Kickstarter is the new “beta” customer, “social proof” and “friends and family” round all rolled into 1 for #entrepreneurs

I had a chance to meet an amazing entrepreneur on Tuesday at Utah, Tammy Bowers, who the founder of LionHeart Innovations. They provide a mobile platform to help caregivers of kids with chronic conditions. Think of it like a coordinated platform that everyone who cares for the kids needs to ensure they are all in sync – the mom, the dad, nurse, doctor, nanny, etc.

Their son has a health condition so their startup was born from that experience. Now, after many months of working with health organizations and other care givers, they are ready to launch their mobile app.

A decade ago, options for Tammy would have been to talk to a lot of potential customers, then raise a small “friends and family” round and then look to get some marquee investors / advisors agree to be associated with the company – to provide social proof.

Now there’s indegogo and kickstarter. Tammy put together an early funding campaign on the tool to see there were many other parents who were also interested in the tool to keep their folks in the know. Word of mouth, thanks to the indegogo campaign also got her a lot of press among bloggers, media and news outlets.

For entrepreneurs in smaller cities, getting the attention of Silicon Valley angels or investors is very difficult if not impossible. Many local investors are willing to help, but they lack the ability to validate the problem, the need and hence tend to invest in “things they know very well” or “those things that generate revenues quickly.

Enter crowd funding. If you thought it was for hardware programs alone or for creative ideas, then you need to look at indegogo and other platforms again. 7 of the 10 companies in the accelerator program at Seattle raised money on these platforms. Some of them raised $50K and others more than $350K.

There are 3 things a successful crowdfunding campaign gives you:

1. Customer validation: People (real customers, though largely early adopters) put their money where the mouth is. Not just “likes on facebook”, they commit dollars to your program.

2. Funding: If you can put a little money into your campaign, typically the crowdfunding dollars can help you generate more money to ship your product.

3. Social proof: I would highly recommend you talk to a few “influencers” who can back your campaign on these platforms, but if they dont and still notice it, then the campaign can help you generate some press, which is good social proof if you can get folks to share the press.

I am a huge fan of these programs not just for creative movies, music and hardware “maker” type products, but also for software products that are niche initially.

There are 3 important elements of a successful crowdfunding campaign, which other folks can tell you more about:

1. Create great content assets – video is usually essential.

2. Engage with potential influencers before your campaign so they can back you when the campaign launches.

3. Provide quick and constant updates to your backer so they can help champion and be evangelists for your startup.

A #contrarian view on how the customer validation phase should fine tune your #startup business model

The trend from users (businesses and consumers) wanting to buy services – software enabled services, instead of software is accelerating more than ever in my observation. Previously things that most folks would sell as software is now being packaged and sold as a service that solves a problem and is a solution than a packaged piece of software.

In the 90’s and 00’s the solution to a business problem was to develop, deliver and sell software, which was either sold as a license or an annuity. SaaS then came about to provide a change in both the pricing model and the deployment model.

The trend is more pronounced in the consumer portion of the business. Let me give you a few examples and then go into detail of one case study that I discussed with some entrepreneurs Utah.

Take the case of Uber. A decade or two ago, the prevailing model would have been for Uber founders to build the software and then try to sell it to taxi companies and help them service their customers more efficiently. They instead chose to be a “full stack” company and own the consumer experience and recruit drivers to their program.

Another example is Zillow. Instead of providing software to real estate brokerages or individual brokers, they turned the model on its head to go direct to consumers and be a lead generation engine for brokers.

Finally on the enterprise side, HackerRank is a product as an example that a decade ago, would have sold software to companies that helps them manage, deliver and attract software developers with challenges. They prefer to directly attract software developers to their platform and then engage with potential recruiters to help match the top puzzle solvers with companies that are looking to hire them.

Note that in all these cases, the companies are purely software companies, but their business model is predicated not on selling packaged software, but a set of services to end consumers.

I speak to entrepreneurs worldwide, who have heard the phrase “software is eating the world” and then immediately assume that the only way to deliver software and build their business is to sell either a subscription business to the hosted solution or to sell packaged software (yes, there are still folks that think this is the way to go). That is no longer the case and you will find in most instances, investors will prefer full stack companies to software business models in the next decade.

Only hosting your product and providing a SaaS solution does not make your business model different.

That begs the question, how does one go about creating and building a service business instead of a purely software business?

I think the most important phase of your startup journey to figure this out, is when you do your customer development and validation.

During the customer validation phase you will find many potential customers not willing to buy what you sell them (software). That’s usually because they don’t have the problem you articulated.

There are two types of problem articulation strategies. One set of folks articulate the problem they think customers have and another set share examples of the questions potential prospects have.

Let me give you an example of a company I met yesterday.

They are folks that run a theme park who had built software to better manage their park and generate better profits and returns. They were keen to sell software that helps manage a theme park to other owners of theme parks.

When they spoke to potential customers and said they had ERP software to help with theme park management, most potential customers did not care. Their customers did not have a problem that required software.  When we got talking, and drilling down to the real problem, it turns out that 20% of a theme parks budget annually was spent on renewing customers.

So, most park owners had a marketing and a renewal problem not a software problem. When they went to the customers with an end to end solution to help streamline renewals and still had software at the back-end to manage the renewals their message seemed more appealing to theme park owners. Suddenly the problem was not software for automating the theme park but a solution to help remove a key headache and a solution to one of their key problems – Renewals.

The startup still wanted to only be a software company so they were not too keen to take on all the hassles of renewal processes, so I suggested they outsource the other aspects of the renewal process to other companies.

Having control of the end to end renewal process, now gives the company the data and analytics to build another stream of revenue to help end customers get discounts on other services they would like and give the theme park owner a cut of that revenue.

That’s the future. Software enabled services will be the primary business model for the next decade or so. Instead of selling it as a software product (either SaaS or otherwise), I encourage entrepreneurs to look at business models in more depth during their customer validation phase.

To raise funds for your startup use a fishing pole not a fishing net: A #contrarian view

Most early stage find raising advice around fund raising is about casting a net as wide as possible to speak to 100’s of potential funding sources to land one investor.

Actually that’s pretty bad advice according to the data I gathered from Pitch Book.

New Investor Additions Each Year- CRM, SaaS and   Home Automation

New Investor Additions Each Year- CRM, SaaS and Home Automation

Within your category or market there are far fewer relevant and willing investors than you can imagine. So casting a wide net is a big waste of time for most entrepreneurs.

Of course the larger the market (e.g. SaaS or Consumer internet) the more are the number of investors in each stage but it is still a small, finite number.

Most venture investors will share broad themes of their investment thesis so they don’t “miss” out on deals, but that does more disservice than good. So, when an investor says we invest in “consumer internet” – that purposely broad so they don’t “miss out” on any hot deals. As an entrepreneur, you need to ask more pointed questions about the sub categories within that theme.

Investors should follow the same advice they give entrepreneurs. Be niche, narrow and focused. Here’s the thing though. They are following that advice but only they don’t message or position it that way.

So the best indicator of if an investor will fund your startup is to look at what they do not what they say. Talk is really cheap I guess.

To prove this I looked at 3 segments. One older theme, one middle aged and one relatively new theme. They were CRM, SaaS and home automation. These are themes I know better than others. For CRM I looked at data from 1996 to 2002, SaaS from 2006 in home automation from 2008. Data does not exist for home automation for 8 years obviously.

I looked at total dollars invested over time  and the number of investors over time as well. Then I plotted the graph over time to look at year over year growth as opposed to cumulative growth.

Here is what the data says. There are a about of 130+ unique investors in CRM over the 8 years, 47 in SaaS and about 15 in home automation. That’s is on the venture side.

So if you have talked to one or more of these and they said no, you will be better of rethinking your business or do without going to other investors. Going to other investors who have not invested in a theme will very likely result in you wasting time. Note that the rate of addition of new investors to a theme is slow. Even in a large market such as CRM.

This also explains two other memes. One that there’s a herd mentality among us and second that venture investing also follows the Geoffrey Moore tech adoption curve.

Once one or two “innovative” VC’s finds a new space then the herd follows but slowly. This explains the fact that new VC additions to a theme rarely exceed 10% YoY even on “hot” themes.

After the innovators, the early adopters and then finally the majority follow.

I suspect, but don’t have the data yet, but a VC innovator in one theme rarely is an innovator in many other. They like to stick to their knitting. Unless they hire a new partner with expertise in a new theme. Which is rare.

So, bottom line for you as an entrepreneur is this.

There is a very short list of VC’s who will invest in your area.

Going after hundreds of potential investors is a big waste of time.

Setup a google alert for funding keyword within your category for 4-6 months before you are looking to raise money and also for “new fund” in your category. Those are your best bets.

If you have exhausted the list of potentials then you are highly unlikely to raise investment. Go back to your positioning and business model and see if you can change something to try again in 6 months with the same set of investors.

Of course there are exceptions to this rule of thumb but they are rare.

A #contrarians viewpoint on personal goal setting and new year’s resolutions

Most people will have several goals for the new year. They will want to have a better relationship with their loved ones and publish a book, or travel to a far away place and get a promotion at work, or start a business, and quit smoking etc. It is the dream to “have it all”.

Then there are the folks who pick one for each – work and life for each year. That’s more realistic but still tremendously ambitious.

I have expressed my views on work-life balance for entrepreneurs before. If you think you can achieve it, then you are delusional. A startup consumes all your time.

If you have a new baby or have a close friend who has one, you’d know the feeling. They are always overwhelmed. They are planning the kids meals, nap time, play time, etc. There’s almost no “time” at all. That’s how a startup is. If you are not thinking about product, then it is funding, else it is sales or customer support. There’s always more stuff to do than there’s time.

Over the last 6 months I have been focused on one project – losing weight. I over-achieved my goal with a month to spare in fact.

Over the last 6 months I have written fewer than 15 blog posts. Compare that to the previous 6 months, I had written 82.

Over the last 6 months I had shared 78 items that I found interesting to read. Compare that to the previous 6 months, I had shared 431.

Over the last 6 months I have averaged running 13 miles every day. Compare that to the previous 6 months, I barely managed 2.

Over the last 6 months, I had 21 calls with entrepreneurs to understand their business and help them find investors, talent or be a friend and a guide. Compare that to the previous 6 months, I had the opportunity to work with 67.

Over the last 6 months I had 5 parties at home with my close friends over lunches, dinners, gatherings, etc. Compare that to the previous 6 months, I had 18. 

Over the last 6 months, I obsessed over my only goal – losing weight and getting my fitness back. It will be obvious to you that I did little else.

I only had time to go to work, do my job and come back to work on losing weight so I can suffer less from my plantar fasciitis.

We moved from Bangalore to Seattle so I was learning a lot about the way startups in America have changed over the last few years I was away. That would take up all my working hours.

In fact if you track my posts since March 2014 to Dec 2014, you will see the pattern. When I had a moment, I was working out or researching food options or focused on my job at Microsoft.

Here’s the thing:

I dont think anyone can do more than one thing very well, at any time.

Either it is work, OR home. Either it is business or personal. There’s only goal you can set for the new year and do a good job to over-achieve your goal.

So, my learning is this.

If you are looking to start your own company and start preparing for GMAT this year, you will do neither well.

If you are looking to lose weight and find a new girlfriend/boyfriend/significant other, you will achieve neither.

If you are trying to do one more thing than the most important thing in your life, you will not succeed.

So, do yourself a favor. Put one goal and remove all other “distractions” from your life. You will over-achieve, even if you are not motivated and lose some energy.

The reason is that if you are going to do only that one thing, then there’s nothing else to distract you.

How to solve the immigration problem for startups and income inequality problem for older Americans with one solution

Americans have 2 problems that are high on the list right now. Income inequality and Immigration.

So there are two alternative solutions:

1. Every year, Forbes publishes the best places for Americans to retire.

This is for the many folks who have made okay money but are not wealthy or ultra high net worth individuals.

So, in effect America is trying to export its retirees.

This is a small number right now, in the thousands. This solves the problem of healthcare for the old and also helps the older folk’s money go farther.

2. For the immigration problem we have solutions as well.

This is a slightly larger number, 65,000 each year. This solves the problem of new talent for companies and also helps young aspirants get a better shot at a better life.

Every year, America also imports new fresh talent.

Think of this like a balance sheet. Immigration imbalance occurs constantly. Right now America does not export as many retirees as it imports immigrants.

Which is why many folks are up in arms about raising the # of allocated H1B visas to foreign legal immigrants.

The reason we get so many immigrants is because it is attractive to be in America.

The reason many retirees don’t leave is because it is not attractive yet to live outside America.

Why is not so attractive to live outside the United States right now?

First, there’s a standard of living issue – access to quality services is just not as good abroad as it is in America,

Second, there is living away from friends and family, and finally

Third, there’s fear of the unknown.

Most older Americans move to Florida or a state in the south so they can get better weather and pay fewer taxes anyway. So, the living away from family is something they are quite used to and they actually end up making new friends.

If we help some of the countries in the “top places to retire” help to build better services, such as transport, healthcare and support, then they become more attractive.

To solve the fear of the unknown, I think the best solution is to educate older Americans on these countries and their culture, unique offerings, weather, etc.

Finally if we eliminate double taxation for Americans going abroad or “suspend” tax filing and payment when they spend, say, more than 80% of their time in their “retirement” country, then you make retiring abroad, more attractive.

That should increase the number of people leaving annually to say about 50K from the current 5K and help “keep the distribution even in the people import/export balance sheet”.

What do you think?

A contrarian view : Is weight loss a sprint or a marathon? Weight loss is a #sprint to start

There are two types of weight-loss theories in the world.

The first kind believe that weight-loss project is very defined and is for a fixed period of time. They are called “Sprint“.

The second kind believe that weight-loss project is an ongoing labor of love and is a “life-time choice”. They call the project a “Marathon“.

I think of weight-loss as a Sprints“. I dont think there’s anything wrong with sprints at all contrary to popular belief. You know the goal, it is short, you can visualize it and you can see yourself winning.

The other kind involves a lifestyle change or a “Marathon” weight-loss project.

Understanding that it is the “Sprint” type you like will help you understand if you will be successful in your goal or if you may be destined to achieve moderate success or failure to reach your original objectives.

Weight loss is a sprint to start. 

You need to have a deadline.

It is the new year resolution, a wedding, a reunion or a doctor’s annual checkup that triggers this project. Some people think of weight loss as a long term goal. I disagree though since I believe there’s no long term without a short term.

If there’s no forcing function, then 99% of people dont achieve success in their project.

There are those that argue that living healthy is a lifestyle choice and you need to be constantly working at it. They consider weight loss as a “Marathon” project. Here’s the thing: most people wont be motivated enough when they know that there in it for the “long haul”.

Research backs me up on that.

Start and finish “Sprint” weight-loss projects have a greater chance of success.

The problem with the marathon approach is that your mind tends to groan and creak at the dramatic change it needs to undertake in a short period of time. I know there are ways for you to “ease” into a marathon by training your mind and your body to help lose weight, but I have tried 5-7 weight loss projects and coached other folks on losing weight as well.

The best approach to losing weight is to have a clear deadline and a measurable weight you want to hit. Then you can optimize around muscle-building, etc. Those are good to have. If your must have is weight loss, I’d highly recommend you optimize for it and think of your project as a “Sprint.

So what happens after you hit the “Sprint” finish? My goal was to lose 50 Lbs in 25 weeks. Now, my “short term” next sprint is to hit my FFM (Fat free mass) towards an athlete’s level. Right now I am at 15% FFM and I want to get to 12%. The best athlete’s in the wold at at between 8% and 10%.

The thing is that’s my next sprint. Then I’ll get a new sprint. Each sprint for me lasts 6 months. Some may call this a marathon comprised of multiple sprints and that I am splitting hair, but I think there’s more to this than just long term life-style changing vs. short-term motivating project.

I am curious to know how many of you have a weight-loss goal this year in 2015 and how are you viewing your project.

I’d highly recommend you sprint your way to that goal.

What kind of a foodie are you? Know yourself before you start a diet

I am a visual foodie.

Yes, I know that food’s more about taste for some people and for others it is about smell, but I am absolutely in the visual bucket. If it looks good, but does not taste great (as in not perfect, with extra salt or the texture is too grainy, coarse, slimy, etc.) I’d eat it.

I am not much into taste is what I figured out early on. I can make out if the food’s got a lot of something – like chilies, salt, pepper, etc. but I dont care too much (within reason) about taste. I was told food was a blessing, so you’d better eat, say your prayers and move on.

I know a few friends who are very much into food that smells good. Which is why they have a tough time going near a Starbucks or a Subway and not ordering something to drink or eat, even if they just had a meal.

The first part of trying to get to your correct weight is to make sure you understand what type of foodie are you. If you are more visual then try to look for ways to avoid being in front of food a lot, or viewing Food TV or watching others order food at the cafeteria. Stick to the same 3-4 things to “condition” your brain to love only those visual cues.

The second typecasting of the type of foodie are you is to put yourself into the 3 buckets of “Thrill seeking foodie”, or “Comfort food foodie” or “Constant cravings foodie”. These are my own categorizations so they are by no means scientific. I think, most people who love food, would fall into one of these three buckets.

The “Thrill seeking foodie” looks for new things to eat or experiments with new types of cuisine all the time. They seek new dishes and viands constantly. They are your friends who are the first to scout the new restaurant in your neighborhood. They always know what to order in the new place you have been to. They have tried multiple “alternatives” and “substitutes” in each recipe and they buy the gourmet foods all the time.

The “Comfort food foodie” prefers the tried and tested, because it reminds them of a time and place they loved. They are your friends who order the same pasta or “palak paneer” or “sambar rice” at every restaurant they go to. They would tell you about the best place to eat their favorite food, and would always order their favorite dish the first time they visit a new restaurant to “compare” it to what they make at home or what their mom made.

The “Constant craving foodie” always has cravings for anything food related. I fall into this bucket. I can eat any time. Rarely am I “too full that I could not eat a morsel”. That’s because I have a very diverse interest in food and I am willing to try anything once and see if I like it. This type of person likes particular foods, but has a soft corner for certain flavors, textures and spices. For e.g. I have a soft spot for lemon. Put lemon in anything and I am a sucker for it. Similarly I love crunchy or hard textures in my food compared to soft. Even in rice and bread.

If you want to lose weight, the one thing you have to do is control your portion sizes more than your diet.

Here is the unfortunate part of weight loss.

If you stick to your calorie intake regardless of the type of food, you’d still lose weight.

You’d be not very healthy, but you’d lose weight.

That means that if you only ate cookies, candy and junk food daily, but were under your calorie requirement for the day, you’ll still lose weight. As I said, you’d be very unhealthy very soon, but you’ll lose weight fast.

In the weight loss department, one calorie is one calorie. Whether it comes from fat, carbohydrates, proteins, sugar, etc. does not matter. Any calorie is a calorie.

Visual foodies who constantly crave food, have the worst of all worlds. If they see something good that looks appealing, then they have to try it.

Here’s the problem with “trying it”. I was coached by my mom to “never waste any food” at all. That meant I always ate everything on my plate, even if I was full.

My stomach obviously said “no more”, but my eyes were like “that needs to be finished”.

So the best way for me to avoid eating things that I “loved” but knew were going to be bad in the long run was to eliminate them completely.

If, however you are a “thrill seeking foodie” who cares more about taste, than how the food looks, you can possibly “sample” many foods, without having to eat a lot of it.

If you are a “comfort food foodie”, then finding substitutes for the high calorie items with same tastes but lower calories might help.

If you are a person who cares a lot about smell, then just walking though the food aisle, smelling the “high calorie food that you love” but substituting it by eating the low calorie foods that are healthy for you will help.

Bottom line, you will have to adopt the strategy that works best for you depending on your archetype.