daily articles for founders

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

Using advisors to raise money  

Very interesting article by VC Nic Brisbourne, examining the usefulness of advisors in raising startup money. Some interesting numbers:

Advisors are typically small partnerships, or individuals, who help startups raise money from venture capitalists. They usually charge some form of retainer, and then a success fee of a percentage of funds raised and perhaps some options. Retainers normally range from £5,000 to £10,000 a month, the percentage of funds raised between three and five per cent, and options up to 0.5 per cent of the business.

These retainers sound expensive, but, as Nic later points out, if using an advisor is right for you, and you're dealing with an experienced advisor with a close-to-100% success rate, this can certainly be worth the money.

Nic also advises startups who are considering this route not to bother with unknown advisors:

If you are going to use an advisor, then for heaven’s sake go for one who is well respected, well known, and has a wide network. Otherwise you might as well email the VCs yourself.

More in the article.

Quick and dirty application of Hypothesis Driven Development  

John Wedgwood published this piece proposing a quick and dirty application of Hypothesis Driven Development:

  • Meet weekly (or more often if you can manage it)
  • Identify the single most important question facing the business
  • Break it down into parts that feel answerable
  • Figure out how you can get answers (or partial answers) quickly
  • Get those answers before your next meeting, then repeat

A key point he notes is that most of the answers did not need any coding or product development. That is true in my experience too, though it can be, for some reason, a counter-intuitive pill to swallow for someone with a builder mindset.

Why code something we won’t end up wanting? It would take longer, and we can make phone calls today.

Send your (wrong-fit) customers to your competitors  

The UserVoice blog makes a good point that you shouldn't keep customers at all costs:

If you wrangle a wrong-fit customer into continuing to use your product, they will cost you in:

  • Time you spend answering their emails asking for things you can’t do
  • Reputation damage via their public complaints about how your product isn’t satisfying them
  • Even more reputation damage when they finally announce they’re moving to a competitor

Instead, they suggest sending wrong-fit customers to the competition, which should bring a number of benefits, such as having them talk about how nice you were to them even though they didn't purchase your product, and perhaps getting them as a customer later, if your product becomes right for them.

It's worth clarifying that in this case we're not talking about toxic customers, who are actively noxious and never desirable, but merely "wrong-fit" customers, who are desirable but simply not right for your business right now.

Don't build a product without validation  

Trevor Owens:

There’s a pervasive, logical fallacy out there in startup land. Propagated by a Steve Jobs quote and entrepreneurs in denial, it is the fallacy that customers don’t know what they want until you show it to them. Of course, the mass market doesn’t know what it wants until you show them, but early adopters do. Logically, they must know.

A good point worth making more than once: if you are convinced that your idea is evidently brilliant, but you can't get any customer validation for it, you are wrong.

Going into denial, failing to accept that you're wrong, won't make you right: it'll just make you poorer. Having a vision is essential. Having tunnel vision is deadly.

It is important to get some market validation for your ideas, especially if you think they don't need validation, because they're obviously valid: that's the time when you're most in danger of getting it all wrong and flattening yourself on the ground like an egg fallen off a high shelf.

Dealing with conflicts in your business  

Would you believe it, startup founders are human beings, and face the same kinds of difficult human issues that the rest of the world faces.

The techniques that Dr. Jared Scherz outlines work for situations other than those found in startups. They work, in fact, for many difficult situations. In particular, stepping outside your immediate situation to look at it objectively is a powerful technique for dealing with conflicts.

So take a moment and step back before reacting to people or situations. Ask yourself what is going on inside you to trigger your feelings. Consider what is driving the actions or inactions of others around you. Scan the team to see how people are working together and what the underlying causes are for problems. Base your responses on what emerges through your awareness to prevent impulsive decision making. As the CEO you are responsible for attending to the processes of your startup, not simply executing a wonderful product or service.

Worth a read if you feel you could use a primer in how to deal with conflicts in your business.

Building a strong company trunk  

Here's an excellent article by Spencer Fry of of Carbonmade, about the importance of building out a very strong core capability before branching out into other domains.

Think Apple and Facebook — both launched with a single stripped down product — Apple's operating system (their hardware was just a delivery system) and Facebook's simple social networking: messaging and, more importantly, photo sharing. Both focused all their attention on building their trunk and then leveraged their core product to branch out.

Spencer also has some good advice for how to go about building this strong trunk: be patient, persistent, and focused.

Too many entrepreneurs think that they need to rush to become overnight successes or they'll never get there. They think it's a sprint and not a marathon. Carbonmade has been around for five years as of December, 2010. It took us three years to be able to work on it full-time, and then another year and a half before we were able to hire our first two employees. Carbonmade is only at 1% of what it'll be in five years. Patience, my friends.

Other than having patience, you need to build a stripped down, functional product that is focused on a special type of user, but at the same time something that can still be used by a more general audience. That way you aren't discouraging anyone from using it.

What's your company's trunk?

Play/life balance  

Greg Bayer:

Working for a startup usually means putting in more hours than others.  Recently, I spent two days on less than 3 hours of sleep in order to push out our new Pulse.me release.  This doesn’t seem strange to me and didn’t make me unhappy.  In fact, it was one of the most exciting and fun things I’ve done in a while.

Chasing after dreams is an essential part of my life.  The feeling of fulfillment I get from doing so makes me a much happier / more content person, and this in turn positively affects my relationships.

I've argued before that hours are not a measure of productivity, but that's not Greg's claim in this post. He's saying, quite rightly, that working on your startup is not work, it's play - and so, unlike working stupid hours on a job, working stupid hours on a startup is a blessing, not a curse.

I'm reminded of an old saying:

Why work for someone else from nine to five for a daily wage, when you can work twenty-four hours a day for yourself for free?

So which view is right? Neither, really. If you feel like working, work. If you feel like resting, rest. If you feel like playing, play. Working for yourself, chasing your own dreams, is worth pursuing with far more energy than the typical job - but life is what happens while you're busy working on your startup.

I'll finish with an observation: I feel most happy, most rested, and most productive when I have had a solid 8 hours of sleep, starting and ending at the same time each day. This plus a good task list has more effect on my productivity than anything else - other than, perhaps, the pressure of an immediate deadline. But that type of intense work under pressure usually has a cost the following days.

How to get users through business partnerships  

Getting users from another business via a partnership (what the author calls B2B2C) can be very hard to pull off. I've had several such attempts fail in the past. So it's with great interest that I found and read this article by Brian Balfour that provides a thorough guide with do's and don't's - well, as thorough as an article can get.

Enjoy the article here!

More about NDAs  

Stef Lewandowski takes a slightly different angle about NDAs. Whereas I previously explored why I wouldn't sign NDAs in initial conversations as a recipient of those documents, Stef looks at why he used to ask for NDAs and how he's changed his mind about it:

Non-disclosure-by-default introduces the risk that your company culture could be poisoned by secrecy at an early stage. I distinctly remember moments in a previous “stealth startup” company where I and those around me were so tied down with non-disclosure that we didn’t tell our own families what we were working on.

The effect of this after we launched was that nobody was sure when or if they were allowed to talk about what we were working on. As we all know, regularly communicating about what your company is working on is a big part of a good marketing plan.

Stealth can be poison to company culture. Through secrecy, you accidentally push your company into a closed, rather than open, mode. And that can be hard to cure.

Stef also covers a number of other angles.

If the fact that other people won't sign your NDAs didn't convince you not to ask for them, perhaps this article will...

How to raise a Series A round  

Elad Gil offers some structured advice for how to raise a Series A round, and how it differs from angel funding. The headlines:

  1. Line up all the meetings in a short period of time.
  2. Create an auction.
  3. Make the first 2-3 meetings "practice meetings" if at all possible.
  4. Find the right partners at the right firms to talk to.
  5. Use back channels to your advantage.
  6. Treat the pitch as a product - iterate on it until it is great.
  7. Know what you are optimising for (control, valuation, expertise, etc).

The best advice missing from the list? As with many tricky aspects of stating up, get advice/mentoring from someone who's familiar with the process.

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