Posts Tagged 'startup'

Startup Administrivia: Part 1 – getting started

Note: This multi-part post is for first time founders.  Anyone who has done it before will already know all this.

If you are a first time founder, what should you obsess about? Hopefully, you are all over the market opportunity.  You are doing customer development to understand buyer and user personas, building knowledge about the problems they face, and evolving hypotheses for how to solve these problems.  You are working on building a great product.  You are focusing on the build-measure-learn loop and iterating and pivoting fast to incorporate market learnings. You are working on putting together an A team to get the job done. And you are managing your time so you are able to focus on these value generating activities.

Instead, I find that a lot of first time founders spend a disproportionate amount of time sweating the details on administrivia.  Hiring professional service providers.  Company formation.  Making sense of Cap Tables.  Setting up a bank account and doing the accounting.  Keeping track of business contacts.  Company positioning and messaging.  Company naming.  Corporate identity.  Web site. Social media.  Filing patents.  You get the picture.

This stuff is not rocket science. It has to be done, but it doesn’t add value.  Figuring out the core premise of your startup – that  needs to be the main thing. Everything else is a distraction.

To help young founders spend the least possible time on this stuff, I am putting together a few posts that helps summarize some of the key tasks as well as pointing out some possible resources to execute those tasks.  Hopefully this will also arm you with the vocabulary to learn more.

  • Hiring professional service providers

    • What is this? Professional service providers can help you with the mechanics of starting and running a company.

    • Why do it? A small cash outlay can save you a lot of time and the trouble of learning things outside your area of expertise (such as how to file corporate taxes) that adds no value to your startup or your professional trajectory.

    • Who do I need? A corporate attorney, a contract accountant, a creative web / graphics service provider, an IP attorney.

  • Company formation, a.k.a. “incorporation”

    • What is this? The process by which the startup becomes a separate entity from the people who own or operate the business.

    • Why do it? To protect your personal assets in case your company gets sued / owes money, or some such.

    • What kinds of entities are relevant? Choice of C-Corp, S-Corp, or LLC.  This is a critical choice as it has significant tax implications.  Forbes has a great article on C-Corp versus S-Corp, and the Small Business Administration has an article on LLC that you should read. Work with a corporate attorney who can help you pick what works for you.

    • How do I file for incorporation? You can file your own incorporation papers with the SEC of your state. The easiest thing to do is to hire a corporate attorney to do it for you.

    • Who can help me with this? A corporate attorney.  e.g. Morse, Barnes Brown and Pendleton or Foley Hoag are example law firms that specifically service startups.

  • Cap Table construction:

    • What is this? A cap (capitalization) table lists who owns what stock in the company.

    • Why do it? To define ownership of the company. You need it immediately if you are incorporating with more than 1 founder, and you definitely need it when you raise your first round, or when you need to define an option pool for new employees.

    • Where can I find examples of cap tables to learn more? S3 ventures provides a fantastic excel template for free – you can download it here. Google any words that you don’t know in there and relax, you don’t need to understand all of that all at once.  Venturehacks has a blog post with a video link depicting the process, as well as an excel template you can buy for $9.

    • Who can help me with this?  Your corporate attorney.

  • Setting up a business bank account and business credit card

    • What is this? Opening a bank account and obtaining a business credit card for your startup, that is separate from your personal bank account and credit card.

    • Why do it? Keeps things clean and separate and saves you many hours of busywork writing expense reports from yourself to yourself. Keeps the credit histories separate.

    • Who can help me with this? You don’t need help on this one – just pick a local bank with a no-minimum-balance checking account product. Amazon business card is a great product for the corporate credit card.

  • Doing the accounting, and the software to do it with

    • What is this? Keep track of money in and money out for your business, separate from your personal finances.

    • Why do it? Some day you will get audited and you will be glad your books are squeaky clean from the start.

    • What do I need to do? Hire a contract accountant who can set you up with Quickbooks. You can do the Quickbooks management yourself until it gets unwieldy, then you can contract it out or hire a staff accountant. I have seen people use Quickbooks through Series B – I would suggest going with a professional ERP (enterprise resource planning system) before you get that far, especially if you are selling product and need to manage inventory.

    • Who can help me with this? A contract accountant.

  • Keeping track of business contacts via a CRM (Customer Resource Management) system

    • What is this? A CRM system helps you keep every detail of every conversation with every prospective customer / vendor / contact in one place via a database.

    • Why do it? Conversations can be long range and have a long half life – important to keep track of people, companies and tracks so nothing falls the cracks. Spreadsheets or documents or email trails are not scalable beyond a few conversations.

    • Who can help me get this done? You will have to set it up yourself.  Then everyone who interacts with outside contacts should get in the habit of logging their notes and conversations in the system.  There are free tools like the Zoho CRM, with limited functionality, or you can always spring for salesforce.com when you are big enough.

That’s enough for starters.  I’ll cover basic marketing presence in the next post.

Complete list of posts in this series:

  • Startup Administrivia: Part 1 – getting started
  • Startup Administrivia: Part 2 – basic marketing presence

 

What is innovation?

A few months ago, I was interviewed by a group of entrepreneurs from Mexico about my thoughts on innovation.  Here are some key discussion points that came up in our conversation.

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What is innovation?

When people use the word “innovation”, most of the time they are thinking about scientific or technological innovation.  To me, however, innovation simply means coming up with new ideas on how to solve problems, and then successfully implementing these ideas into viable solutions, and it applies to every discipline.

Coming up with a non-invasive way to test a diabetic patient’s blood glucose level is innovation. Coming up with novel ways to incentivize a sales channel to double their product sell through rate is innovation.  Coming up with visualization tools for budget-versus-actual analyses to help a cost center manage its expenses is innovation.

Why is innovation key in a startup?

Innovation is critical for any organization that needs to maintain a competitive edge, but for a startup, it is a matter of survival.  Startups are always pressed for time and resources.  They are constantly looking for  new and non-obvious ways to solve problems and meet objectives quickly.  They are constantly solving new problems never solved before.  Being creative and flexible is key.

How do we come up with a process for innovation?

In my mind, the very nature of innovation is non-linear, whereas processes and frameworks tend to be rigid and structured. In my opinion, innovation and set processes don’t go well together. Rather than creating a documented process, we should focus on creating an environment that encourages risk taking and spontaneous, out-of-the-box thinking, which in turn encourages and nurtures innovation.  We should make it ok for team members to try things that aren’t guaranteed to work.  Also consider building in some intentional slack, so people have the space and breathing room to come up with great ideas during their down time.

How can you tell if your organization is innovating successfully?

It’s one of those “you know it when you see it” things.  An innovative organization simply exudes creative problem solving vibes.  There are also objective signs: more patents being applied for; faster turnaround in responding to market needs and customer requests; loyal and happy customers who trust an organization to solve their problems effectively; these all help to show that the organization is innovating where it matters.

Are there best practices for encouraging innovation in a startup?

One thing I advocate is the “tiger team approach”.  I like to pull a cross functional team together from different departments.  This project team gets  together and works on a well defined problem with great focus until it is resolved.  The diversity within the team ensures that the problem is looked at from multiple perspectives.  Effective collaboration results in effective innovation.

Entrepreneurs needed – the younger the better

How young is too young to start a startup?

Young Entrepreneur

The answer is that there’s no such thing as being too young to start a company. Just look at Tony Hsieh, the CEO of Zappos, who started his first company, LinkExchange, at 23 and sold it to Microsoft for $265 million less than two years later. Drew Houston, co-founder and CEO of Dropbox, started his first company, Accolade, at 21. Mark Zuckerberg was 19 when he first launched Facebook. And we all know the stories of Steve Jobs and Bill Gates.

I work with entrepreneurs of all ages, and I see a huge advantage to being a young founder: They don’t know what cannot be done. They are unfazed by problems that other people have not been able to solve. They believe that things will be different for them. They will not be discouraged by seemingly insurmountable obstacles – they will find a way forward. They will not shoot down ideas before they are properly explored, believing that there can be a gem in there somewhere. They also have an unbounded and irrepressible amount of energy, enthusiasm and drive. This is a huge asset when it comes to recruiting top talent, and motivating a team to push the frontiers beyond what seems possible. The healthy stamina that youth brings is very helpful too, considering the long hours they are taking on.

However, that confidence can sometimes be a double-edged sword. A friend of mine who was working on his first startup once said to me: “Elaine, I can read a book on anything, and then do it better than anyone who has done it a million times before.” I was struck speechless by his statement. In the final analysis, he lost a lot of time and energy learning entire new disciplines from scratch and reinventing the wheel, when a short phone call to someone relevant could have saved him some money and reduced his time to market.

There is a lot that one can leverage with youth, but if a young entrepreneur does not temper it with a readiness to listen well and take advice, then he or she might end up on a long and winding road to success. The good news is that it is easy to get help. Entrepreneurial hubs like Boston, the Bay Area, Austin, Boulder and so forth have healthy startup ecosystems full of highly qualified people who are willing and available to help while asking nothing in return. If you are a young entrepreneur doing something for the first time: Don’t be shy – lean on this support system. You will be surprised at how much free consulting you can get if you only asked.

Another easy way to get this support is to develop a team that fills gaps in your experience and perspective. A team comprised entirely of mini-me clones can only lead to group-think, which is the worst thing you can do to your team and business. If you are a young technical founder, find team members who have proven industry experience in business development or marketing, and vise versa. This holds true for all teams, including startups led by older founders. A little diversity goes a long way, especially in a startup.

As for financial concerns, youth can work for or against you. On the one hand, young founders are less likely to have a spouse, kids or mortgage. Working for stock and living on frozen dinners may be OK for a while. It can also be easier for them to relocate to a different city or even another country. On the other hand, younger founders are less likely to have successful startups already under their belt. Raising seed capital could be tough with an inexperienced team, and with little savings and no earnings, bootstrapping – much less paying for groceries — can be challenging.

While youth brings many benefits, I personally believe it is important for aspiring entrepreneurs to finish college, as young adults continue to develop and mature both personally and professionally through their college years. Focusing all of one’s energy on starting a company can make it hard for a young person to develop the skills that will bring one to full potential. Also, entrepreneurship is a learned skill, and college is a great place to gain that knowledge through classes, internships, and labs. The networking and resources available to aspiring entrepreneurs should be fully taken advantage of during those college years.

The bottom line is that there are many more “pros” than “cons” for being a young entrepreneur. If you are 20 and passionate about starting a company, then go for it! Your startup ecosystem stands behind you and we are ready to help you succeed.

“Vision without execution is hallucination”

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This time of the year, we get to hear all about everybody’s New Year Resolutions.  I shall lose some weight! I shall exercise! I shall spend more time with family! I shall volunteer! I shall learn the trumpet!

These resolutions have fantastic mileage.  Most people can recycle last year’s resolution every year.  This is because those lofty goals fall victim to vision without execution.  Without an actionable plan and a commitment to execute, these good intentions end up going nowhere.

The importance of execution is often overlooked in a startup where fluidity, creativity and innovation define “cool”.   The need to be nimble and quickly pivot can create an environment where visionaries thrive, but execution is glossed over.  But if execution is ineffective, even the best idea will fall down.  In this brutal economy, if you cannot execute on the milestones attached to a funding round, you may never get a second chance.  Your next appointment could be with the repo-man.

How do we set up an environment where our team can execute with excellence?  Here are some tactics that have worked for me.

  • Clearly define the goals, objectives and measures of success, and communicate it up and down the foodchain.
  • Having enough an actionable plan to get started and go for at least the first phase (which should last weeks, not days).
  • Continuing to refine and build on the plan as you progress.
  • Construct the right team with the right skillset to get the job done.
  • Be ready to swap out team members if they turn out to have the wrong skillset or the wrong mindset.
  • Measure yourself against success metrics early and often and call a spade a spade as soon as enough data is available.
  • Celebrate victories, big and small. Reward team members for a job well done, early and often.
  • Hold yourself accountable. Own up to failures yourself – don’t make excuses, and don’t wait for someone else to notice.
  • Be open and humble.  Talk less and listen more, to tap into the wisdom and experience of other people.

What are your favorite tips for execution? I’d love to hear your thoughts.

Say “thank you”

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The day before yesterday, one of our software gurus pulled a miracle out of his hat.  A server had been hacked, and he got stuck with the unsavory task of trying to retrieve what’s salvageable and to bring the same services back up on a different server, with almost no material support from anyone.

I thought it would take a week to bring it back up. It took him 2 working days (and nights).   So I emailed the software team and the senior management team to acknowledge this feat.  I also acknowledged his improbable achievement in other public gatherings.

In my mind, this guy put in effort above and beyond the call of duty and achieved a fabulous outcome.  The least I could do is to make sure everybody knew it was he who did the work, and that I was really impressed.

In startups this kind of acknowledgement is simply not done frequently enough.   When everyone is in a constant state of running around like chickens with their heads cut off, it is hard to remember to stop and say a simple “thank you” to the people responsible for the achievements that keep the lights on and help support the success of the company.  But we simply have to make the time.

Nobody reads minds. If you don’t express it, it’s like you never experienced that sense of appreciation.    Our employees make big personal sacrifices to be in a startup, with an often compromised compensation package, strange working  hours, and a perpetually high stress level.  Say thank you frequently, often, in public and in private.  Make sure they know your appreciation.  It’s the least we can do for our star performers.

A year in review

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As the year draws to a close, it’s time to reflect upon the good, the bad and the ugly in this year.

  • We did a really cool segmentation and ethnography project that helped define buyer and user personas. That was great fun.
  • We did a bunch of pricing research on the cheap, but the results were inconclusive.  Probably should have hired professionals to do this (a casualty of working for cash-strapped startups).
  • We built a strong, diversified, talented and productive software team.  This makes me feel like a million bucks.
  • Said team figured out how to develop and self-host a scalable web based application. That felt great.
  • We launched a new iPhone App.  That felt great.
  • We had several intense “Oh Crap” moments. That felt crappy but all’s well that ended well after we fixed what’s broken.
  • We launched a massive new project with a ridiculously aggressive timeline. That felt scary.
  • We are miraculously on schedule 1.5 months into said aggressive timeline. That felt great (even though I still come close to passing out each time I visualize my 390 line Gantt chart in my head.)

At the end of the day, everything that was achieved at work was achieved because we put together a fantastic team of trained assasins who are super good at their jobs, yet flexible enough to adapt themselves to the rapidly changing needs in a startup environment.  I’m very proud of my team and all their achievements.  They rock!

On Competitive Advantages

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I just stumbled across a fantastic series on bad startup pitches from Jason Cohen’s blog.  It’s titled “5 lessons from 150 startup pitches“.  I find myself agreeing violently with 3 of the 4 posts that relate to competitive advantage.

I had a recent conversation with a friend who is working on a pitch for a new venture.   The product concept is a good idea, but the way it is currently presented, it veers dangerously close to the offerings from a couple of competitors.  When I asked what the competitive advantage was, the answer was quite diffuse:  “we have Feature X, that’s our differentiator.”  “Our UI is so much better than theirs it will blow them out of the water.”

It gets worse: “Company X is charging $Y for a substantially similar service. We are going to come out of the starting gate charging 50% what they charge.”  At some point I will write a post on what not to do in pricing strategy – but that’s a conversation for another day.

So what qualifies as valid competitive advantages?  Here are some candidates.

  • First mover advantage – you are the first to solve this particular problem in this particular way. (This could work for and against a business though. It’s much easier to launch a product into an existing category than to make your own product category.)
  • Deep knowledge about your target market’s needs and wants, enabling you to build something that solves their problems better than the competition has solved their problems.
  • Special soup technology nobody can easily copy, even if they hire away your chief engineer or read and understand all of your published patent applications.
  • Deep relationships with big fish at key potential customers (if B2B) that gives you a big head start on business development.
  • A team with domain expertise that can execute at twice the speed of their competitor’s team.

What are some competitive advantages you have enjoyed in your experience?

Startup learnings

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I have been invited to give a talk to some MBA students about life in the startup landscape. I reflected on my experience and boiled it down to these bullets.   Do they match your experience?  I’d love to hear what you think.

  • Be audacious. Aim very high and fail sometimes.
  • Be open. Listen to your customers’ needs and wants.
  • Be humble. Listen to your advisers who have experience that you don’t have.
  • Be nimble. If something doesn’t work, fix it now and move on.
  • Be focused. Keep the Main Thing the Main Thing.
  • Be fact-based in decision making, but learn to trust your gut too.
  • Hire some generalists and some specialists.
  • Pace yourself while working hard. It’s a marathon, not a sprint.
  • Don’t take yourself too seriously. Have some fun along the way.

Where should product management live in an organization?

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I attended Product Camp in Boston over the weekend and the topic of where product management should live in an organization came up once again.  I had a blog post about this on my abandoned old blog, so I dragged it out and looked at it.  I realized I now agree with bits of it and disagree with other bits of it.

On the bits that I agree with, I continue to stand by my basic tenet:

Engineering and product management must be peers.

In my old blog post I went on to advocate that Product Management reports directly to senior staff as peers of Engineering and Marketing. I still think that’s the best possible structure.

However, the reality is that very few startup companies and small businesses are equipped to support this structure.  The CEO is typically terribly overloaded and is often not equipped to give the head of Product Management the support that he or she needs on a regular basis.

At the time I thought the next best thing would be to have Engineering and Product Management report into a Product organization which then reported to the CEO. With one more company and a couple more years of perspective behind me, I no longer believe this is practical for a small company. When the company has 20 or fewer people, 3 product execs is 1 exec too many. A much more practical solution is to have product management report into either Marketing (prefered) or Engineering (as a last resort).

It all depends on the people we have in a company and the skillsets they bring to the table. If Engineering has access to resources who are great at understanding customer / buyer needs and wants and can generate their own functional specification as a service to product management, then I think a more strategic product manager with substantial product marketing skills would make sense, and that person would work well in the Marketing organization. Conversely, if product strategy and roadmapping is well covered by other executives, and the need is for detailed product design and specification, then a technical product manager reporting to Engineering could work just fine.

I still believe Product Management should have a seat at the senior staff table together with Engineering and Marketing. But I think other less optimal structures can be made to work. The trick is to clearly define the role within the organization and make sure the product manager can succeed in their role.

Beta programs

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This is the eighth post in my Customer Research series.

What is a beta program? The Wikipedia has the following definition:

“Beta” is a nickname for software which has passed the alpha testing stage of development and has been released to users for software testing before its official release. It is the prototype of the software that is released to the public. Beta testing allows the software to undergo usability testing with users who provide feedback, so that any malfunctions these users find in the software can be reported to the developers and fixed. Beta software can be unstable and could cause crashes or data loss.

In my mind, the beta program provides an early window into how the market will receive the product release.  It generally happens at the very end of the development cycle.  I generally run small-scale beta programs as follows:

  • Recruit 10-20 beta testers to match the primary and secondary personas that the product is designed for
  • Do a kickoff meeting (either one on one or in a group) to set expectations on what’s in the new release, and how we expect to collect feedback from beta testers
  • Ask beta testers to use the product in the target environment of use
  • Schedule a call with each tester on the phone 1 week into the program, to ensure everything is going smoothly
  • Use phone calls and email to keep track of progress during the program
  • At the end of the beta program, schedule a phone conference or an in person debrief to collect feedback.

Since beta programs occur at the very end of the development cycle, typically weeks before the target release date, it is really only useful for testing things that can be iterated right before the release: positioning and messaging, delivery and support mechanisms and the like.  There is a great recent post on beta programs by Dave Daniels of Pragmatic Marketing that outlines all this – do take a look, it brings into sharp relief many of the questionable practices a lot of software companies take for granted.

Findings from beta programs can also be used to pull a release if (gasp!) a customer discovers a fatal bug that the QA department failed to find.  Lastly, it can also be used as a vehicle to collect customer feedback for the next release.  It is NOT a vehicle for usability testing – it is way too late in the game for that!  Usability studies (whether in lab or extended use tests) should be done early in the development cycle, before the product is finalized and when there is still time to effect change.

Using beta programs to test positioning is a great idea.  One can save a lot of money in marketing programs by iterating the messaging with target buyers until winning messages are arrived at.



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