Category Archives: Entrepreneurship

If you are #napkinStage what is the 1 thing to focus on to get traction with investors?

I was at the Seattle Founders Institute graduation event last night with 40 others who gathered to see the 3 newly minted entrepreneurs from the program. From the over 100’s of applicants, there were 30+ who signed up for the program, and yesterday 3 folks graduated.

Seattle Founders Institute

Seattle Founders Institute

TeaBook is a monthly tea subscription. The founder has spent a lot of time in China to source and obtain unique tea’s that will be mailed to your home every day. The tea market is over $25 Billion and growing at 7% annually. They had a great story and compelling market presence. I personally felt the monthly subscription commerce business has many players, and I suspect in the next few years there will be much consolidation. The tea market itself has many competitors as well including TeaLet, teabox, Chahoney and LizzyKate. They have some early indication of traction, with some trials and some passionate customers already willing to sign up for the service.

American Giving – was focused on ending poverty in the US, with a researched philanthropy website. They founder was looking to create a indegogo style site, where philanthropists could research, back and support giving to Americans better. The potential to unlock over a $ Trillion in well researched giving would be large and they were looking to take a 15% admission fee on all giving.

MeltingSpot, has a 2 sided marketplace for helping consumers looking to meet “folks they like” near them. Think of “Tinder meets FourSquare”. They Melting Spot could be a bar, or a restaurant, who wants to “sponsor” a spot where people only interested in “animals” would be able to meet others. There are many dating sites and apps, and many social networks, but their focus was on helping folks in their local region. They would make money by charging bars to sponsor a “melting spot” – initial suggested retail price was $30/month.

All 3 entrepreneurs had great stories and did an excellent job showcasing the market (which was large) and spoke to their personal backgrounds as well. None of them had a working website or prototype (some mockups), but they had financial projections. They were all non developer or technical founders, looking for their CTO, but had the sales and marketing background and expertise.

All of them were looking to raise some money – from early seed (>$100K) to seed ($2 Million – teabook).

As an investor, the biggest challenge I faced was I was not sure how many more pivots were going to happen before they get Product Market fit. I suspect a lot more, because none of them had product shipping yet.

Which leads me believe that Kickstarter or Indegogo is the best way to show social proof, customer validation and early traction.

If you have an idea and you want to progress on the journey towards investment, the launch page with social proof, early orders on your crowd funding campaign, product prototype and having a well rounded team are a must have for #napkinStage companies. Those would be the things to focus on, more than distribution channels,

Leveraging your advisors for understanding the market dynamics before your customer development

One of the most effective ways to get smart advice early is to get a trusted advisor. Most companies I know get up to 3 advisors on board with different competencies, skills and expertise. Typically you’d like one advisor who has entrepreneurial background for customer and investor introductions, one for go to market expertise and one for technology excellence.

Once you have selected and recruited your advisors, I’d highly recommend a scheduled cadence to meet and consult your advisors (early on, once a month is good). Typically, most startups will (if all goes according to plan, which it never does, but nonetheless) need a new set of advisors every 18-24 months. Most advisors are paid in equity. Your advisor’s main role is to give you confidence, but many help with their strategic thinking or insights as well.

In this post I am going to talk about market dynamics using an example to help share a concept that I think you need to get advice from an external person for.

Let’s say you are trying to build a mobile application that replaces Siri or Google Now. This has been attempted before by many folks, so it is not a new idea, but I am taking a crack at shaping and outlining the landscape for discussion.

This will be a “smart assistant” that allows consumers to get personalized recommendations for many of their daily questions based on observed patterns on their phone – including usage of other applications.

Mobile Market Dynamics

Mobile Market Dynamics

In this particular case, there are 5 major “interested parties” – the consumer, who wants personalized recommendations, and needs the service, the app developers who have the data, the app store and platform which control the experience, the phone manufacturer, who makes the phone and the mobile carrier who provides the service.

Even though the first pass suggests that you should build the consumer service, focus on acquiring users and then get the app developers on board, it turns out unless you have the data (either from the platform or from the 3rd party app developers) you don’t have a valuable service.

Distribution might be easier for your product via the mobile carrier (if they choose to bundle it with the phones on their network) or even from the phone manufacturer, but unless you have many users, the carriers and the manufacturers don’t want to take a risk.

Consumers find that without their favorite applications (services) integrated into the platform, the assistant is of not much help.

So you realize it has to be the platform (Android, IoS, Windows phone, etc.) or the 3rd party app provider.

Since most consumers are using their favorite apps – such as Yelp, Uber, etc. the data is proprietary to that 3rd party app providers, who have little incentive to give you their “crown jewels”.

The best way to get the 3rd party app developers is to find a way to give them value, so they get consumers more engaged with their app, or acquire new users or monetize better.

While you still have to get consumers after you get the 3rd party app developers on board, that’s the “next problem” – the sequencing matters. Getting app developers quickly and the key (right ones, not anyone that will listen) ones is critical.

This is a good example of a market dynamic that typically you can get from an “insider”. Many of the seasoned investors will help you understand and navigate this landscape as well.

I would highly recommend you talk to potential advisors and help outline the problem statement so they can give you their perspective before you sign them up as an advisor. That way, you are able to gauge their expertise and understanding of strategy as well.

What do you think about this landscape? How would you analyze this better or differently?

Some awesome quotes from Pete Sampras’s letter to his younger self

Peter Sampras wrote a letter to his younger self. Great read.

Pete Sampras

Pete Sampras

“There will be times when you wake up in the middle of the night before a match craving crazy things like hamburgers and pizza. It’s because your body is missing something.”

“One day, everyone will be a nutrition freak. Be ahead of that curve.”

“Play hard, do it on your own terms and stay true to yourself. Do that, and you can’t go wrong.”

“It’s the people in your life — people like Tim — that will shape you. Appreciate them.”

How 3 peace-time founders are laying the foundation to transition to a war-time role

I have been at 3 board meetings this week. It is very apparent to me that we are in an environment where money is easily available to both the best and not so good performers. There are exceptional cases when the awful performer is also getting funded, but I want to avoid judging performance at the earliest stages.

Ben Horowitz popularized the term Peacetime CEO and Wartime CEO’s. We are at a really good peacetime – so the tactics for hiring, fund raising and customer acquisition are different than those when the market will turn – and it will. I cant predict when that will happen, and wont even know when it will start to turn.

I wanted to highlight the change in compensation strategy that’s being used by 3 companies who are preparing for when money gets more constrained, hiring is easier and customers are more cautious about their spending.

Most of the companies I know are moving from 60/20/20 split of base salary, performance bonus (based on individual goals) and stock options to

50/40/10 for marginal performers and

for the superstars, the compensation is 70/10/20.

The superstars have a total compensation that’s greater than the marginal performers.

PeaceTime CEO and WarTime CEO

PeaceTime CEO and WarTime CEO

What is being optimized is the bonus – for the marginal performers a lot more is being paid out on bonus – variable pay based on performance.

The logic behind the thinking is that the key players should not be poached – hence they are given a higher base than they would get outside, and are to be kept for the longer term – hence the incentive on the stock, whereas the marginal performers do not care about options that much.

Who are the marginal employees? Most of them are putting the “6 months, course at a coding academy” folks in the marginal employee pool. Not sure that’s correct, but that’s the approach being taken right now.

Going beyond “I have an idea” – a rigorous design of your experiment

The first step to your experiment is usually an idea. Either you or someone at your startup has an idea, which you want to determine is a good one or not. Having tried a framework to experiment your ideas, I’d say the crucial firs step is designing the experiment.

Brainstorming the idea over a casual conversation is usually the first step. The tendency among most startup oriented people is to complicate it and think of all the edge cases and 100% coverage, which is why documenting all the ideas is important.

This documentation need not be long drawn out or format, but needs to be written down.

The best way to do this is to continue using your multi-user messaging solution as before – Slack or HipChat, or Google docs suffices.

To design your experiment, you need to write down the 3 most important aspects of it.

a) Hypothesis b) Outcomes, c) Learning Objectives and d) Time frame

I mention hypothesis vs. assumptions for a reason.

Something that has yet not been proved to classify as a theory but believed to be true is a hypothesis.

An assumption is any statement that is believed to be true.

Until you know your idea will work or not, it is an experiment which has certain items you have to prove.

For example: If one of your customer service people have an idea – they believe as a startup you should send a summary email of the usage of the product every month so the customer understand how valuable your product is to them.

They believe this will reduce churn – the outcome you desire from this experiment.

Your hypothesis may be many all or some of which might be proven, yet others may be false – a) email summary reduces churn b) customers would like the email summary c) your email summary captures key pieces of information about the usage that customers care about and others.

Finally the learning objectives – this is important especially for failed experiments, but it will be useful if it succeeds as well – It helps plan future experiments and creates filters for ideas that come next.

Designing your experiment involves documenting these 3 important items, usually by the person who has the idea. Even an email will suffice, but documenting it is key – even an email will suffice.

Finally in designing the experiment, the time frame how long you are going to run it is important. First so you dont have too many experiments running at the same time, which might skew results, but second so that you can give each experiment the due time to determine if it truly failed or succeeded.

I was thinking of an acronym – HOTEL – Hypothesis, Outcomes, Time Frame, Experiment Design and Learning objectives, but it does not quite fit. I’d love some suggestions on if you can come up with a better acronym of if you believe I have missed documenting anything.

How to design Experiments

How to design Experiments

Is just being exposed to interesting things enough for curious kids? #parenting #personal

My friends and I have an ongoing debate about programming. They would like their kids to learn programming, but they say their kids dont enjoy it. Regardless of gender, they seem to have an aversion to development.

I am a geek at heart and love programming. I am not good at it, but I enjoy it. I dont get enough time to do it, but it shows on my face when I am developing something or learning a new language.

I have 4 kids, and we are a very geeky family. My daughter, 13, loves mockups, is building apps and is a pretty decent (for a 13 year old) front end dev – She does HTML and CSS with ease and is okay with Javascript. She would ask me to do most of her database development, which I was happy to do.

Kids still love selfies

Kids still love selfies

She recruited my son to learn SQL and he has been tasked to write the DB schema – for someone that does not understand the difference between Integer and Date, much less the phrase datatype, he seems to be struggling through it, but enjoying it.

All 4 of our kids have a laptop and the older ones have their own cell phone – they are all the same, except for my oldest daughter. They all have Surfaces, while my daughter has a MacBook Pro.

This is a point that many of our friends dont get – she’s only 13 or he’s only 11.

They are too young to have a phone and they will be addicted to it all the time is what I hear from them.

That’s a risk for sure. I know that. It is a risk we have chosen to take, since the exposure and benefits far outweigh the negative consequences.

Although my kids are 13, 11, 9 and 9, they seem to enjoy learning to code. They got started without Scratch, I would take 30 min to explain a few concepts, then turn them loose on a bunch of videos.

Then of course there’s Google. When they found out their dad’s limitations – syntax, libraries, etc. – they discovered that Google was their friend. Their first instinct is to Google and cut and paste. Apparently, according to my son, even the best programmers do it – so there.

Many of the basic concepts of computer science are not clear to them. They “kinda” understand that there’s a database and a user interface and a “middle layer”, but that’s as far as it goes.

Their programming skills are very basic (no pun intended), but I enjoy talking to them about programming.

The one thing I have learned is that if you just expose them to various activities and ensure that they are curious enough to learn, they will.

The fact that I dont monitor their PC usage (We do have a basic filter to make it child friendly, but we dont restrict usage) is also a big point of debate among my friends.

I dont, because I believe it does not matter. If you keep talking to them daily about the positives and negatives, they will learn to make choices. Sometimes, they make the wrong choices, for sure, but that’s unavoidable.

The only thing I do to give them the love for programming and coding is to be passionate about it when I explain things to do (since it comes naturally to me that’s easy).

I am sure if I were a finance person on Wall Street, my passion for that would show as well, which means they’d get that instead of programming.

The “problem” is that they have multiple interests – my daughter loves her piano and singing – she’s a good vocalist, my son is really passionate about his cricket. My youngest loves drawing and is a better artist than I am even now and the middle one loves sports of any kind.

I call it a “problem” with air quotes since they dont get enough time to spend on programming. So I make it a point to have them see me do some coding and development once a while. Which gets them excited again to do something new.

I am not sure if exposure, wearing your enjoyment on your sleeve and unrestricted learning models is sufficient, but it seems to work for us.

Why it is so difficult to spot unicorns when they are hatched – I need your opinion

Yesterday I was a judge at the TechCrunch event in Seattle. The meetup had 500+ folks from the Seattle area, with 9 companies being selected to pitch at the event. Over 100 startup applied – some that were idea stage, others with prototype and still others with a few customers and early traction.

TechCrunch Meetup

TechCrunch Meetup

Here are the 9 startups in a nutshell.

1. A bar robot that helps mix cocktails (home, personal use). It comes with 4 ingredients standard and you can add more ingredients (think of vodka as an ingredient and same for tomato juice as an example). It is meant to be counter-top friendly and starts at $99. They are building a prototype.

2. An Outdoor ad projection system for personal messages. According to the founder, as an individual, when you are trying to get your message out, there are few options other than those online (the rest are prohibitively expensive). So, he designed a projection system, which beams the messages at key spots outdoors. They are in 2-3 locations in Seattle right now.

3. Cashless POS and payment system for bar owners. The big problem is that busy bars lose money since it takes 2-5 min to get payment from the users – either with cash or credit card. Many bar owners lose money since patrons lose patience and instead opt to give up standing in line for a drink. This company produces a band (wearble) which you tap for contactless payment.

4. A lock screen app that replaces your lock screen (which most people stare at 50-100 times daily. This will replace it with images and photos from your collection on the cloud or the phone. The app has 100K users already.

5. A Car on demand service, replacing owning a car. Long term leasing or renting of cars. You can “rent” a car when you want for however long you want and keep changing. Need a small car for the weekday, rent it. If you however need a boat-towing Ford F150 during the weekend, no problem, replace your compact car with that for the weekend. In beta at Austin.

6. A curated collection of interactive STEM content (videos right now) for kids between the ages 7 and 15. This product provides way for children to get interested in STEM content watching engaging and interactive videos online. Has many users already.

7. A soccer ball sized Mic for student participation in class. Most teachers have trouble getting kids to listen to their voice, so they use a mic and speakers in the classroom. If they have to get the kids to talk, then they pass another mic in the classroom. This product has a mic built into a soccer-sized ball so kids can “engage” with the class and have fund doing it. Being tested by a few teachers in their classroom.

8. A learning system with games for your dog. They provide hardware that allows your dog to “learn”. These toys come with hardware that can be controlled and upgraded for new toys. When you dog plays with these games, you get notified via your smartphone. Currently looking for beta testers.

9. Uber for beauty. There are some days you want to look your best – party, interview, etc. For those days you can get a beautician “on demand” locally, who will come in and help you get your hair, clothes, etc. right and ensure you look the best. They use local beauticians and are a marketplace. Have a few users trying the service.

So, there you have it. 9 ideas and startups.

If you were the jury and had 1 min to listen to each of the founders, which ones would you pick to “have a deeper” conversation. I am not sure which of these companies will become a unicorn, or if any of them will be venture scale, but they are all promising ideas, and some have traction as well.

We declared one winner – the car on demand company and one runner up – the Uber for beauty. The audience choice was the learning system for your dog.

  1. If you were an early stage investor with $50K to put in one of these companies, which one would you invest in?
  2. Do you think any of them will become large in a short period of time?
  3. Which ones are cash-flow businesses – generating enough cash to be profitable, but not large.

Some of these ideas are really interesting, others I am not sure about at all – in terms of scale.

I’d love your opinion.