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daily articles for founders

Here are 10 quality posts from the Founder's Library:

To raise or not to raise  

Joe Stump, founder of SimpleGeo, has written a pretty solid article examining whether people should raise capital or not. It's a balanced view that looks at both angles instead of dismissing or praising fund-raising outright, and mostly matches with my views on raising investment:

I look at capital, whether it comes from an angel, a VC, or a traditional bank loan, as an accelerant. It’s like gas. Sometimes your fire is burning nice and bright. You’re warm and have plenty of heat so why pour more gas on the fire? Sometimes, however, you’d like to start another fire, or maybe you’d like to burn down a house, or, possibly, you’d like your little glowing embers to be a fire more quickly than is otherwise naturally possible. These are all great reasons to reach for the can of gas.

Joe lists a number of good reasons to raise or not to raise. Reasons to raise:

  • Your business is capital-intensive.
  • You're at an inflection point and the capital will help you grow 10x faster.
  • You want to get some money out. (I find this one dubious - just pay yourself a better salary!)
  • You can't afford to keep working on your startup. (I disagree with this one, that's using investment as a cushion)
  • It'll give you access to a lucrative partnership.

Reasons not to raise:

  • It's hugely distracting.
  • If you raise too much, you might get hurt in later rounds.
  • If you raise at too high a valuation, you'll be taking early exit options off the table.
  • You give up control of your company.
  • Even after raising, investors are a huge distraction.
  • You may not get the attention you want or need from your investors.

Finally, Joe offers some tips about do's and don'ts of fund-raising, but you should really just go read the article to find them out.

How to find a technical cofounder  

Jeffrey Talajic discusses how to find a technical cofounder. In short, go to the relevant networking events, talk to people, discuss your project, let them self-select, and bring them on slowly while testing out the relationship. Oh, and be picky about who you select.

Decent advice, apart from one thing: I believe that if you've started your business already, it's probably too late to find a technical cofounder for this one (though you can find a good CTO-for-hire). But you can find a tech cofounder for your next business.

You shouldn't start a business with someone you've just met. Let the relationship evolve, grow, and solidify, and then consider starting a business with them.

Starting out? clone threewords.me  

Gabriel Weinberg suggests, quite rightly, that aiming to build something like threewords.me is a great approach to startups for a new entrepreneur.

I couldn't agree more. It's the "throw things to the wall and see what sticks" approach, and also what I would recommend to myself if I could travel back in time. This impatient approach may not be the best for building a great startup, but it is the best for building a great entrepreneur.

Sell the emotional benefits first  

Paul Hontz of The Startup Foundry makes an excellent point:

I’ve discovered that’s it not your products features that sell people on your software, it’s their perceived experience with your app. Users are more concerned with “How will buying this app make my life better?”, than “Our new version benchmarks 6% faster”. Giving people an emotional connection with your app is paramount in gaining users.

That's an excellent point, and one that is worth repeating and rephrasing.

People don't buy features, they buy benefits. Moreover, they don't buy practical benefits (most of the time), they buy a promise of an emotional benefit. People buy OmniFocus because it will finally get them organised (and thus give them peace of mind). They buy Fogbugz because finally, the pile of bugs they're not tracking properly will be taken care of. They buy GitHub because they want to be part of the awesome crowd. They bought Tweetie (back when it existed) because it was just damn nice.

All of those are emotional benefits. The most powerful selling points, the most convincing benefits, appeal not to the rational mind, but to emotions.

So, when you build a landing page or even homepage, make sure that your very first message is focused on capturing the visitor's emotions. Make sure you answer that question of "How will this make my life better?"

Once that question is answered, the visitor will stay (at least another 15 seconds...) and there'll be time to tell them about the features then. First, hook them by the emotions.

Worth noting that this applies to both B2B and B2C - after all, even in the business world, you can only ever sell to people.

Designing your sign-up pages  

When trying to design a sign-up page, I've generally started with the AIDA principle - grab their Attention, arouse their Interest, create Desire for the product, and present a clear call to Action. That said, that's only the first layer in this process. You can go as far down the rabbit hole as you like.

Des Traynor takes a good long dive into the aforementioned rabbit hole, and comes up with a number of insights. Worth reading for insights like:

Your app looks simple to use but is it powerful enough to handle my set-up? Does your software know about the taxes/rules about how invoices are handled in my country? Will I be your first serious customer, or do have experience dealing with firms of my size? Do other firms like mine use your software? How long have you been running? How do I know you won’t wrap things up in a few months? Can I trust you guys? Can I talk to you guys? How do I know you are legit? Do you offer good support?

(...)

When you don’t have the volume, go for the personal approach. When you can no longer go personal, then analyse the volume. At every step you need to ask yourself “Is every single thing on my website selling the product” and “Is there anything else I can include that will help“.

Enjoy.

Business Model Environment  

Salim Virani, serial entrepreneur, Leancamp organiser and regular speaker at startup workshops and conferences, on the significance of the later part of the Business Model Generation book:

[The investors'] most consistent question beyond the value proposition, customer problem and target customers were about the growth and adoption trends, competition and market size. The investors were sizing up the opportunity by looking at the context and starting point for the business. It became clear that to explain the full opportunity quickly, the canvas had to be augmented with the Business Model Environment.

(...)

The Environment consists of 4 types of factor:

  • Market Forces
  • Industry Forces
  • Trends
  • Macro-Economic Factors

Worth reading if you're an aficionado of using The Canvas, as many are nowadays, and looking to get better at turning your business models into investor pitches.

Making all the decisions yourself  

Stephen Wolfram:

I insist on really understanding everything. And, you know, every time I don't, something ends up being wrong.

I think that's a general feature of at least my style of running a company. At the beginning the CEO does everything. But gradually as you understand things, you can hire other people to do them.

I know people who favour both this style of company management (known in the E-myth parlance as "delegate, don't abdicate"), and the other.

What's the other? It's the style where you surround yourself with amazing people who work really well together, and let them make their own decisions. As a founder, doing this requires you to be really good at recognising amazing people and helping them work together, though, which is easy to fail at. The other style is easier, and probably a better choice for new founders.

Fundamentally, you can trace back those two philosophies to Taylorism, where every important decision is centralised to the CEO and the rest of the company implements his wishes, and modern management, where important decisions are pushed down to those "closest to the coal-face". Both systems work, but the latter has been proven to be a better way, if not the only way, of building very large companies.

Google couldn't run if Larry Page and Sergei Bryn had to make all the important decisions themselves, for example.

In any case, this talk is well worth a read. Enjoy.

How to detect a toxic customer  

Excellent article, and vital information. The less time you spend on toxic (and unprofitable) customers, the more time you can spend on good (and profitable customers). Recognising toxic customers is a vital skill.

Warning signs (see the article for more details):

  1. Disrespectful or Abrupt
  2. Asks for a Discount (With No Reason)
  3. Multiple Contacts, Often Through Multiple Channels
  4. Unrealistic Expectations
  5. Multiple Questions that Can Be Answered from Your Website

The article also describes an amusing encounter with a toxic customer, recognised early, and, unlike many such stories, it actually finishes well.

Update: excellent response from Joel Spolsky on HN.

Make money from your web apps by starting with the market  

Here's another interesting article by Paras Chopra, proposing that building a cool application and then trying to make some money from it is not the best approach to making money. Instead:

If making money is the objective, I suggest going with the market-first approach (as opposed to idea-first approach).

Paras then provides some steps for this market-first approach:

  1. Pick and industry where people are making money
  2. Find a differentiator which will allow you to wedge in
  3. Make a web app, market, refine, monetise
  4. Slowly build up to being a market leader

As I proposed in this earlier article about how to evaluate startup ideas, if you're honest about your areas of uncertainty, as a builder/developer, market uncertainty will be at the top of your "hypotheses to resolve".

Another point, though: even better than starting with a market is starting with the set of markets which you have some access to. If you have some delivery channels already, building a startup around those is the path of least resistance.

How to choose a domain name  

A company or domain name seems so inconsequential in the greater scheme of things. After all, what will sell is the product, right? Google would still have stormed the world even if it was launched as searchforstuff.com, right?

Whenever starting a new business, venture, site, or other thing that needs a name, it always feels like finding the name takes a disproportionate amount of time compared to its impact. But from experience, I find that actually, the right name can be very important depending on the context.

Really, the importance of a name depends on your business. For something like GrantTree, having a clear, memorable and trustworthy business name is essential, since we often introduce ourselves over the phone, and our customers want to feel reassured that we are not some rip-off outfit. Would you get your tax credits handled by "Rapid Lobster Inc" (one of our quickly-discarded brainstorming options)? However cool that name may be in the right context, it would be disastrous in ours.

For something like Bushido, having a cool-sounding name is probably more important, and the clash with the existing concept of Bushido is not too much of a problem, given how Rails-related stuff has tended to dominate whatever word it's adopted.

On this topic, here's an excellent article by The Name Inspector about some common, older myths of selecting domain names, and how they have evolved over the last 10 years.

Some of the key points:

  • Short is good, but memorable and clear longer names are better than opaque shorter names.
  • Ideally the name should have some meaning associated with it that helps bolster your brand (I certainly agree).
  • You should be able to dominate the search engine results page for your name (i.e. avoid names with a very popular existing use).
  • Alphabetical order is not very relevant today.
  • There are no magic letters that make a domain name better.
  • All types and patterns of names can be good.

Chris Dixon also pipes in with some advice, focused more on naming startups rather than domains:

  • Your name should be easy to spell once heard in conversation.
  • Different products require different naming strategies.
  • Related Words on RhymeZone can be a great way to come up with a good domain.

All good stuff, to keep in mind when you're next looking for a domain.

I'll conclude with this quote from Umberto Eco's excellent book, "The Name of the Rose":

Stat rosa pristina nomine, nomina nuda tenemus.

Or, for those who don't speak Latin:

The name of the rose of yesteryear is but a name, but only names remain among us.

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