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daily articles for founders

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

Public speaking for normal people  

Public speaking is a fundamental entrepreneurial skill. If you can't do it - you should learn to do it.

Tragically, many people come out of the European educational systems with little or no public speaking experience, not even in front of their classrooms. By contrast, in America, most children are regularly forced to do "show and tell" or other classroom speaking activities, which eventually takes away much of the fear of public speaking.

Ultimately, the only way to get over your fear of public speaking (if you have one) is to do it, repeatedly, until it goes away. One place to do so is Toastmasters, a non-profit organisation which has chapters all around the world.

However, practical tips are also welcome. Here are some tips from Jason Freedman. Summarised:

  1. Have a standard "routine" that you do before very speech, that gets you in the right frame of mind.
  2. Do not use powerpoint - if you do, have only a few words per slide and don't look at the slides.
  3. Pick two people in the audience and speak to them.
  4. Don't worry about your "Ums" and other filler words/sounds.
  5. Don't memorize your talk or, even worse, read it out.
  6. Practice in front of real people, not alone.

Read the whole article here.

Test your startup ideas for $20  

In the theme of validating and invalidating your business ideas, here's another approach.

Explain that your brother has a crazy business/product idea, and that he's about to get a 2nd mortgage on his house, raid his 401k and quit his job. His wife is a nervous wreck, afraid that they'll lose their house and retirement fund, and he's hit your parents up for seed money that they really can't afford to lose. Your parents and your sister-in-law have come to you for help to try to talk him out of his hair brained scheme.

Suggesting that it's your brother's idea is a good move, because people will often avoid giving negative feedback in person. With this approach, however, you'll really elicit all the negative feedback they can come up with.

The salesman and the developer

A salesman and a developer go on a bear hunting trip.

They arrive at the cabin in the woods and start unpacking the car, moving stuff into the cabin, getting things ready for a week of bear hunting in the wilderness. The salesman quickly gets bored of this and says:

"Tell you what, you continue unpacking and getting everything ready, and I'm going to go and find us a bear."

The developer sighs and nods (he's used to salesmen), and continues setting up while the salesman vanishes in the woods.

Half an hour later, as the developer is about three quarters done with getting things ready (the cabin is now all neat and tidy at last), he hears a very loud growl as he comes out of the cabin. Twenty metres away, the bushes start shaking. Out shoots the salesman. Right behind him, a huge, snarling, drooling, roaring monster of a bear. It's twice the size of a normal bear, and it's very, very angry.

As the developer hides behind a chair, the salesman runs right up to the cabin, with the bear on his heels, and just as he's about to go through the door he quickly leaps to the side. The bear crashes past him right into the cabin, and the salesman deftly closes the door right behind, locking the bear in. Loud noises can be heard as the bear begins trashing the inside of the cabin.

The developer emerges from behind the chair. The salesman cheers and says:

"Woohoo! That's the first one. Now, you kill him and skin him, I'll go find us another!"

Two perspectives

There are two ways to understand this story, and which way you favoured largely depends on whether you're a "builder" type or a "sales" type.

If you're a builder type, you see this as a great story that illustrates a common problem with salespeople: they don't seem to care about what happens after they make the sale. Actually delivering the project is hard work, but by then the sales guys have moved on to something else, so they don't care (and, as an additional problem, in some industries the salespeople will sell stuff that can't be realistically delivered).

However, if you're a sales type (like my cofounder, Paulina), you have a different perspective on this story. It's yet another story that makes fun of salespeople while completely discounting just how hard it is to not only find that damn bear, but bring it back and get it through the door.

Who's right, then? Both, of course. In business, you need both to find and sell clients, and the ability to then deliver what you sold them. One without the other is not a business.

Sales is not optional

Many people who "do startups" these days are from a technology background. In other words, they're builders rather than salespeople. And, like all builders, they tend to disregard sales as something that can happen later, something secondary that we'll solve when we get to it.

Well, sales isn't secondary. Speaking as a builder type myself, and having experienced businesses both with competent sales and without, I now believe that having someone whose job it is to go and find clients willing to give you money from day one is so important, that I would not start any company without such a person.

Sales don't happen without someone energetically pushing the product, service, or whatever it is you're intending to sell. Some may dream of products that sell themselves, like Dropbox or the original Apple II, but even awesome products like those took serious sales effort to get off the ground. Apple had Steve Jobs, one of the master salesmen of his generation, pushing the product everywhere he could and striking bold deals to get the company off the ground. Dropbox endlessly tweaked their referral scheme before they went viral.

Some few businesses like Google or Facebook or Instagram get to figure out the business model later. They can do without sales, perhaps. But this model only works in one place in the world, and unless you're starting up in the Silicon Valley bubble, your business is not a business without sales.


The startup founder dropout lie  

Worth repeating this point. Latest rehearsal is, unusually, by a student, Jason Adriaan:

There is something about a story about a young unqualified person that effortlessly makes millions that appeals to us in this industry. In fact it's very much like every Hollywood movie you've ever seen: some unlikely hero against all odds manages to come out on top in under 90 minutes. We all know it's a lie and that in real life things are a lot more complicated, but when it comes to the tech industry for some reason we buy the lie.

Some of the other points in this article are over-generalisations, but the the key point is correct: startups (the fast-growth, big-VC-investments kind) are largely a lottery, and unless you know your ticket is already a winner because you've just raised $20 million for your startup, dropping out of university is not a good idea.

Dropping out to work on someone else's startup is even worse an idea (you get all the downside and very little of the upside).

Startup lessons from Constant Contact  

I'm not a huge fan of "X startup lessons" posts. They tend to be easy to write but hard to action, because they're fairly context-free, and when it comes to startup advice, context is everything.

However, this post seems better than the average. It's very focused on advice for low-priced SaaS B2B products, contains clearly actionable points, and quite quick to read. Here are a couple of points that stood out:

  • Get a CEO peer group to bounce ideas off of as soon as possible. Gail learned from a fellow CEO that calling free trial-ers would lead to a doubling in their "trial-to-pay" conversion rates. Trying this was the difference between a model that she thought was failing miserably and one that has built Constant Contact into a publicly traded company (see #3 on giving experiments enough time).
  • If your product is strong enough, people do not need to be sold. Focus your sales teams on being coaches, not salespeople. This means focusing salespeople on making prospective customers successful, and not on near-term revenue maximization.

The article also includes an audio stream of the interview if you want to listen to the whole thing.

How VC firms are managed  

Here's a great article by Jo Tango, that starts off as a description of the way in which VCs are paid (which is relatively common knowledge), and proceeds to explain some interesting facts about the way VC firms are managed (which is not so common knowledge):

The existence of the management company has a few implications. First, the Chief Partner cannot be fired without his/her consent. Every other partner at a VC firm can be, including the ones who have worked hard to earn pieces of the management company. So, a partner at a venture firm is usually an employee-at-will. They can be fired at any time.

(...)

Now, a VC firm's culture varies from one to another. The Chief Partner may delegate authority so that all partners have a voice in an investment decision-or, he may allow input from others, but in reality, is the one making the decisions. Entrepreneurs need to know that when they pitch a firm. Who is the Chief Partner and do the other partners have power?

Read more here.

Horizontal vs vertical products  

Joel Spolsky:

Vertical software is much easier to pull off and make money with, and it's a good choice for your first startup. Here are two key reasons:

  • It's easier to find customers. If you make dentist software, you know which conventions to go to and which magazines to advertise in. All you have to do is find dentists.
  • The margins are better. Your users are professionals at work and it makes sense for them to give you money if you can solve their problems.

Making a major horizontal product that's useful in any walk of life is almost impossible to pull off. You can't charge very much, because you're competing with other horizontal products that can amortize their development costs across a huge number of users. It's high risk, high reward: not suitable for a young bootstrapped startup, but not a bad idea for a second or third product from a mature and stable company like Fog Creek.

Spot on. And with the ever decreasing costs of starting up, tiny vertical niches that were previously not worth anyone's time are becoming worthwhile targets for first-time entrepreneurs.

If you haven't checked out Trello, which is the product Joel is referring to, be sure to do so. It's probably the best generic people/process-management tool I've found online yet. I'm not kidding.

While we're on the subject of Trello and Spolsky, they both make a great example of an experienced entrepreneur (Joel has an array of profitable products under Fog Creek Software, and also cofounded the hugely successful StackOverflow) using a cash pile to protect a project from short term profit considerations.

Whether that leads to a profitable exit for Trello is another matter, of course.

How designers and developers can work together  

Matt Gemmell has written two excellent articles recently, aiming to help developers and designers to work together:

Both are solid and worth reading. The key points for developers:

  • Know what you want
  • Examples are helpful
  • Trust your designer
  • A sketch goes a long way
  • Consider sample data
  • Present all the work up-front
  • Remember design constraints
  • Be responsive
  • Don't assume it's easy
  • Don't micro-manage
  • Use the same tools
  • Speak the same language
  • Allow use as a portfolio piece
  • Pay on time
  • Don't condone spec work
  • Understand the model
  • Source code is extra

And the key points for designers:

  • Use an intelligent method of version control
  • Keep your layers
  • Name all your layers meaningfully
  • Use groups, and do so sensibly
  • Prune unneeded layers
  • Use Layer Comps
  • Keep everything as vectors, and scaleable effects
  • Learn how to preserve rounded corners while resizing
  • Design at 72 ppi
  • Snap to whole pixels
  • Always use RGB mode
  • Asset-preparation is part of your job
  • Be careful with fonts
  • Mimic the platform's text-rendering (where possible)
  • Be sure of design dimensions
  • Use the platform's idioms
  • Design once for landscape, then design again for portrait
  • Design for each major screen-size, and their contexts
  • Use genuine or at least realistic content
  • Consider localisation
  • Respect the global light source
  • Make navigational or organisational constructs explicit
  • Export cut-ups without compression
  • Ask about shadows
  • Understand how buttons are constructed

Read, bookmark, and remember.

Fit your product to the right market

On my first startup, I made the mistake of not talking to customers at all until launch day. As a result, the product sucked - it was not fit for any market. And because it was unfocused, it was impossible to define any sort of effective marketing strategy, either. This is the kind of expensive mistake you don't make twice, and I extracted it as a one of my "N tips" posts later (see tip number 4).

So imagine how surprised I was when I managed to make a variation on this mistake again with the next startup - albeit in a different flavour. We launched within 2 months, had active users from the right industry right away, saw the product spread... and yet when it came to charging people, the process of getting those happy users to pay was harder than pulling teeth from a cat! Moreover, when trying to sell to other potential customers, who had been unwilling to use the product for free but seemed more inclined to pay for it, there was always a feeling that the product was exciting and had potential, but it didn't quite do what they needed in order to justify paying for it.

In startup lingo, that's known as a product/market fit issue.

Fit the right market

It turns out that getting a prototype out there is not enough. You have to get the prototype into the hands of the right market. If you're planning to sell a paid SaaS product, this means finding early users, from day one if possible, who will pay. Otherwise, you're getting product-market fit - with the wrong market.

In that context, it was good to see, recently, the following story about SyncPad, who did launch to paying customers right away - which enabled them to discover that their paying market was not who they thought initially:

After Davide launched his app he hit the streets and began talking with his actual customers. What he discovered surprised him. Instead of taking the art world by storm, Davide discovered that his true customers for SyncPad were in the business market. He found that companies were using SyncPad to help manage meetings (both remote and locally), real time visual communication, and for presentations.

SyncPad made some wrong assumptions about who their customers would be, but by charging early, they found those assumptions out very quickly, and were able to pivot their product into the right market.

The price selector

Price is a very strong selector when it comes to users. The people who pay are often not the same as the people who want a free product. This is especially obvious in the B2B market, where "how much the customer wants to pay" allows you to select between enterprises, small businesses, freelancers, etc.

If you build a product with the feedback from free users, you'll build a product that's great for free users. If you want to build a product which users will pay for, you need to be charging them as early as possible so your product feedback comes from paying users.

Charging early

One approach for charging early is to ask users to pay from day one, even while your product is in early beta. Even though they're helping you out a lot by being some of your first users, you need to validate that they are the right kind of user, and the only reliable way to do that is to ask them to pay you.

Of course, you can't charge them the full price. They'll laugh you out the door and you'll lose a potentially very valuable relationship. So, what do you do?

You give them a steep discount. "We're still early in the development, so you will get a 90% discount for the first three months, and we'll review the price upwards as more features are developed." This can also lead very nicely into a discussion of what feature they would most like to see in order to accept the price increase in three months. This can turn into your product road map, if you manage it well.

Of course, perhaps no one will want your product even at a 90% discount - but if that's the case, you should revise your assumption that they'll be willing to pay for it at full price, ever, and perhaps pivot into a different product, one that people are actually willing to pay for.


How many VCs should you have?  

Mark Suster makes the point that the ideal number of VCs to have invested into your business is 2.

"Many" has benefits but it also has drawbacks. If you plan to do it I highly recommend that most of the VCs be smaller funds and ones who are generally not looking to invest much more after your first round of capital. There are firms with this stated objective - seek them out if you want to load the VC roster on your deal.

(...)

There is an obvious pitfall to working with just one VC - if you fall out of love you're screwed. There are reasons why VCs sometimes don't support deals once they've invested.

(...)

In my mind [two VCs is] the perfect scenario. You get all the benefits of the "many" deal without the drawbacks. If you can pull it off, I love the "two-handed" deal. If you're doing well but need a little more gas to prove yourself, it's so much easier for VCs to split an inside round. It's both a smaller check and it's external validation that somebody else was willing to fund.

Mark ends with some practical advice for managing herds of VCs, for those of us unlucky enough to have this problem:

  1. Always have a lead: no lead = no one on the hook for tough times.
  2. Make sure the lead VC is the right lead for your stage: generally, don't raise a $2m round from a $1b VC, or a $10m from a $100m VC.
  3. Make sure they have enough left in their funds, or are raising the next one soon, so they can fund follow-on rounds.
  4. Make sure they play nicely: if they don't play nice while they're still trying to charm you while you're raising the fund, they'll get worse later.
  5. Always pitch outsiders first for follow-ons: it keeps the insiders honest.
  6. Always make room for value-added angels.
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