without the infrastructure required by a permanent solution.  Here are some details from the  “Pretotyping Cheat Sheet” by Leonardo Zangrando (

  • How: Deliver target customers the real experience in an extremely narrow geographic scope and time frame.
  • Why: Avoid large infrastructure investment until validating market interest and actual use.
  • Where: In the same real-life situation where the innovation will be used but with limited time and geographic scope.

Three situations where this is most appropriate:

  1. The solution is-or depends critically upon–an interactive service experience
  2. You expect demand for the offer will be sensitive to the choice of channel, and you need to test a number of possible customer interception points
  3. You want to validate a large homogeneous market before scaling up

I think this is an intelligent elaboration on what was called “The Provincial” in the second edition but it’s particularly appropriate where a specialized facility can be replaced in a trial for a temporary setup (e.g. a tent in the parking lot of an existing store, a stall in a farmers market, a rented facility in preference to building your own before you have determined there is a need).

Related Articles and Blog Posts

Zoom In For Traction, Zoom Out For Impact

Written by Sean Murphy. Posted in 2 Open for Business Stage, 4 Finding your Niche, 5 Scaling Up Stage, skmurphy

Your startup is  a work in progress.  When most entrepreneurs evaluate where they are it’s difficult not to include the promising future they foresee naturally ensuing from current efforts (or on bad days the certain doom no matter what they do). If you are not getting traction, if you don’t have the ability to reliably set and hit goals, then you need to narrow your goals. Zoom in for traction.

Tips for B2B Customer Development Interviews

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

Office Hours: MVP Readiness ReviewThis post on customer development interviews is one of my most popular. If you would like help preparing for customer development interviews or reviewing results from recent interviews please sign up for a no cost no obligation office hours session and I will be happy to help you rehearse or de-brief. Here are my lessons learned from taking part in interviews where the startup planned to offer a product or service to a business.

Purpose, Patience, Politeness, and Prudent Risk Taking

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

A bootstrapper needs four attributes to succeed: purpose, patience, politeness, and prudent risk taking. These are markers for strength not weakness.

Four Strengths: Purpose, Patience, Politeness, and Prudent Risk Taking

  • Purpose: a sense of purpose that springs from a desire to solve a problem or meet a need for a target set of customers. It’s been my experience that purposeful founders do not fail, they adjust their plans to reflect the current environment they find themselves in.
  • Patience: is always a requirement for success.  Many entrepreneurs are unhappy with one or more aspects of the status quo, but to convince people to change and adopt a new solution always requires patience.
  • Politeness costs you nothing and allows you to foster goodwill in situations where a way forward might not otherwise be available.
  • Prudent Risk Taking:  mastering the calculation of affordable losses, only committing resources (time, money, social capital) whose loss you can recover from to learn more about the market or how to improve your business allows a team to master both the market and business operations.

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

Two Key Risks: Pride and Perfectionism

  • Pride: you need confidence but if you are too proud to acknowledge your mistakes to co-founders, customers, and partners you won’t learn as fast as your competition.
  • Perfectionism:  high standards are important, especially in the personal value and ethics of the founders.  But an unwillingness to deviate from your view of the ideal product or ideal customer can blind you to real opportunities.  Early customers don’t expect perfect products from a startup, but they do expect them to continually improve. Perfectionism can also trap you in the BatCave, continually improving your product in response to imaginary conversations (typically imaginary criticism) with prospects instead of testing your vision by asking for real feedback on your understanding of the problem and the product concept.

“A windmill is eternally at work to accomplish one end, although it shifts with every variation of the weather cock, and assumes 10 different positions in a day.”
Charles Caleb Colton

I used the Huxley quote in “Julian Fellowes on Persistence, Getting Started, and Logical Consequences“which also touches on these same issues.

This was written as a rebuttal to Marc Cenedella’s repellent blog posPolite, Purposeful People Create Startups That Fail related




Gauging Customer Commitment

Written by Sean Murphy. Posted in 4 Finding your Niche

Some customers will tattoo your brand onto their body.

Harley Davidson and a few rock bands  have able to achieve this.

But in general it’s difficult to create that level of life long commitment in a paying customer and you have to be content with accepting their money and working hard to evolve your offering to continue to meet their needs.

Erecting Barriers to Competition That Are Difficult to Duplicate

Written by Sean Murphy. Posted in 4 Finding your Niche, Rules of Thumb, skmurphy

Competition is inevitable, that is why it’s wise to prepare for it and immunize yourself with difficult to copy differentiation where possible. A pure focus on implementing new features as fast as possible in an effort to outrun the competition is unlikely by itself to be enough. Here are some barriers you can erect that are often difficult to duplicate, or at least duplicate rapidly:

  • Customer satisfaction: customer relationships with a track record of support and evolution in services. Focusing on customer satisfaction erects a barrier an is always a good idea.
  • Proprietary data, info, or know-how that complements functionality
    • Beyond user data, e.g. link data for user relationships that’s “owned” by both users but maintained by the service, for example a LinkedIn Recommendation.
    • Other examples: a custom dictionary or taxonomy, a proprietary set of business rules/logic
    • Partner relationships: Developing key partnerships or other third party relationships that are either explicitly exclusive or effectively exclusive can be both a source of unique value and further differentiation against competitors.
    • Knowledge of  a customer’s future plans and needs:  jointly committed private roadmap helps to maintain alignment. Taking the time to do joint planning with key customers makes you much harder to displace.
    • Network size in network driven businesses: Metcalfe’s Law works in your favor if you are larger (and against you if you are not).

    There are many more: only commodities–products with a fixed spec or non-evolving feature set–are purchased purely on price (and delivery).

    Narrative Rationality: Be Mindful Of Your Self-Description

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

    Pay attention to self-description: the story you tell yourself and about yourself. Cultivate productive habits that don’t require conscious decisions.

    “It is a profoundly erroneous truism, repeated by all copy books and by eminent people when they are making speeches, that we should cultivate the habit of thinking of what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them.”
    Alfred North Whitehead in An Introduction to Mathematics

    Tony Schwartz builds on this in “The Only Way to Get Important Things Done

    The counterintuitive secret to getting things done is to make them more automatic, so they require less energy. It turns out we each have one reservoir of will and discipline, and it gets progressively depleted by any act of conscious self-regulation. […]

    The proper role for your pre-frontal cortex is to decide what behavior you want to change, design the ritual you’ll undertake, and then get out of the way.  Indeed many great performers aren’t even consciously aware that’s what they’ve done. They’ve built their rituals intuitively.

    Self-Description: The Story You Tell Yourself and About Yourself

    I have blogged about the importance of monitoring the story that you tell yourself, suggesting in “Be Careful of How You Tell Yourself ‘The Story So Far’” that an entrepreneur who called himself stubborn and a frequently failing as “persevering and continuing to experiment.”

    To be able to see yourself as persevering it’s useful to remember Eric Hoffer’s advice:

    “Our achievements speak for themselves. What we have to keep track of are our failures, discouragements, and doubts. We tend to forget the past difficulties, the many false starts, and the painful groping. We see our past achievements as the end result of a clean forward thrust, and our present difficulties as signs of decline and decay.”

    Related blog posts

    Why Your Startup Matters Has Little to Do With Funding

    Written by Sean Murphy. Posted in 4 Finding your Niche

    Giff Constable had a great post “Money Raised is a Terrible Metric for Success” about two weeks ago where he made the following suggestion

    I would love for our ecosystem to purge the notion that how much you raise should be a valid comparative metric for success. Speaking as someone who has worked for quite few well-funded companies, I know that it is not. […] Raising money is not success. It is an enabler of success. It is supposed to make success easier, but I have seen situations where the opposite has happened. I have also seen plenty of situations where the outside investors were the only ones who really benefited from an exit.

    This echoes a similar point by Seth Godin in “Getting Funded is not the same as succeeding

    “The goal isn’t to get money from a VC, just as the goal isn’t to get into Harvard. Those are stepping stones, filters that some successful people have made their way through. […]  I don’t care so much how much money you raised, or who you raised it from. I care a lot about who your customers are and why (or if) they’re happy.”

    Jeff Nolan suggested in “Why the TechCrunch Economy will Falter” that

    If all we care about is starting things then the tech economy will eventually falter because at some point you have to answer the critical question “why do you matter?”. This simple question should be at the top of the list whenever any company or product is written about, I know that it will be for me going forward.

    I blogged about “Entrepreneurial Motivation” in January of 2009, highlighting Tim O’Reilly’s thought provoking post “Work on Stuff that Matters” from earlier that month. O’Reilly highlighted three principles:

    1. Work on something that matters to you more than money.
    2. Create more value than you capture.
    3. Take the long view.

    that I still find very valuable. I want to work on things that will make a meaningful difference in people’s lives. And like Randall Munroe, “I never trust anyone who’s more excited about success than about doing the thing they want to be successful at.”

    See also

    B.V. Jagdeesh on “Startup Leadership Lessons Learned”

    Written by Sean Murphy. Posted in 4 Finding your Niche, Events, First Office, Founder Story

    Mr. B.V. Jagadeesh gave a great talk on “Lessons Learned Starting, Leading, and Succeeding at Multiple Startups” tonight at the GITPRO meeting.  Mr. Jagadeesh co-founded Fouress (a bootstrapped consulting firm), co-founded Exodus Communications, was CEO at NetScalar (and stayed on after  its acquisition by Citrix as a VP/GM),  was  president and CEO of 3Leaf Systems, and is today  president and CEO of Virtela.  He is an accomplished entrepreneur (more details on LinkedIn and CrunchBase) and he gave a very candid talk on his entrepreneurial journey starting with his arrival in the United States in the early 1980’s to work at Novell.

    I have had the privilege of hearing experienced entrepreneurs talk about lessons learned but it’s normally been a small group, a half dozen or dozen folks in a conference room or 15 or 20 around a Bootstrappers Breakfast table. This had that same sense of practical candor but there were perhaps a hundred to a hundred and twenty folks in the Oak Room.  It was a candid an insightful talk punctuated by frequent questions from the audience.  What follows are a few stories that I thought had a particular emotional resonance with the early stages of a startup.

    He came from a family of teachers and professors of modest means. They were delighted when he graduated with bachelors degree in engineering and went to Bombay to earn a Masters degree. When he  was able to get a job in America it was unprecedented success. His new job allowed him to buy a used car which was one of the first owned by his family.

    This made for a difficult phone call when he called his father to tell him he was going to quit his job to start a company. He had tried to work on it on the side with his future co-founder but came to understand if it was going to move forward he would have to focus on it.

    “How much will this new job pay?” his father asked.

    “It’s a startup, once we get clients I will be able to make some money” was Mr. Jagadeesh’s answer.

    Needless to say his family thought he was making a mistake, but his calculation was that he had enough money saved to live simply for a year, he would pursue his dream of his own company and if it didn’t work out he would go back to being an engineer for a while.

    Exodus went on to spearhead the concept of offsite co-location datacenters, changing the model from on-site data center served by an ISP. It enabled a number of companies large and small to establish a significant presence on the Internet.

    His tenure at NetScalar saw the company narrowly avoid shutdown and go on to establish a  new paradigm for Internet connectivity management. He had to prepare two speeches for the employees, one where he announced that the company was getting shut down, and one where they announced  new round of funding (from Sequoia as it turns out). He was able to give the second speech and returned 8x to Sequoia when Citrix acquired NetScalar two and half years later.

    He had to give the other speech a few years later as CEO of 3Leaf Systems when a key ASIC needed another spin and he was not able to convince investors to help. His point was that in both cases you had to prepare for the likely outcomes and take responsibility as CEO for what happens, doing the best that you can for your employees and investors.

    One theme he stressed repeatedly was the need to impose the discipline on yourself and your team to prepare and act with the professionalism that your competitors are going to bring to the market. He talked about one team that he is advising that has met with some initial success. They realized that treating their offices as dorm rooms had been OK when there were a few founders, but now that they were growing and had two dozen  employees they needed to establish a more professional tone–without spending a lot of money. So they spent a few thousand dollars at IKEA and held furniture assembly parties. The new look changed both internal attitudes toward the workplace and those of  customers and potential investors who visited their offices.

    He talked about volunteering to help the IEEE Silicon Valley put on events and conferences while he was still working at Novell. They met more than two decades ago in the Oak Room where he was speaking tonight .  By volunteering to find speakers he was able to have conversations with managers and executives at many companies that allowed him to develop a network that helped out as he was growing Exodus and NetScalar.  He felt a sense a coming full circle: he was now the invited speaker in the same room where he first started out as a volunteer.

    It was a candid and reflective talk, Mr. Jagadeesh not only offered a wealth  of practical advice, answering a number of very good questions,  but he also communicated a fundamental sense of what it means to be a CEO: you need to take action and take responsibility for outcome of your actions.

    Tristan Kromer on Businesses Models

    Written by Sean Murphy. Posted in 4 Finding your Niche

    Tristan Kromer, who blogs at Grasshopper Herder, offered some great insights on business models on the Lean Startup Circle mailing list in response to a question about how to select which idea to focus on for your startup

    There’s nothing wrong with a services business.

    It’s harder to scale, but there’s nothing in the customer development handbook that says only billion dollar scalable software companies are worth doing.

    Plenty of people get filthy rich running pool cleaning businesses.

    I think a lot of people look to software businesses with some idea that it will somehow be easier because there is no inventory and you can just build one product for a million people.

    Personally, I think that’s an illusion. There are just different issues. There is still inventory (people), assets (ideas), a manufacturing process (coding), etc.

    Starting out as a service business, or primarily as   a services business, does not preclude you from becoming a product oriented company later on. I hear too many entrepreneurs worrying “that approach won’t scale” when they should be more worried “that approach is unlikely to find any customers.”

    Also, if there are complex workflows involved, using a service business to prototype and explore what capabilities will actually be required (and used) is much much faster than trying to get it all coded.

    Our “Entrepreneur’s Guide To Sales” Added To Chicago MBA Coursepack

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

    Mark Duncan and I collaborated on a four page  article “An Entrepreneur’s Guide to Sales” that was designed as an adjunct to a custom sales training workshop. It’s intended for entrepreneurial engineers who need to develop and debug a B2B sales process.

    Most articles and books on sales are intended for people who sell. In contrast, this article is for the technical founders of a software startup who need to better understand the sales process, with practical tips on how they can be more effective as part of the selling team.

    Specifically, we’ll review frequent reasons for the sales process being broken, the need for an iterative approach in refining the sales learning curve, key steps in the sales process, preparing for a sales call, sales methodologies, and key sales positions.

    We were contacted recently the folks at XanEdu publishing to license it for use in a package of supplementary materials–a coursepack—for a new course “Building Internet Start-Ups: Risk, Reward, and Failure” taught by Groupon co-founders Eric Lefkofsky and Brad Keywell at the University of Chicago’s Booth School of Business.

    Travelling Hopefully

    Written by Sean Murphy. Posted in 4 Finding your Niche, Quotes

    Robert Louis Stevenson wrote a great essay establishing goals in life and working toward them called “El Dorado” in 1888. Here are two quotes–one from the opening paragraph and one from the closing–that give you a flavor for the essay (emphasis added):

    We live in an ascending scale when we live happily, one thing leading to another in an endless series. There is always a new horizon for onward-looking men, and although we dwell on a small planet, immersed in petty business and not enduring beyond a brief period of years, we are so constituted that our hopes are inaccessible, like stars, and the term of hoping is prolonged until the term of life. To be truly happy is a question of how we begin and not of how we end, of what we want and not of what we have.

    Soon, soon, it seems to you, you must come forth on some conspicuous hilltop, and but a little way further, against the setting sun, descry the spires of El Dorado. Little do ye know your own blessedness; for to travel hopefully is a better thing than to arrive, and the true success is to labour.

    My plan for 2011 is to travel hopefully. Accelerating change in both technology and business models is creating many new opportunities as it obsoletes many others.  There is always value in appreciating the risk in a situation but too much focus on the loss of what has been obsoleted can obscure emerging possibilities.

    For 2011 I am renewing my commitment to counting my blessings and redoubling my efforts to spot emerging trends and the opportunities that they will create.

    Stevenson’s “El Dorado” is in Chapter 6 of his “Virgnibus Puerisque” essay collection and also available stand-alone at

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