Sell the Problem (Not the Solution)
Great advice from Seth Godin. The post is about marketing to customers, but it’s just as relevant if you’re an entrepreneur pitching to a potential investor. I’ve lost count of the number of pitches I’ve seen where the entrepreneur jumps right into describing the solution (i.e. their product) without describing the problem they solve. Always pitch the problem.
(Image on Dropbox’s /jobs page)
Finding great people for your startup is hard everywhere. I know a lot of companies that use their social networks to recruit and this usually involves directing people to a /jobs page. Given its importance, the jobs section of your website should do a lot more than just list open positions. It should convey why your company is a great place to work. Listing benefits is all well and good, but unless they’re unique, it probably won’t differentiate you. The language you use to describe the positions and associated responsibilities is a great window into the character and personality of the your company (I think Soundcloud does this pretty well). What DropBox does takes it to a whole new level :D
Ten Steps To Ten Thousand Sign Ups Before We Even Launch Our Startup - Sachin Agarwal's blog
(via rafer)
A great post by an increasingly smart ;) old friend (Sachin and I both had our asses handed to us as banking analysts at Broadview). Highly recommended reading, even if you aren’t in the pre-launch phase - there’s great info on acquiring, communicating with and engaging a community for all stages of companies.
Jeff Bezos (via brycedotvc)
What he said.
This is the way to pick em…
Fabrice is a smart and passionate serial entrepreneur. (Random sidenote: back when I was a lowly investment banking analyst, the Boston office of Broadview represented Fabrice’s company Zingy in its sale). The guidelines below are great, though since they were written in 2005 I think point 3 should be updated to $250-500k in seed capital and a $2-4m Series A.
I met Fabrice Grinda at the MaiTai event. We were talking about all sorts of different interesting businesses. He told me that he has 9 criterias for picking the next thing that he goes into. The list is awesome and fortunately he blogged it because I could not remember all 9:
1. At least a $1 billion addressable market
This criteria is inherently personal and depends on the entrepreneur’s ambition, but there are good reasons to target larger markets:
- It’s easier to obtain funding
- Many Internet businesses have a certain amont of fixed costs but limited variable costs, therefore the larger the business, the higher the net margin
- I find it more interesting to build larger companies
This does not mean that the market must be a $1 billion market at the launch of the company, but that it must have the potential. When I created Aucland, the online auction market was small, but the offline used goods markets were multi-billion dollar markets in their own right suggesting that the online market would be large enough if a certain percentage of the trading went online.
2. A valid business model understood from the get go
There is only a 5% chance that a company created today will still be around in 5 years. I have not seen official statistics, but many VCs seem to believe that only 0.1% of the company started without a valid business model succeed. It’s so risky to create a company to begin with, I would rather have all the odds in my favor… I realize that Google is a counter example, but in an upcoming post I will describe how they got lucky.For clarification purposes, by having a valid business model I mean understanding how you are going to generate money and having a good sense of the gross and net margins at the creation of the company.
3. Does not require more than $2 million in seed or $15 million in first round VC money
If it requires much more, the business might be too capital intensive which could lead to too much dillution and suggest that this is an idea that is easier for a large incumbent to fund rather than a new startup.4. A business where you have a real shot at being one of the top players – at least in the region you are targeting
Avoid entering businesses where many players are well funded or where the incumbents have a sustainable advantage. That is not to say not to enter businesses where there are incumbents – just make you have a hard to replicate edge on them – after all Skype did extremely well because it entered the telephony market with a radically lower cost structure than the traditional telcos and used it to its advantage.5. A scalable idea
This is again a very personal criteria. Walmart and Starbucks are great businesses, but I would rather not be in a business where I need to open a new store to increase my sales as it leads to slower growth and greater capital requirements. Internet businesses are magical as they give you the ability to build and grow global companies in record times – just look at what Google, eBay, Skype and many others accomplished in less than 10 years – in some cases in less than 5 years!6. A business with little or no risk of disintermediation and/or margin compression by suppliers and/or customers
You are in a much safer position if you are much larger than your customers and/or suppliers. Walmart exerts tremendous pressure on its suppliers which are much smaller than it is and depend on its sales. eBay can also continuously increase prices on its sellers – none of which is in a meaningful position to fight back on its own. Zingy violated this criteria and this is one of the main reasons I sold the company as I hated having so much of the revenues coming from the top 3 carriers in the US and so much of the costs generated by the top music labels.7. A business that is in a rapidly growing market
A rising tide raises all boats. Growing markets generate more interest from the press, consumers, customers and suppliers. Moreover, if you are gaining share in a rapidly growing market, this can create exponential growth.8. An idea that I know how to execute on or can learn how to execute on
For now I will probably focus on technology ideas as I have a clear comparative advantage in the field as I understand technology and know how to manage technology organizations. This probably excludes biotechnology for me – if five teams present me their cure for prostate cancer I can tell you which presents the best and has the slickest Powerpoint presentation, but I can’t really say which is best positioned to win.9. An idea that I like and want to do!
One of the keys to happiness and success in life is to do things you love and are passionate about…
Jason Fried and David Heinemeier Hansson - Rework
Finally got around to ordering a copy of Rework, which I’ll have in my hands shortly. In case you don’t know, it’s a book (I don’t want to call it a business book because I think it defies the genre by not being mind-numbing) the founders of 37Signals wrote. One and two page essays on a host of topics (full list of essays at the bottom of this page).
The quote above is one of the essays and it captures the way I think about marketing perfectly. Marketing is everything a company does, from the way it designs a product to its customer service to its internal culture. The companies that understand this (both large and small) can have much smaller dedicated marketing budgets and I believe will have happier customers (=repeat or long-term or whatever metric is important for a particular business) and happier employees (=better retention + easier recruitment / hiring). Zappos is the gold standard of this approach.
Another great internal company presentation from Netflix. Worth a study by all entrepreneurs, particularly those with the ambition to build sustainable enterprises.
PS - if viewing on Tumblr, you have to click through : (
Dick Costolo - The Twitter Platform
Increasingly, Twitter looks like an infrastructure / pipe provider, rather than a product company.
via // jarredbishop:
Extension.fm redesigned their plugin, and it is looking rather silky.
For the past couple of weeks, Extension.fm hasn’t been working on my home Mac. Due to general busy-ness and specific laziness, I only contacted Dan about the problem a couple of days ago. Because he’s awesome, he helped me fix it right away. It now works again and all is right with the world.
On a related note, I don’t like calling Extension.fm a plugin. “Plugin” paints it with the wrong brush - the word makes it seem less valuable than it really is, like it’s something that can’t exist in its own right. Google calls them “extensions”, which I think is marginally better, but still doesn’t capture it. I think of it like this: It’s an application that sits within my browser.
I see a lot of startups that start out as browser “plugins” and sometimes, they are just that - a feature that is a nice add-on to a browser, but not something that could exist as an independent service. Increasingly though, some startups have “plugins” that are so feature rich, they deserve a better name. Partially this is marketing (which is not to be dismissed), but it’s also how you think about this part of your product - how you develop it, distribute and market it, and potentially even price it.
If you’re a startup and a plugin is your initial entry into the market, think seriously about what you could do as a constant presence in a user’s browsing experience and if the plugin itself could potentially be an application / product, versus just a feature of one.
Maybe your start-up is, Mr. Blank. Personally I’m not in business simply to conduct cheap and risk-free R&D for Fortune 500 companies. We’re building a real business here at blip. A sustainable business with philosophies and vision and revenue and people. And hopefully the organization itself has some measure of permanence.
All of the biggest businesses in the world were start-ups once. From Standard Oil to Ford to Yahoo! to Google to NBC. They weren’t started as “temporary organizations.” Neither should yours be.
(via mikehudack, shaneguiter)
Wow, talk about taking a quote out of context and completely misunderstanding it. Anyone who actually cares about, you know, reality, should read Blank’s Four Steps to the Epiphany, a horribly named but excellent book on customer development. Also, his blog is highly recommended.
If you don’t have deep respect and admiration for the people you’re building with, it all falls apart. More importantly, it’s not fun.
(via soupsoup and heyamberrae)
Ranking tech companies by revenue per employee - (37signals)
I love this graphic. Apple’s isn’t on here, but it would be number two if it were ($1,361,749 per employee based on $46.7b in trailing twelve months revenue and 34,300 employees). I think far too few startups think about this metric when designing their business model.
