Author Archives: Mukund Mohan

How to come up with the “one metric” to track and improve at your startup

Yesterday, we had a discussion about OMTM (One Metric that matters) with Chase of GoSkip. There is lots of information about how to chose the metric that matters, and also enough about why it is important. The missing part is how do you choose the metric depending on the stage of your company, the industry you are in and the way to make sure the metric matters to your employees, customers and investors.

It is fairly easy to say that you need to focus on growth – which is fairly obvious, but the question becomes grow what? Users? Revenue? Shares? Likes? Churn?

Picking an arbitrary metric wont hurt you in the short term, but it will not get you to the point of moving your startup forward.

The OMTM changes by stage of the company – from idea stage to prototype and to MVP and PMF. In fact, you will be tempted to put one metric for each part of your organization – engineering, sales, funding etc. – I suggest you dont. It completely defeats the purpose of the OMTM.

There are 3 criteria you need to consider when coming up with your OMTM.

1. The direct impact of that metric to the monetization or valuation of your business – depending on how you intend to eventually monetize, you want to make sure the metric is very closely aligned with that number.

2. The validity of that metric for the duration (time period for which it will be valid). If you come up with a metric that’s going to be valid for less than your next major milestone, I would reconsider it.

3. The ability for anyone in your startup to action based on that metric. If you end up putting a metric together that most people cannot take a direct action within their span of work, you end up not having the metric be meaningful to most of your employees.

Accelerators, more than seed funds have created the glut in early stage companies

There are 3 major trends that have driven startup formation over the last 7 years.

First the cost of infrastructure, thanks to AWS has dropped from hundreds of thousands of dollars to hundreds of dollars – 3 orders of magnitude.

Second, the number of seed investors has gone up 5 fold, from 35 to over 250 now.

Third the number of accelerator programs has gone from < 10 to over 635 in the US alone.

The number of startups in technology has remained though constant, at about 20K to 30K per year from the US alone. There has been a slight increase, but not by much. So what gives?

Some questions – has the failure rate increased? The anecdotal evidence is yes, but the real data is inconclusive.

Are startups talking more time to mature? I call maturity as time to get to series A from the time they were formed. If you look at 2007 data, the time to get to VC series A funding (crunchbase data) was 2.2 years.

If you look at 2014 data, the time to get to series A has dropped to 1.6 years.

The size of the rounds have gotten higher, as startups are taking in more money.

The number of side projects (indicated by participation in hackathon’s, which is a proxy but not an easy to measure metric, has increased dramatically by 400%.

So, AWS has allowed you to really reduce the cost of experimenting, more than building a startup alone.

If you look at 2007 data and see the number of seed funded companies that got VC funding as a percentage, the % has reduced by 2014 – largely because there are a lot more companies getting seed funding.

The real difference is the accelerators in the US – they have gone from bringing out 250 companies in 2007 to over 2000 in 2014.

That’s the big (4 times the number of early stage companies) change from 2007.

Accelerators are causing the glut in startups getting in front of institutional investors more than angel funds.

The self inflicted wounds that cause early burnout among startup entrepreneurs


That’s the word of the day.

Try to avoid keeping up with the Kevin’s. That’s the digital entrepreneur equivalent of keeping up with the Joneses.

I know many entrepreneurs who are constantly comparing themselves to other fellow founders and wondering a) how did they raise money for “xyz” company, or “how did they raise money so quickly? b) why did I not come up with that idea? or c) how come they are growing faster than us? d) how are they able to get more press than we can or e) why is everyone talking about their company more than ours?

There are any number of reasons why entrepreneur’s envy other founders.

Envy causes a ton of stress. It is not limited to entrepreneurs alone, take the case of MIT students.

Stress causes you also to make irrational conclusions and bad decisions. When you operate under stress, you will end up making the mistake of “good data, wrong conclusion, bad decision”.

So, how do you handle stress? Since this is largely a self inflicted wound, it is “curable”, but requires a lot of discipline.

1. The most important thing I have learned is to keep routines and exercise to relieve stress. Many folks read to relieve stress, others cook, still others eat. The worst of the 3 of these is to eat. I have known at least 30% of the founders who come to our accelerator program, gain more weight after the program. The biggest reason for the weight gain is the increased food intake, especially bad foods such as those with excess sugar.

The time that I found most of our entrepreneurs eat the worst is between 2 pm in the afternoon and 6 pm in the evening. The afternoon snack is likely the worst.

Most entrepreneurs tend to wake up late, so they tend to skip breakfast. Lunch, most likely will be relatively healthy since they tend to have guilt from the previous night’s drinks. Dinner is takeout for most days among the founders I know. The older ones tend to eat at home with the family, so they tend to eat a healthy dinner.

2. Make healthy choices about eating. More than not exercising eating bad causes more weight gain. That’s one of the prime reasons to carter food to your office, instead of “grabbing a burger” for lunch. Sit down with the team and eat healthy. That’s going to work wonders for the team and you tend to eat a lot healthy.

3. Have small milestones weekly that you can celebrate. I am a big fan of frequent celebrations, for achievements, how ever small. They reinforce the belief that your team is in it together and everyone is contributing towards building the company. Celebrations also tend to reinforce culture.

Above all, try to reduce your stress by not comparing your startups progress to others, even the competitors. It may seem to be that winning is all important and that you have to beat the competitors, but I found that the founders that achieve the best or “top dog” status, believe that their sacrifices were rarely worth the stress.

Why accelerators focus so much on “Pitch Preparation” than operating plans

Josh at First round capital is usually attributed to the quote:

As I always say, there’s nothing like numbers to f*** up a good story.

Here’s the rub though, the story is not as simple as that. That’s not the reality.

Here’s a better way to think about numbers and funding, actually.

Story and Numbers

Story and Numbers

See the 2X2 Matrix above. The easy cases are when you have good numbers and story (funded) or if you have poor numbers and story (not going to be able to raise money).

If you have good numbers (traction, growth, revenues, users, etc.) but have a poor story, you are much likely to not get funded.

If however, you tell a good story and have poor numbers you are more likely to get funded than the person with good numbers.

That’s not just a hypothesis, that’s the truth outside the valley.

If you go to Chicago, Bangalore, Boston or Berlin, the entrepreneurs show great numbers – likely in revenue, but their funding prospects in the valley and locally are slim.

The reason for this is that as investors most of us are fooled by slick, great PowerPoint slides more than we are jazzed by 3 layer Excel spreadsheets.

So, if you want to raise money, even if investors tell you to master your numbers, I’d first master your story more than your spreadsheet.

Which is the biggest reason most accelerators focus on “Pitch preparation”, more than “Operating plans”.

That’s not the case with what I advocate at our accelerator, but I have tried that for 3 years and failed constantly to help great companies with good strong numbers to get funded.

The problem is that in the absence of funding, most entrepreneurs judge accelerators by “connections to investors”, knowing that they cannot force and investor to put money, but they can give the entrepreneur more “at-bats”.

If, as an accelerator, you want to give strong introductions to investors, you are going to likely send an email with a short pitch or at best a deck. You wont send a spreadsheet with numbers.

So, getting the story is more important than showing strong traction, but all else being equal, I’d recommend doing both.

That’s also the reason why you hear stories of “entrepreneurs from Google or Facebook” raising “seed funding just on napkin drawings”.

My advice to entrepreneurs, is that you have to master both to guarantee funding, but if you have to make a choice (a poor one, but that happens), focus on getting you story right.

That’s poor advice, actually and dangerous, for some entrepreneurs, but that’s the truth.


Happiness Manifestor: A framework for picking your battles, while keeping your vision

I want to introduce you to a new personal productivity tool, that I am testing with myself, which I think will help you as an entrepreneur. You are welcome to use it even if you are not one, but YMMV.

As a founder there will be many situations when you will disagree with many folks in your organization. With your cofounder, your investors, employees, etc. I have learned the hard way that many of these disagreements result in irreparable damage to relationships, and in some cases permanently. You will become very unhappy in this situations. This tool is to help you avoid many unhappy moments.

Of course, it is very hard, in fact sometimes impossible to be objective about the situation or have a very high level of Emotional Quotient to ensure you are doing the “right thing”.

One of my investors ages ago taught me this lesson early, but I have a blind spot, which I have learned, which is my innate desire to be the “smartest person in the room” and also to be the person that’s “right most of the time”.

This is still in the works, so by no means am I an expert, take this tool with a lot of salt.

When you have a vision as a founder to solve a problem, the first thing I’d advice you to do besides write it down, is to put it in a notepad file or sticky notepad and keep it on your desktop screen all the time. Write down also a list of things you wont compromise on and things you are willing to let go.

Here’s an example: I am making this up on the fly, so bear with me.

Your vision would be, for example, or what happens when you achieve nirvana.

AmazingCo envisions a world where working mom’s are fit and healthy and eliminate their propensity for lifestyle diseases.

Now for your mission statement - or why you exist.

AmazingCo exits to make the best fitness application for working mom’s who have to juggle multiple chores and priorities by making it easier to integrate exercise into her daily routine.

Then the next thing I’d do is to make a list of values - things you  and your cofounder believe in firmly – these will define your culture to a large extent: For example:

1. Speed – we value people that move quickly and make decisions fast

2. Open communication – we value honest feedback

3. Collaboration – we believe people should work with one other well, team before self.


These will help you determine who you’d like to hire and how they’d be successful in the company.

You and your cofounder may have disagreements about this as well, and that’s the whole point of this exercise.

As a side note, dont be fixated on having 3, 5, 7 or some odd, but arbitrary number of values – list as many as you care. Of course, larger the number, the harder it gets to communicate them. If you need help, read the list of values and culture of the best leading technology companies.

When you have disagreements with your founder, the first thing to know about your self, is to find what triggers and what emotions overcome your self, when you feel disappointed, angry or despair. This is the MOST critical part. I would say the first step is knowing more about yourself.

What I found was that I lacked the ability to overcome the emotional barrier. I recognized the barrier, but I was unable to not go “ballistic”, when that happened. By ballistic, I mean, getting really upset enough to disagree and try to win the argument so I could prove that I was smarter or that I was right.

So, the best thing to do is to appoint yourself a helpful friend, colleague or significant other as your “personal trigger detector”. This person’s sole job is to remind you when you are getting into the unproductive zone.

When you have finished your mission, vision and values, the next thing you need is your “happiness manifesto”.

This list of things is items you consider sacred to your happiness. They should align closely with your values, BTW, so dont be surprised if you repeat them here.

1. I will be happy when things are clean around my work area

2. I am happy when people acknowledge my points, even if they are not valid.

3.  I am happy when I am able to get food on time.

The next part of your happiness manifesto, is what you are willing to compromise.  I have found that this compromise list feed off the values / happiness lists.

What are you okay with because you chose to value certain things will be on this list.

1. I am okay with other people having a messy work area.

2. I am okay if we have many bugs in our product because I value speed over perfection

3. I am okay with many difficult questions from employees because we value open communications.

Then I would put this on your communications and keep reminding yourself to pick your battles.

If a situation arises which triggers responses from you that you dont like, remind yourself to look at your compromise list to see if it deserves a response.

Most likely it wont deserve a response. Move on.

Pick your battles wisely as an entrepreneur – use the happiness manifesto and let me know if it works for you.

It is not that I dont think you are great, but I am not confident about my ability to pick winners consistently

I had a very interesting conversation with an entrepreneur yesterday who I was keen to invest in. He had soft circled $250K of his $750K seed round. I have been a big champion of him and really respect his determination, thoughtfulness and diligence.

I committed to $50K and was going through the details of the investment with him, but letting him know that even if it took him a while to raise the remainder of the funds, I would ear-mark the $50K for his venture.

He then asked me “You know and influence a lot of other investors as well, can you please convince them to join the round”. I said that I can introduce him to investors who have invested in the past with me, but they will have to make their own decision.

I was not going to lean in on them to invest.

He mentioned that I “leaned in” on another VC to invest in a portfolio company, which is what he heard from the other entrepreneur, who I had worked with.

He was correct. I did lean in. So, the signal I sent him (although that was not my intent) was that I was not as committed to his venture as I was to other the one where I leaned in.

First, I dont have as much influence as entrepreneurs give me credit for. That’s just the truth. They may attribute the fact that I am at Microsoft Ventures as a signal that the corporation thinks this is a good investment, which is absolutely untrue.

Second, I believe there’s a HUGE difference between an angel investor (who I dont like to lean in on) versus a institutional investor (who I will lean in from time to time).

Most angel investors invest by reputation, connections and referrals. VC’s will judge an entrepreneur and their opportunity on its own merit, do their required due diligence and will likely pass EVEN if there was a strong referral from a person they trust.

Referral’s get you in the door with an institutional investors, whereas with an angel investor it will usually get you a deal.

Most angels I know have “day jobs” or “other interests” with angel investing being their side project, activity or means of giving back. That does not mean they don’t want a return on their investment, it just means they don’t do as much diligence as an angel group or an institutional investor would.

Knowing that, I believe the biggest challenge is the confidence in my ability to pick winners all the time. I am investing as an individual investor because I believe in the entrepreneur. I don’t know if that entrepreneur, problem set, idea or market is right for the other angel investors I know and invest with.

Well, I do know that to a certain extent, but with angel investors, the relationship I have would be personal as well as professional. With VC’s it is rarely (exceptions exist) personal.

So, when I meet the other angel investors over dinner, with their family, I don’t like having uncomfortable conversations about “the investment that went south”. Many of them are great folks, but not mature enough as an investor to realize many of these angel deals (in fact 70-80% of them) will return in loss of their investment.

Many of the angel investors I invest with are not in the “early seed market” for the long haul and have not seen ups, downs, sideways deals, etc. So, end up investing in 1 or 2 companies, solely because of referrals and recommendations.

I don’t think I have confidence in every deal I do to end up returning my money or generate a great return.

That does not still mean I dont believe in the entrepreneur when I invest in them.

This is truly one of those cases, when its not you, its me.

Are accelerators failing startups or the curious case of “zombie startups” jumping from one accelerator to another

On Wednesday I had a chance to interact with 31 entrepreneurs in the IoT space at Plug and play technology coworking space in Sunnyvale. There were 10 companies in the Healthcare IoT area, 11 in the connected car and 10 in the home automation (IoT) space. Plug and play has 3 sponsors for their programs including Bosch, Johnson and Johnson and StateFarm, so the companies chosen were deemed a good fit for those sponsors to help them with innovation and startup scouting.

The interesting part that was very obvious to me when I looked at the list and later spoke with many entrepreneurs was that 19 of the 31 had gone to another accelerator program before this one. Of the 10 companies in the connected home space, 3 were from the Microsoft Accelerator itself. Of the 31 companies, 28 were outside the Silicon Valley, which makes sense (that they would want to move to the valley). Two that applied were from YCombinator as well, so, there were not just companies from tier 2 accelerators.

I asked the entrepreneurs why they felt the need to go through another 3-4 month program after they had been to one before.

The not so surprising conclusion is that for many (not all) companies, the 4 month accelerator model is largely insufficient. I did learn that most entrepreneurs did value the support, mentorship and advice provided by the accelerator program they were with before, but many had insufficient “traction” to justify a series A after their “acceleration”.

Of the over 3500 companies funded by venture capitalists in technology last year, less than 150 went through accelerator programs. Of them, nearly 50% were from YCombinator.

At the same time, over 1200 companies went through accelerator programs in the US alone last year. Of the over 1200 companies, 68% have gotten some form of funding (or about 800 companies) is the claim from the accelerators.

Which means about 650 (800 minus the 150 who secured VC funding) companies that “got funded” after an accelerator program, have not secured Institutional funding from a VC, but either from angels or from other accelerators.

If you look at the angel data from the US, of the over 4000 deals funded by angel investors in technology, < 5% or about 200 companies have been through accelerators before.

The result is that 450 companies that were claimed as “funded” after an accelerator program actually went to another accelerator.

Going back to the numbers above, if out of the 1200 companies funded by accelerators, about 450 (or 30%) went to another accelerator and 20% of them (on average) shut down, fail or close, then really about 50% of the startups from the accelerator programs or about 600 companies should be technically “funded” institutionally, but that number is 150. So, there are 450 “zombie” companies.

So the question is – what has happened to the “zombie” companies?

There are only 3 possible answers:

1. More companies have shut down that the numbers reported by accelerators.

2. Many companies end up becoming “cash flow positive” or “break even”, so they chose to not raise funding, but instead grow with “customer financing”.

3. More companies are “zombies” or walking dead – trying to raise funding, not succeeding, but not growing fast enough to justify institutional Venture funding.

I have my hypothesis, that it is #3 that makes up most of the “zombie” companies, but I’d love your thoughts.

If the measure of value that an accelerator provides (as measured by entrepreneurs) is funding, alone we are failing big time.