So I am spending more and more time these days advising concept stage and seed stage startups. And I had an interesting conversation with a pair of entrepreneurs the other day about press releases and marketing. They had reached a significant milestone and put a release on the wire. They were waiting for coverage.
I had the break the news that you don't really get coverage from putting a press release on the wire. You have to work it like this.
Somewhere along the way it came up that they had dropped a low four figure amount on a PR agency to help them with their release and to create a list of potential writers to contact. I love using an agency at the appropriate time but for companies without funding or revenues getting attention is a core competency that someone on the team needs to develop. It will both save you some money and people that write about startups prefer to talk with founders over flacks.
While we were having this discussion one of the founders started having a bit of a text exchange with a writer for a national news website focused on information technology companies from startups to Fortune 1000 firms. Seems he had networked his way to the writer. Hot space. Got same day feature coverage.
I have been reading and thinking a bit these days about the sources of startup ideas. How ideas that are worth turning into technology startups come to life. The best work I have found on this is by Daniel Gulati who actually conducted some primary research on the matter and wrote it up for the Havard Business Review. Good stuff but I don't think he has it totally right. As I have thought about this it seems there are two primary categories that serve as sources of startup ideas; those that occur naturally and those that are manufactured.
Natural or organic startup ideas just happen in the course of your life. It is almost by accident. The aha moment when you experience some pain, could not find something to fix it, and have a sudden realization that you should go out and solve the problem yourself. This is how Charles Brewer came up with the concept for MindSpring and David Cummings created Pardot (Pardot was a pivot). I believe this the best source of startup ideas. It's just kinda hard to plan an accident.
Another natural situation that occurs is when you are working at a company and discover a customer need that no one is addressing and for whatever reason your employer does not wish to address that particular market. The most obvious of these in Atlanta was ChoicePoint, which was spun out of Equifax. Endgame came out of ISS in the same fashion. ScoutMob actually got their start when EarthLink shut down its municipal WiFi network and some of the laid off employees founded SkyBlox.
The second large category of startup idea sources are those that are manufactured. The most prevalent manufactured startup idea is created of necessity. It is also known as a pivot. The original startup concept is not as successful as desired so the team has to figure out some other model. Examples abound. The aforementioned SkyBlox pivoting into ScoutMob. The Sunday Paper becoming Half Off Depot. Viture moving from a walled user generated video service to a social platform. CipherTrust was a pure message transfer agent before becoming an email security company. I could go on.
Finally there are purposely generated startup ideas. While I have an ongoing list of startup ideas that I think about, just sitting down and coming up with good startup ideas is incredibly hard. It's so hard that I am extremely hard pressed to give examples. I agree with Paul Graham (and his Ideas for Startups and How to Get Startup Ideas are most reads). The best way to get startup ideas is to look for problems. Problems where you have some domain knowledge. Problems where you know other people that might be able to validate them. Problems that you could potentially solve. While problems to solve abound not many of them meet the criteria for evaluating startup ideas.
The catch-22 around startup ideas is that in some ways purposefully generating them seems more challenging then stumbling upon one. Startup ideas are best generated if you are working on something else than trying to generate startup ideas.
One of the things that I have been pondering lately is how I can evaluate startups and startup ideas more systemically. There is good reason for this; I am looking for my next venture. And as I was contemplating how to go about this a thought popped into my head. Evaluate them in the same manner that investors do. Which took me back to a lesson I learned from Merrick Furst, the founder of FlashPoint.
Merrick taught an undergrad entrepreneurship class at Georgia Tech. I sat through some of them. During one Merrick explained a venture risk framework that most investors used even though they generally don't talk about it. The framework included management risk, market risk, product risk, and funding risk.
From an early stage investors perspective all startup milestones should be focused on reducing management, market, technology, and funding risk. And if you are going to be investing the most precious commodity in the world, your time, it is not a bad lens for an entrepreneur to use as well.
Looking at startups and startup ideas through this lens leads to a host of questions to ask to evaluate the risk inherent in the opportunity. You need to get to a point where you can decide if the idea is something that could become a real company. Below are some of the questions to ask.
Is there extreme need/pain being felt by an individual or group?
Do they have money to spend?
Are there enough people feeling the pain, or put another way is the market intuitively large enough to create a meaningful company?
Is there any potential potential impact of government action?
Is management team passionate about the market?
Can a team of A players be attracted to the startup (many of which are asking the same type of questions listed here)?
Doe the team have experience in the space with deep domain knowledge.
Does the team have the ability to leverage personal networks to build the business.
Does the team have strong past professional relationships built on mutual respect and trust.
Does the team have shared values and work ethic.
Can a product be created to address the market need with the team that can be assembled?
Can a compelling step function improvement unique selling proposition be created?
How can long-term sustainable differentiation be created?
Is the business model capital efficient?
Can it get to revenue within one year and a repeatable sales process within two years.
Can the team fund it to cash flow positive or further investment?
You also need to ask yourself if the startup is one where you can have an impact. You have to look at it through the lens of your own personal experience and the value you can bring. For example when I personally evaluate startups or startup concepts I look for a business to business SaaS or SaaS like Internet company with a consumer element where sales and marketing are key drivers to business success. I know I can have a significant impact on these type of businesses.
Your lens is likely to be much different. Know what it is and focus on it.
Look at startup concepts and startups through the lens of investors and your personal experience. If you do you are more likely to find a winner.
While a number of articles have been written on startup naming by the likes of Guy Kawasaki, Jason Calacanis, and Dharmesh Shah, I but together my own simple five point framework for startup name characteristics. I hesitate to call them requirements because in today's day and age if you are going to meet all the requirements it would take a pretty good chunk of change that concept and seed stage companies can not afford.
I will also say this, I am not sure if the company name really matters. If might give you an edge but it may not be a big issue. It is an subject that deserves some serious cycles but if you take a peek at the winners in the Atlanta tech space it is hard to discern if the name matters at all on ultimate company success.
This is the most element to me. A startup name needs to be memorable. To be memorable it needs to be brief. Four syllables or less. Less is good. Think eBay, Google, Netflix, Twitter, and Yahoo!. All two syllables. Two syllable names also seem to have the best verb potential. Dropbox it to me.
Part of the reason is that you don't want the name to become too long is that people will have a tendency to cheat on your name. A great example of this is Internet Security Systems. Great descriptive name, but so long people just called it ISS.
A bigger part of the reason is that you want the brand and word of mouth effects that a memorable name provides. Having a memorable name greatly increases word of mouth marketing potential.
The name needs to be memorable not only to people but to machines. Machines such as search engine crawlers. You want to be sure it is unique enough that you can own it via SEO.
2. Easy to spell and pronounce.
You want someone to be able to spell and say your company name correctly unprompted after hearing it one time. This, along with shortness, are the two most important elements in my book. If it is not obvious know to spell you will spend the rest of your time with the company dictating the letters over the phone every time you talk to someone for the first time or they ask for your email address.
If it is not obvious how to say the name you are going to have a much harder time building a brand. And this may sound a little out there but people have to like the way it makes them feel when they say the name. Xobni does not exactly roll off the tongue with pleasure. You want your name to make people smile.
No hipster buy a vowel names allowed.
3. Reflect product capabilities or be evocative.
Some of biggest brands on the Internet today have names that do not reflect their product capabilities but are evocative. Amazon, Google, eBay, Yahoo.
Some of the biggest brands on the Internet today have product capability names. Facebook, LinkedIn, NetFlix, The Weather Channel.
While I prefer product capability names I will also say this. If you go down the road of your company name reflecting product capabilities it can create issues if you have to pivot. More likely than not you will pivot.
The key to the mark being clear is if it has the potential to create confusion in the marketplace. You find a trademark clear name you should start the process of registering it as soon as you use it in commerce.
5. Able to secure web properties.
You want to be able to obtain the .com domain and the company name on the big three social networks (Facebook, LinkedIn, Twitter) if appropriate for your market. The .com has to be available or available for a price that you are willing to pay, now or at some time in the future. Successful companies cheat on this all the time. Twitter was Twittr. Delicious was Del.ocio.us. Do what you have to do to grow the company and then getting the right web property in the future seems to be a enough common practice that you can pursue it if you have to do so.
Planning at a startup, like most things, is hard. Conditions are rapidly changing and the amount of real information that you have is smaller than in larger more established companies. One tool to use to help in planning is the creation of strategic priorities. It is kinda like a big company three year plan. But due to the rate of change and unknowns startup strategic priorities need to be set about every six months.
Not sure if Charles Brewer or Mike McQuary came up with this strategic priority scheme. Perhaps they came up with it together. All I know is that it works. Here it is listicle style.
1. Assemble the team off site. You need to gather up the senior team and get them off site for a day or so to focus. Depending on the stage of the company this could include board members, investors, advisors, co-founders, or senior management. Plan on a day and a half. You need some time to think about things overnight.
2. State of the company address. The girl or guy in change opens the meeting with the state of the company and the purpose of the meeting. The purpose of the meeting is to come up with a set of three to five overarching objectives for the company to meet over the course of the next six months. It's a team effort, the guy and the girl should not get too deep into the below at this stage. It would taint the outcome.
3. Review past strategic priorities. If this is not your first time at the rodeo, doing a post-mortem on the previous set of strategic priorities is a must. Grade the results just like in school. A - F. Talk about the why. There are both good and not good reasons for not achieving an objective. Know which type is at work. If it is a not good type discuss how to improve the cause of failure going forward. Have a scribe to capture this and all other discussions at the off site.
4. Macro environment discussion. Have a discussion about the big environmental factors potentially effecting your business. The economy, politics, change/potential change in government regulations, the financial markets, other technology areas to name a few. These are not really things that the company can control but discussing what everyone is thinking about concerning the wider landscape helps to provide some perspective as the team starts drilling down.
5. SWOT analysis. Have a SWOT analysis discussion. Or if you prefer a Porter five forces analysis discussion. Once you do this, combined with steps 2 through 4 above it is time to determine the strategic priorities.
6. Strategic priority selection. Have everyone present the three things that they feel the company needs to focus on during the next six months. By the second or third person themes will start to emerge. Combine them into some smaller number. Have the team debate what is really the most important areas for the company to operationally focus on during the next six months. Pick five give or take one or two. Have no more than seven. For each strategic priority appoint an individual at the meeting that is accountable for its delivery. More often than not strategic priorities are focused on customer experience, product development, and revenue generation.
7. Set strategic priority measurement criteria. The last thing before getting back to the work of the day to day is setting measurement criteria for the strategic priorities selected. These metrics will be used in the weekly progress report and to grade the work toward the objectives at your next strategic priority meeting. The person directly responsible for delivery of the strategic objective should lead the discussion on the appropriate metrics.
8. Create drill down objectives for every employee. Every employee needs to understand the strategic priorities and how their actions contribute to it every day. Explain the priorities to those (if any) that were not at the off site. Jointly come up with goals and measurements for each and every employee. Either one on one or in teams.
9. Discuss progress every week. Every week as part of an internal team meeting set aside time to discuss progress against the strategic priorities and what adjustments need to be taken to meet the objectives. In my experience sharing this with the entire company during company meetings is very powerful. Having the person accountable for achieving the strategic priority provide these updates works best.
10. Rinse and repeat. Managing via strategic priorities is a great tool. Do it once then rinse and repeat. Adjust as necessary for your company.
Don't hire your friends just because they are your friends. This, along with slow decision making, is portrayed as Ev's downfall and the reason for his ouster as CEO.
Have no mercy. When Ev pushes Jack out of the company he leaves him with a ceremonial board seat. Jack uses the seat as a place to plot his revenge and oust Ev.
Backup your application. At one point pretty far in there is no backup of the Twitter database.
People behave differently when a lot of money and power are at stake. What begins as a small team trying to do their best to start a company can turn into something much more complex pretty darn quick.
Fred Wilson comes across as a hard ass. Nothing at all like the friendly guy on A VC. Not sure if I believe the portrayal. Then again, people behave differently when a lot of money is at stake.
I don't know how accurate the tales are in Hatching but it is a darn good read with many lessons. Highly recommended.
There is a lot of startup events and conversations happening around Atlanta, it is exciting to see, but I am wondering: “is it really helping, honestly, is it helping create better entrepreneurs and more awesome businesses?”
The short answer is yes.
The longer answer is a little more complicated and I have written about it before (the link is worth the trip for the comments). My short take is that there are too many events, or to be a little more specific there is an opportunity for entrepreneurs to attend too many events if they are not disciplined in focusing on creating products, getting customers, and building companies. Attending events is easy. Those other three things are hard.
Since I wrote that first article on the subject back in 2010 I have moved from helping entrepreneurs to running a business. I have taken my own advice. I typically do not attend more than two events per month. I have also taken to following David Cummings advice on work life balance throwing out the word "average." No more then one evening event per week. It forces me to make choices and keeps me focused.
Back in the day when I used to listen to lots of investor presentations I was sitting in a room one day listening to a pitch with a group of angels and VCs doing exactly that. The entrepreneur got to his financial projections slide. Everybody started shaking their head yes. They liked the numbers.
At that moment it dawned on me that every time I saw numbers in that range I would see the same reaction from investors. I wrote them down in my trusty Moleskin.
The other day I was helping an entrepreneur with his financial model. And like a flash those numbers came back to me. I did not remember them but I knew where to look them up. My notes from December 2008.
While certainly not right for every startup these numbers seem to be pretty good guidelines for the type of ramp that early stage investors like to see in presentations. Fact of the matter is any number put together like this is purely a work of fiction and achieving them takes great execution and a little luck. Very few startups make it to revenue numbers like year four and five.
But if you are looking to pass the sniff test of early stage investors having a solid financial model with results somewhat in the range above will have you coming out smelling like roses.
Alan Dabbiere wrote a most excellent article on the WSJ blog The Accelerators. A lot of folks (David Cummings and Stephen Fleming to name two) have been writing about why Atlanta is a great place to build and scale a startup recently but Alan really hits the nail on the head. This is from a guy that started and built two billion dollar market capitalization companies in the ATL. The money quote:
"Here you can start and build a great business, meet your first customer, access to a deep bench of talented individuals and the innovation produced by our great universities. At its core, Atlanta is also a great place to live."
Atlanta has the ingredients to start companies. Being a great place to live is just the cherry on the cake. That's why I'm still here.
Force of Good is licensed under a Creative Commons License. You are free to share, remix, and share alike with attribution.
The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person or entity. All postings adhere to my personal values.