daily articles for founders

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

Questions to ask a VC  

Depending on how you ask those questions, they may be needlessly antagonistic, so be smart about how you ask them. In my experience, most VCs will talk about these points whether asked or not, as part of their standard "this is who we are" pitch.

The questions:

  • Are you accredited?
  • What's your background?
  • When was the VC founded?
  • What is the vintage year of the fund?
  • How much capital is under management across how many funds?
  • How much capital has been deployed out of the current fund?
  • Who are your LPs?
  • What is your investment thesis?
  • How many investments have you made in my space?
  • Can I speak with some other founders you have invested in?

Certainly, if a VC refuses to answer, or appears to try to wiggle out of, one of these reasonable questions (asked politely and in a friendly manner), that's a red flag, and you should dig further before taking investment.

Update: Thomas Ptacek points out that asking VCs about their accreditations is pointless.

Using LinkedIn for Cold Calling  

Martin Grönberg from myGengo has some advice for those who still need to rely on cold calling for some of their marketing:

Use our company’s extended network, and particularly LinkedIn, to an extreme. We flip the standard target prioritization process around: We make the people in our extended network (within 2 degrees of separation) the starting point and ask ourselves “how can myGengo help this person and company better do business”. Then we go ahead and prioritize those contacts based on common business metrics (value potential, strategic fit, etc) and use the network that initially lead us to the target for reaching out.

Not much to add to this, other than to link to a post which appeared here earlier, by Iqbal Gandham, about Generating B2C and B2B links systematically.

The right funding strategy  

Another good article by Roger Ehrenberg, this one about picking the right investment strategy for your startup.

In summary:

  • If you can generate cash flow early, bootstrap, and only raise capital when you absolutely need it.
  • If you need a bit of capital (up to $500k or so) to prove the concept, go to angels, but if you expect high exploitation costs (e.g. you'll need lots of sales people), get VCs involved in the round too.
  • If you need a lot of capital up-front, go to VCs straight away to have the relationships in place.

Seems obvious, but many people go straight from "I want to build a startup" to "I need some funding". Don't be one of those.

A couple of key points to add:

  • The less experience you have of running businesses and/or startups, the more you should aim towards the bootstrapping end of the scale. Very few people in the world can walk out of a VC office with $10m in initial funding based on zero business experience. So if this is your first business, build something you can monetise soon.
  • Be careful about the "involve VC firms early" thing. If they pass on you, it may be difficult to get other VCs interested.
How to invalidate your startup idea  

Some good methods for invalidating ideas. Method 2, which is morally grey, got ripped into on HN. To that I'd reply that lying is a part of life, and I challenge anyone to go a single day without telling even a single white lie. Not all lies are equal.

Here are the methods proposed to identify a "hair on fire" problem, as opposed to a nice to have:

  1. Get a focus group, talk to them about the problem you're solving, and then provide them with a URL where they can go later to sign up for the product.
  2. Cold-email 20 potential customers and offer to pay them money to use the product. When they do sign up, tell them the offer was oversubscribed and is not longer available.
  3. Create a landing page with a 10-step registration process. Drive traffic to it. See how far into the process people are willing to go (the further, the more desperate they are for the product).

The article also points out this doesn't apply to all product types.

Advice for ambitious 19-year olds  

Great read from Sam Altman, well rounded and sensible advice, providing enough context to help someone make a good decision:

No matter what you choose, build stuff and be around smart people. “Stuff” can be a lot of different things—open source projects outside of class, a startup, a new sales process at a company you work at—but, obviously, sitting around talking with your friends about how you guys really should build a website together does not count.

Can't disagree with that or, indeed, anything else in this article. If you're an ambitious 15-19 year old, have a read.

On being an early startup employee  

I've never been an employee at a startup, but I wish I had. I spent four years of my life working for Accenture instead. Knowing what I know now, I would have tried much harder to find a role in a promising startup.

As a founder, particularly a technology founder, the picture has been very different. I've only had myself and the mentors I personally attracted to learn from. Back in Accenture, there was a whole hierarchy of managers and senior managers and partners and senior partners that could teach me the tricks of the trade. The startup world feels a lot more solitary.

For example, if I'm stuck on how to architect a certain service, there's no one I can pull in to help make the decision. More problematically, although everyone always has advice about how you should do your pricing, your sales, your marketing, and so on, ultimately they're all just opinions from people who have not spent anywhere near as long as you thinking about the problem. They may be insightful, and true even, but you can't know until you try it, and the decision to try or not try a certain idea rests entirely on your shoulders.

It's an unfortunate truth of the world of startups that the world expert on your startup is yourself.

So, in hindsight, I wish I'd gotten internships and jobs at startups before starting my own, so I could learn how someone else makes decisions about their own startups, see what they were doing wrong, and try to do better on my own.

James Yu, describing his time at Scribd, seems to agree that being an early startup employee is a great place to be:

It's hard to put in words the amount of experience an early employee gets at a fast moving technology startup. My time at Scribd wasn't just another job — it was a kaleidoscopic learning experience spanning all aspects of business and technology. For those of you weighing the benefits of an MBA program: join a startup instead. You'll not only learn about real world business problems, you'll also execute them in the real world with smart and passionate people.

One key insight before working at a startup, however, is to realise that you are an employee, not a cofounder. You need to be even more sure than founders that you will get something out of it even if the startup tanks. For example, don't work for a startup at a wage where you're losing money every month (though being paid less is ok). You need to be able to save for your own startup, right?

Even founders shouldn't sacrifice everything for a startup, as argued yesterday. For an employee, that should be completely out of the question.

It's one (bad) thing if your girlfriend dumps you because you work too hard on your startup. It's an order of magnitude worse if she dumps you because you're working too hard on someone else's startup!

Don't let your rock stars do the customer support  

The UserVoice blog makes a good point here, that when it comes to customer support, you don't want an exceptional performance, you want a steady, reliable, friendly performance:

Here’s what makes a good support person:

  1. A prompt response
  2. A friendly attitude
  3. A willingness to listen, understand, and think critically before responding


So as fun as they are, let’s all stop looking for our very own Jack White and start enabling our team to make customers happy. That’s what matters.

It's a reasonably point, but it's worth adding that rock stars have their uses in business too. The person who showcases your latest product in front of an audience of thousands should be a rock star, not a "prompt, friendly, listening" type.

And if you yourself are the inconsistent type who works until 8am and then doesn't answer emails for 2 days, make sure you join forces with someone more steady, rather than strangling the habits which give you your obsessive productivity.

Selling your company doesn't make you happy  

Ryan Carson:

Every entrepreneur wants the following things and selling your company doesn’t change them. You want to be …

  1. Solving a problem that makes the world better
  2. Working with people you like and respect
  3. Free to be creative
  4. Hitting milestones and making progress
  5. Challenged and learning

All those things can be achieved within the context of running your own business. If those are not the priorities that you want to achieve, though, perhaps you should not pick a career in entrepreneurship!

Other equally valid priorities:

  • Raise a numerous family
  • Live a peaceful and happy life
  • Be an artist
  • Take over (some part of) the world! - through money, power, or other means
  • Push the boundaries of human knowledge
  • Teach people something of value

And so on... While some of those are achievable within the context of entrepreneurship, if the goals Ryan mentions are not high on your priority list, you may wish to consider doing something else!

Enjoy the adventure that you’re currently experiencing and realize the daily highs and lows are what actually make your life meaningful.

Of course, as one of the commenters puts it:

I always figured that if you sell one business then at least a part of that would be funding the next one. A significant part of starting a business should be because you love what you're working on, when you sell up it'd get boring very quickly without a large project to work on and nurture.

How to find startup ideas that make money  

Here's another excellent article by Paras Chopra of Visual Website Optimizer. He proposes and describes a "market-driven approach" to finding startup niches that make money:

Find a startup idea that: a) is already making money for someone else in a growing industry; b) interests you; c) aligns with your skill sets. Once you find such an idea, simply carve out a niche within the industry by a) addressing pains of an under-served segment within that industry; b) or, making it much easier to use than existing solutions; c) or, disrupting the market by making your product accessible to masses at a much affordable price. And once you dominate a particular niche, expand from your niche with your eyes set on the largest player in the market.

Build businesses, not apps  

A point that bears repeating, by Bryan Doll:

I’m not suggesting anyone stop building prototypes. I’m not suggesting we don’t explore the idea of an application through its development. However, the next time you have that “aha” moment, think first of the value you can create and the app will follow. The app, it turns out, really is the easy part.

A startup is not a web application. A startup is first and foremost a business, and to be a successful business it needs to fulfill some important function for its customers, so that they will be willing to pay for it.

Of course, this doesn't mean that every startup needs to follow this approach, but Twitters and Facebooks are few and far between.

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