daily articles for founders

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

How to deliver an elevator pitch  

Don Dodge on the key elements for an elevator pitch (already covered before here, for those whose elevator rides don't last 3 minutes):

  • have several different pitches of different lengths;
  • start with a description of the problem;
  • describe the target customer;
  • stop for feedback to check the listener cares;
  • present the solution, and why it's better;
  • describe the competition;
  • described the business model (how you will make money);
  • sell the team;
  • close.
Strategic investments in early startups  

As many startups are created by people with ties to related industries, it can be very tempting to look for "strategic investment" from the businesses that you have the strongest links with. This article makes a good case for why that's a bad idea.

The right way to accept strategic investment is from a position of power and independence, and this is best exemplified by the recent investment by WPP in Buddy Media. Buddy had just raised $15 million Series C at a high valuation in the wake of building a massively successful, fast-growing business.

Classic startup mistakes  

This is an interview of Mike Arsenault, product manager at GrassHopper group, which built an application called Spreadable, which was eventually shut down.

Q: Did you talk to customers or just start building?

We just started building. This was probably the single biggest mistake we made. We made the assumption that since our program worked so well for Grasshopper, we could just port over the same functionality to Spreadable. There were major problems with that logic. First, very few of the customers who came to us had businesses like ours. We learned later that there is actually a threshold in terms of customer count for a Spreadable powered referral program to be successful.

For the experienced entrepreneur, the mistakes listed by Mike seem painfully familiar, and even obvious.

If you're on your first startup and thinking "our startup is different, that won't happen to us, even though we're doing the same things", don't. Not getting customer feedback early enough is the classic startup-killer mistake.

5 reasons to sell your startup  

Previously, Ben Horowitz made the point that if you are early in the market and have a good chance of being number 1, you should not sell your company.

Elad Gil looks at the reverse question: what are good reasons to sell a startup?

  1. You're exhausted and don't want to keep going. In the context of startups, this makes sense. A startup is usually nothing without its founders, so if the founders just can't keep going, it probably makes sense to sell. However, if you're building a more traditional company, it's worth pointing out that there are other ways to "take a break": you can hire someone to be the CEO of your company, for example, and morph yourself into a more passive shareholder. You'll reduce you profits, but you'll also greatly reduce your stress levels.

  2. The founding team is about to blow up. Same argument as above.

  3. The acquirer is willing to "pay ahead" substantially.

  4. You are about to get massively crushed by a competitor.

  5. You need financial security or regular cash flow. As Ben Horowitz pointed out in his article, that's a pretty bad reason to sell the company. If the founders are running out of cash and considering selling the company to pay the rent, perhaps the company should pay them a better salary. If the company can't afford that, then it's probably not going to sell for a good price anyway.

It's also worth reading Elad's thoughts on those five reasons.

Picking technologies on the right side of history

When we started Woobius back in 2007, we believed (rightly or wrongly) that we needed to be able to provide a relatively complex, "UI-heavy" front-end to make things simple for our non-technical users. For example, one of the key screens in Woobius is an explorer-like file browser, loved by users, and only possible because of the technology we picked.

We surveyed the field in 2007, which was in the very early days of jQuery, Dojo and other rudimentary toolkits, and came to the conclusion that it would be very hard indeed to use them to deliver our vision (particularly since IE6 support was not optional for us).

So we picked... Adobe Flex.

Based on our perspective, it was the right choice. But our perspective was wrong. There was a factor which we didn't take into account, though we knew about it. It was clear to us that, because of the greater dynamicism and wider community behind javascript toolkits, they would eventually surpass Flex's power, flexibility and speed (and indeed that is what has happened). We knew Flex was on the wrong side of history, we just didn't realise how much it mattered.

As a technology cofounder, one of your unspoken functions is to be a visionary. Businesses are long-term endeavours (or should be). When you make fundamental technology choices for a business, they are there to stay. The longer such a choice is made and not changed, the longer it will take to change it. So, when we chose Flex, we chose it not for the short term (as we may have thought), but for years to come.

And, in hindsight, that was a mistake that cost us.

The cost of using Flex

Adobe (perhaps seeing for themselves that the writing was on the wall for Flex, though I think it was probably sheer laziness) never stood behind Flex the way they should have. They let ridiculous bugs and limitations fester over the years, and in the meantime, the chaotic horde of Javascript toolkits advanced, took over, became superior, better, and became the standard.

All the community effort that took the web into the design-centric UI richness that we know today went into Javascript, not Flex. Flex is now a relic that must be extirpated at great cost to guarantee a future to the Woobius collaboration product. And this is only 4 years after starting development.

When Kublax (a Mint clone) closed its doors in February 2010, articles mentioned there was an alternative called Money Dashboard. I went to check it out. I signed up. I went to the login screen, and I felt this sinking feeling in my stomach. Money Dashboard uses Silverlight. Oh woe! In 2010? Sure enough, within a year, Silverlight was doomed by Microsoft themselves (followed, a year later, by Flex itself). The anonymous tech cofounder of MoneyDashboard made the same mistake we did, though even more flagrantly. I never even bothered to log in, in the end, put off and saddened by the choice of Silverlight.

The history test

When you're picking what technologies to use in your brand spanking new startup, your responsibility as a technology cofounder is not just to make the best choice for today, but to look 3 to 7 years into the future, and make a choice that will be sustainable for at least that long, if not longer. Don't lock your startup into a technology path that is a dead end.

Yes, technology changes rapidly and somewhat unpredictably. That is precisely why you need to make sure that the fundamental, critical pieces of technology that your company depends on are there for the long haul, not dependent on a single vendor, and, most importantly, pass the "history test".

Every time you choose a critical technology to lock yourself into, ask yourself: "Is this technology on the right side of history?"

If it's not, think again.

An easy way to increase startup success rates  

Mike Thomsen writing for Forbes, about the culture of working ridiculous hours:

The irony of this increase in working hours is that it usually comes in service of extraordinarily bad ideas, the majority of which end in failure.

Yep. This is not a new point, unsurprisingly for such an endemic problem.

A study in Sleep, the journal of the American Sleep Disorders Association, found significant declines on "divergent" thinking, a category of mostly creative brain functions.

Sounds a bit like Modafinil's effect on me then.

Here's a constructive and effortless suggestion if you want to easily boost your startup's success chances by what, in my opinion and experience, will be a significant margin (more than double I reckon):

Sleep 8 hours a night minimum, and enforce a half-hour walk through a park every day. And a two-hour walk on Sunday.

Your best ideas will come during that walk, and they will make a very tangible difference to your business's likelihood of success.

Commit to being an entrepreneur  

We've all heard the old parable. The chickens and the pigs decided to make breakfast. The chickens provide the eggs, and the pigs provide the bacon. The chickens are involved, but the pigs are committed.

Jeff Bussgang, VC at Flybridge Capital, makes the point that VCs naturally prefer investing in founders who are committed to the startup - i.e. they've quit their job, they've gotten started, they're getting it done with or without VC money.

Following on from this morning's article about shutting down your startup, I think it's worth drawing an important distinction here.

"Being committed" is important. I've observed founders who could have made a company work, but failed to do so because they never really committed into a sink-or-swim push. Being very good at keeping multiple options open, they never jumped into the startup struggle with enough single-minded focus to actually make their startup work.

However, conversely, I'd argue that the commitment is to being an entrepreneur, not to a specific company. Many of the successful entrepreneurs I know have their fingers in multiple pies. They're committed to working for themselves, they're committed to launching cool new things and making them profitable - but they are not committed to any single specific venture (at least not until that venture is clearly taking off and a surefire winner). They juggle, they make multiple things happen, and they follow success wherever it appears.

In 2011, it's not unreasonable for one person to be running several startups. Be committed to the entrepreneurial way, but don't put all your eggs into a single startup until you create one that's clearly a winner.

Email-first startups  

Ryan Hoover:

Email-first enables startups to:

  • Validate ideas quickly [...]
  • Fake it ‘til you make it [...]
  • Force focus [...]
  • Create habits [...]
  • Be ubiquitous [...]
  • Transfer to other mediums [...]

Very good points. Ryan goes on to point out several examples of email-first startups.

For what it's worth, GrantTree is currently paying £2k a month for a startup that still has no web page. They do have a daily email that is well worth the money, though. Do I care that they don't have a website? Nope. Would I pay any more if they did? Nope.

The choices we make when we build startups  

Joel from Buffer on the impact of his strategic choices to the success of his company:

They have absolutely shaped what Buffer is today. However, if you were to try and attribute these choices purely to success (maybe take revenue as the metric), then I think we could probably be just as successful with different choices:

  • being a distributed team
  • not raising a Series A
  • doing retreats 3 times a year
  • choosing to not have a sales team and instead focus on self-serve
  • serving small businesses rather than large enterprise customers
  • establishing cultural values early and being disciplined about living to them

He contrasts this with another founder whose controversial values included creating a fun workplace, yet grew the business to $8 billion in revenue:

I kept saying that our values were not responsible for the run-up in our share price and should not be blamed for any downturns in the future.

Which leads Joel to:

I can't say that creating a company where everyone is happy is something that will make us more successful, and I can't say that being fully transparent about revenues, user numbers, salaries and other details helps us grow faster than other companies. The point is that our values should hold true in either case, and we should stand by them.

Values aren't independent to the key choices though. Principled decisions connect values to choices, and speed up decision-making.

For example, when Buffer was hacked, they responded quickly and transparently, and they were lauded for it. Joel refers to Buffer's core cultural values: Happiness and Positivity; and Defaulting to Transparency.

In my experience with Founder-Centric, our startup training business, our consistent values have always been Do The Right Thing, Make Founders Better, Be Intellectually Honest, and Choose Work That Makes You Happy. We started by teaching for free, then when we wanted to teach full-time, we only charged for big workshops. By keeping a free option, we stayed true to Do The Right Thing. But we started to burn out from all the travel, so moved into curriculum design. Choose Work That Makes You Happy. This also made more time for the right workshops, conference talks, deeper research, and making our content freely accessible.

We can navigate our business through various stages because we stay true to our values. This hasn't been simple, because four partners need to agree each time! But each decision is far faster and easier because we refer to what we stand for.

Attention seeking for startups  

Here's a great post by Milo Yiannopoulos proposing some occasionally tongue-in-cheek tips for startups to get attention early on in their life, when they can't afford to spend much on PR.

Prey on a journalist's weak spot. Taking a journalist for lunch is one of the most effective ways to get coverage. It's time consuming, it's borderline immoral, but it's true. That's because we're all broke and consequently don't eat out much. Be strategic about who you approach, find our what they like (eavesdropping on their Twitter feed is a good way to do this) and drop them an invitation. There are other ways you can tickle a journo's sweet spot too: find out what their hobbies are and tailor your communications accordingly. The Jedi move is flattery: no journalist is immune to the "I love your stuff" line. Even if they don't believe it's entirely sincere, they tend to respond to it anyway.

One thing that I've learned about early startup PR is, if you're paying someone to do your PR at that stage, you're doing it wrong. As Milo suggests, be creative, be controversial, be novel and opinionated, and if you can draw in some kind of sex or celebrity angle, even better.