Some amusing words of wisdon from Dharmesh (who can teach you alot - check out his blog! As someone who's involved in teaching MBA Entrepreneurship at UC Berkeley, I can tell you this is only the beginning!
Startups: 10 Things MBA Schools Won't Teach You
1. No amount of strategic planning will ever substitute for managing your cash flow. Financial statements are great. The most important one is your bank account statement.
2. There are always more things to do than there is time to do them. Startups are a continuous exercise in deciding what not to do. You can sometimes win by just not doing things faster than your competition.
3. Sleep is that time you’re working on startup problems with your eyes closed.
4. It helps not to call people “human resources”. They’re people. And, as it turns out, people like to be treated like people. Go figure.
5. No amount of academic theories on efficient pricing will prepare you completely for what people will actually do. Finding the “optimal” price is really hard. In the meantime, remember that a sub-optimal price is a lot better than no price at all.
6. Price discrimination (in an economic sense) is a wonderful thing. Except that it often ignores the real costs in terms of organizational complexity. Every time you add a new product or product option a small part of your company dies.
7. There are an infinite number of ways to spend money on marketing. You have no idea what’s actually going to work. The idea is to experiment broadly and learn lessons cheaply. On a related note, no amount of MBA marketing classes will prepare you for the day that you have to produce leads in order to close sales. As it turns out, marketing is about more than product feature matrices and the right shade of blue for your logo.
8. To recruit the best people, fair compensation and equity are only a start. Company culture and a demonstrated passion for your vision is hugely important. (Oh, and your vision should be on the larger path to truth, justice and overall goodness). Your vision should not involve harming kittens. They’re adorable. [insert gratuitious kitten photo here]
9. There’s a lot of value to being likable. Good things happen when people like you. When people like you, bad things have less of a chance of being fatal. I advise being likable. That’s why I advise against being an investment banker after getting an MBA. (I also advise against being an investment banker before getting an MBA).
10. Advanced game theory is exceptionally useful. Basic game theory is dangerous — because it assumes that you’re dealing with a bunch of rational “players”. It’s like trying to design a real car that’s going to be driven on a theoretically frictionless surface, with no air resistance and no idiots on the road.
What are your top startup lessons learned that even the top MBA schools don't teach?
Wednesday, January 13, 2010
Tuesday, December 1, 2009
Why the Customer Development Process is So Important
Iwanted to pass along this blog posting from the guys at Venture Hacks, who in general put up really useful, practical info. I thought this post was particularly important as it has three specific detailed case studies on customer development. Be sure to link through to the actual case studies (not just the summaries in the blog posting) - there's a lot to be learned here! Case Study number two is so simplistic but so important for startups to put on their list of things to do. Nothing speaks louder to an investor than a customer (or propsect).
http://venturehacks.com/articles/case-studies?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+venturehacks+%28Venture+Hacks%29
3 customer development case studies
3 customer development case studies
by Nivi on November 22nd, 2009
2 Comments
If you’re trying to implement customer development at your startup, you’ll learn more from these 3 case studies than anything else I’ve seen. I consider each of these a “must-read”. I’ve quoted some great bits from each case study, but make sure you click through and read each one in full.
1. Using an LOI to get customer feedback on a minimum viable product:
“We decided from the get-go that, while we clearly saw the benefits and necessity of our concept, we would remain fiercely skeptical of our own ideas and implement the customer development process to vet the idea, market, customers etc, before writing a single line of code.
“My partner was especially adamant about this as he had spent the last 6 months in a cave writing a monster, feature-rich web app for the financial sector that a potential client had promised to buy, but backed out at the last second. They then tried to shop the app around, and found no takers. Thousands of lines of code, all for naught — as is usually the case without a customer development process. (See Throwing away working code for more on this unfortunate phenomenon. – Eric Ries)
“We made a few pencil drawings of what the app would look like which we then gave to a graphic designer. With that, the graphic designer created a Photoshop image. We had him create what we called our “screenshots” (which suggests that an app actually existed at the time) and had him wrap them in one of these freely available PS Browser Templates. Now armed, with 4 “screenshots” and a story, we approached our target market, some of which was through warm introductions, and some, very literally, was through simple cold-calling.
“Once we secured a meeting, we told our potential customers that we were actively developing our web app (implying that code was being written) and wanted to get potential user input into the development process early on. Looking at paper print-outs of our “screenshots”, no one could tell that this was simply a printout of a PSD, and not a live app sitting on a server somewhere. We walked them through what we thought would be the major application of our product. Most people were quite receptive and encouraging…
“On the third visit, we pressed those who saw merit in the idea to sign a legally non-binding Letter of Intent. Namely, that they agree to use it free of charge if we deliver it to them and it is capable of X, Y and Z. And not only do they agree to use it, but that they intend to purchase if by Y date at X price if it meets their needs.”
The author of this case study is currently looking for a technical co-founder.
2. proof that we’re not (completely) crazy:
“The few customers we talked to had little in common except for the core problem we were solving. Two had very similar job titles, (let’s call them Ditch Diggers), so we ran a facebook ad with the job title at the top of thead, which was roughly, “Ditch Digger? Feeling spread thin? Click here to complete a survey and tell us about it.” Facebook ads were the easiest because we could pick types of people — we have yet to create an effective adwords campaign. We offered $10 Amazon gift cards to complete a 15 minutephone interview.
“What followed next was absolutely amazing. When we talk to a Ditch Digger it’s like every response has an exclamation point. “Yes, that’s me exactly!”, “I can’t believe you’re building a tool for this, thank you!”, “Here are 5 emails of other people that will want this!”, “It’s only (number that was so high we had to force each other to ask)/month? Great deal!”
3. How I built my Minimum Viable Product:
“I filled out a set of hypothesis worksheets in Steve Blank’s book on product, customer, channel pricing, demand creation, market type, and competition. I would recommend everyone formalize this process. My initial scan of the worksheets made me believe I already knew all the answers. I involved Sasha in the process, and discussions that I thought would be 30 minute conversations turned into 2 hour discussions as she questioned almost all my assumptions… Yes, I still love her after that… The biggest mind shift following a customer development process is from thinking you know something to testing everything you know.
“We built out our initial customer problem presentation and decided to target people just like us – busy parents with young kids.
“Our top 3 problems where:
Sharing lots of photos and videos is a hassle
A lot of services downsize the images so the quality is poor
Notifying family and friends of updates was manual and a chore
“We were able to find the initial batch through friends and daycare, and subsequent batches through follow-on referrals. I’ll add that it is very important to talk to complete strangers to keep objectivity in check. Family and friends can be too kind sometimes and really lead you down the wrong path. We debated paying for their time with gift cards or doing a DSLR camera raffle and in the end decided to just lay out our objectives and ask for 30 mins of their time. That was enough.…
“During the interview, we were particularly interested in learning what their sharing workflow was like. We set up the stage and let them tell us everything they did with their photos/videos taking them from camera to shared, what they wished they could change, and the magical pricing questions: Would they use a solution like the one we were envisioning if it were free? Would they use it if it were $X/yr? X changed from customer to customer but we kept it as real as we could.
“We talked to enough people until their answers started sounding the same…
“Our revised top 3 problems were:
Sharing lots of photos and videos is a hassle (stayed the same)
Requiring visitors to signup is annoying
Photo gallery design was too busy or complicated
If you’re crazy for case studies, I’ve found at least a billion at the Lean Startup Circle. Let me know if you find any good ones there.
http://venturehacks.com/articles/case-studies?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+venturehacks+%28Venture+Hacks%29
3 customer development case studies
3 customer development case studies
by Nivi on November 22nd, 2009
2 Comments
If you’re trying to implement customer development at your startup, you’ll learn more from these 3 case studies than anything else I’ve seen. I consider each of these a “must-read”. I’ve quoted some great bits from each case study, but make sure you click through and read each one in full.
1. Using an LOI to get customer feedback on a minimum viable product:
“We decided from the get-go that, while we clearly saw the benefits and necessity of our concept, we would remain fiercely skeptical of our own ideas and implement the customer development process to vet the idea, market, customers etc, before writing a single line of code.
“My partner was especially adamant about this as he had spent the last 6 months in a cave writing a monster, feature-rich web app for the financial sector that a potential client had promised to buy, but backed out at the last second. They then tried to shop the app around, and found no takers. Thousands of lines of code, all for naught — as is usually the case without a customer development process. (See Throwing away working code for more on this unfortunate phenomenon. – Eric Ries)
“We made a few pencil drawings of what the app would look like which we then gave to a graphic designer. With that, the graphic designer created a Photoshop image. We had him create what we called our “screenshots” (which suggests that an app actually existed at the time) and had him wrap them in one of these freely available PS Browser Templates. Now armed, with 4 “screenshots” and a story, we approached our target market, some of which was through warm introductions, and some, very literally, was through simple cold-calling.
“Once we secured a meeting, we told our potential customers that we were actively developing our web app (implying that code was being written) and wanted to get potential user input into the development process early on. Looking at paper print-outs of our “screenshots”, no one could tell that this was simply a printout of a PSD, and not a live app sitting on a server somewhere. We walked them through what we thought would be the major application of our product. Most people were quite receptive and encouraging…
“On the third visit, we pressed those who saw merit in the idea to sign a legally non-binding Letter of Intent. Namely, that they agree to use it free of charge if we deliver it to them and it is capable of X, Y and Z. And not only do they agree to use it, but that they intend to purchase if by Y date at X price if it meets their needs.”
The author of this case study is currently looking for a technical co-founder.
2. proof that we’re not (completely) crazy:
“The few customers we talked to had little in common except for the core problem we were solving. Two had very similar job titles, (let’s call them Ditch Diggers), so we ran a facebook ad with the job title at the top of thead, which was roughly, “Ditch Digger? Feeling spread thin? Click here to complete a survey and tell us about it.” Facebook ads were the easiest because we could pick types of people — we have yet to create an effective adwords campaign. We offered $10 Amazon gift cards to complete a 15 minutephone interview.
“What followed next was absolutely amazing. When we talk to a Ditch Digger it’s like every response has an exclamation point. “Yes, that’s me exactly!”, “I can’t believe you’re building a tool for this, thank you!”, “Here are 5 emails of other people that will want this!”, “It’s only (number that was so high we had to force each other to ask)/month? Great deal!”
3. How I built my Minimum Viable Product:
“I filled out a set of hypothesis worksheets in Steve Blank’s book on product, customer, channel pricing, demand creation, market type, and competition. I would recommend everyone formalize this process. My initial scan of the worksheets made me believe I already knew all the answers. I involved Sasha in the process, and discussions that I thought would be 30 minute conversations turned into 2 hour discussions as she questioned almost all my assumptions… Yes, I still love her after that… The biggest mind shift following a customer development process is from thinking you know something to testing everything you know.
“We built out our initial customer problem presentation and decided to target people just like us – busy parents with young kids.
“Our top 3 problems where:
Sharing lots of photos and videos is a hassle
A lot of services downsize the images so the quality is poor
Notifying family and friends of updates was manual and a chore
“We were able to find the initial batch through friends and daycare, and subsequent batches through follow-on referrals. I’ll add that it is very important to talk to complete strangers to keep objectivity in check. Family and friends can be too kind sometimes and really lead you down the wrong path. We debated paying for their time with gift cards or doing a DSLR camera raffle and in the end decided to just lay out our objectives and ask for 30 mins of their time. That was enough.…
“During the interview, we were particularly interested in learning what their sharing workflow was like. We set up the stage and let them tell us everything they did with their photos/videos taking them from camera to shared, what they wished they could change, and the magical pricing questions: Would they use a solution like the one we were envisioning if it were free? Would they use it if it were $X/yr? X changed from customer to customer but we kept it as real as we could.
“We talked to enough people until their answers started sounding the same…
“Our revised top 3 problems were:
Sharing lots of photos and videos is a hassle (stayed the same)
Requiring visitors to signup is annoying
Photo gallery design was too busy or complicated
If you’re crazy for case studies, I’ve found at least a billion at the Lean Startup Circle. Let me know if you find any good ones there.
Friday, November 20, 2009
How to Operate a Tradeshow Booth: real advice that you can actually use!
I've been reviewing some old blog posts by Jason Calacanis lately, who I think gives out some of the most useful and practical advice to startups. Here's one from latelast summer that he posted about How to Operate a Tradeshow Booth. If you've seen it, its worth another look. If you haven't, there's something useful in there for everyone! I think putting your goals in place and running your budget against key metrics are two areas he talks about that are so very important.
---
I thought I would take a moment to discuss the bestpractices for running a booth or table at a trade show or conference.These points are general and are intended to apply to everything froma 50-person SIG (special interest group), where you're given a genericfolding table, to a custom-built booth at a trade show like CES, heldin the Las Vegas Convention Center.This list is far from comprehensive, but I did query a number of eventexecutives with it to get their insights.
Tips on How to Operate a Trade Show Booth--------------------------------
1. Define your goal=============In order to maximize your investment in a trade-show booth orconference table top, you must clearly define your goals. A booth isbut one of many ways to obtain value from a conference. In fact, evenattending a conference can be a way to grow your company. It'simportant that your entire team, from marketing to product to the CEO,agree on the goals long before committing to an event.The most frequent reasons I've heard for hosting a booth are:a) to obtain leads/clientsb) to further develop relationships with existing clientsc) brandingd) educating people about your company and productse) to support your industry or the people throwing the eventf) for the fun and enjoyment of the team attending the event (i.e. "a junket")g) recruitingh) courting investorsSince your goals are going to determine your strategy, you need toreally think about which one or two of these are the most important toyou. Most companies will look at the list above--the same list that'sin the marketing materials that sold you on getting a booth--and say"yeah, we want to do a little of all of that."If you focus equally on each of the goals above, chances are you'renot going to succeed in any real way at any of them. Once you have alist of goals, you really need to prioritize them. I like to forcemyself to define one clear goal, like "we're here to find aninvestor," "we're here to get press for the latest version of ourwebsite," or "we're here to find a CTO."As an exercise, consider forcing your team to select your top threegoals and assign a percentage of importance to each. As a follow-upexercise, ask your team to now select, hands down, the most importantsingle goal. If you have too hard a time with this task, you probablyshouldn't be hosting a booth--unless of course it's 1999 or 2000 andyou feel like burning through venture capital money as quickly aspossible in order to take your company public.
2. Pick the right event=============The goals mentioned above are very specific and they target specificcategories of people: venture capitalists, clients, employees, or thepress, for example. Now that you know your goals, you need to find outwhich conference to sponsor. Most professional conferences will eitherprovide a list of companies represented at the event or a nice shinypie chart with demographics.Now you can take their word for it, or better yet, you can do your ownresearch. The best way to figure out what trade show to go to is toask the types of people you want to meet what trade shows they love.For example, if you wanted to meet developers, ask a developer for alist of their favorite events.You might hear about eTech (sorry tohear it's not returning), SXSW Interactive or Lockergnome.If you're looking to meet angel investors, you might hear back aboutTechCrunch50 or Web 2.0. For CEOs, you're gonna hear the Wall StreetJournal's D Conference or TED. You get the idea; ask the people whoactually put their money down for tickets about which events theylove.
3. Develop a strategy and timeline=============After you've prioritized your goals, you're going to need a checklistand timeline. Your conference presence is going to have a lot ofmoving parts--far too many to just remember.For example, if you want to generate leads, then you should bring yourmost sociable team members and charge them with getting business cardsinto the raffle bowl. If your goal is to land actual clients at theshow, instead of just getting business cards, well then you're goingto want to bring your most knowledgeable sales people and focus onsocializing over drinks, lunch and dinner. If you want to landdevelopers, you'll probably want to bring your developers and set upan area for them to hang out with their laptops open. (That's whatdevelopers like to do).The main point is that different goals will lead to differentstrategies and a varied punch list.Signing up for a booth is easy but running one is not. Many marketingpeople are quick to sign up for a booth, but slow in preparing to runit. After you've defined your goals you need to develop a timelineleading up to the event, during the event and for post-event.
4. Budget properly=============The cost of the booth is typically 1/3rd to 2/3rds of your totalinvestment in attending an event. Someone just told me that the absurd$18,500 fee that people pay to demo on stage at the DEMO Conference istypically 1/3rd of the total spend once you add in travel, runningyour booth and preparing. $50k to launch at a conference--ouch!NOTE: That will be the last dig at DEMO, the conference that takesadvantage of startups desperate for attention, I promise! :-).Clearly, you need to budget for things like travel, hotels, signage,swag, raffle items, staffing, opportunity cost and food. If you canbarely afford the cost of the booth, you shouldn't be doing the event,because you're going to cut corners on things like staffing yourbooth, signage and giveaways--all of which are essential.Prepare a comprehensive budget for the event and make sure all yourstakeholders understand the true cost, so that they can measuresuccess post-event.
5. Run your budget against your key metrics=============Since you have your goals and costs defined, you might considerassigning a cost to each goal and metric. For example, if your goalsare equally to get prospective leads for the sales team and to recruitnew sales people, and you'd also like to brand yourself a bit, you canrun your costs against those categories:a) Land qualified leads: 40% ($4,000)b) Recruit potential sales executives: 40% ($4,000)c) Branding: 20% ($2,000)As you can see, I've modeled this conference as a local one-day eventwith a $10,000 cost: $5,000 for the booth, $1,000 for the raffle oftwo iPhones, $2,000 in swag, $1,000 for marketing materials and $1,000in staffing costs. Since you're spending $4,000 on generatingqualified leads, you can easily back into a cost-per-lead of $10 ifyou collect 400 of them or $20 if you collect 200 of them.If you normally pay a recruiter $10,000 to find a sales person, thenyou need to find a new sales person over 2-3 events to make thisworthwhile. If you land a new sales person or two at one event, you'reway in the black.These are the kinds of discussions you need to have before committingto an event. Again, unless you've got money to burn because yourcompany throws off huge profits like Google, Yahoo, Microsoft or NewsCorp. Those companies have departments that can burn money onconferences without giving it deep consideration because they'veearned that right. They have huge profits and your startup probablydoesn't. Startups and small- to mid-sized companies need to thinkabout these things deeply, because this money might be better spent onother bullets.
6. Who should work your booth=============As mentioned above, you want to pick the right category of person foryour goal. If you're recruiting sales people, you're going to want tobring not only your HR people (who do it for a living) but also othersales people to act as references for the HR people. If you're lookingfor developers, you need to bring your developers.After you've found the right category of person to manage yourpresence, you have to buy them a copy of the audiobook or print bookfor "How To Win Friends and Influence People." If you do this, pleasebuy it from the following URL at Audible since they sponsor my show,"This Week in Startups": http://www.audiblepodcast.com/twist :-)What they will learn in this famous book is, essentially, how to makeyourself a likable person, by smiling, showing interest in otherpeople and having a positive outlook. Sure it's corny, and maybe it'sobvious to many people, but it's well worth the investment of $10-30to get each of your folks both the book and the audiobook. (Make iteasy for them). In fact, insist on them listening to it and have abook club-style discussion about it before the show.
7. Getting people into your booth=============Be friendly, make eye contact and smile. Ask people one of the following things:a) "Hello, would you be interested in seeing our product?"b) "Hello, would you be interested in seeing our product and winning an iPhone?"c) "Hello NAMEonNAMETAG, how are you doing today?" -- response --"That's fantastic, glad you're having a good time. Let's win you aniPhone and show you want Mahalo does, shall we?"d) Hold out a candy bowl, and say with a big smile, "Candy?" -- waitfor thank you -- say one of the three lines above.If someone says "no, thank you," say something like:a) "OK, thanks, would you like to drop your card in to win an iPhone anyway?"b) "No worries, perhaps another time... enjoy the rest of the show!"c) "OK, enjoy the rest of the show. See you at the cocktail party!"The giving of the raffle or candy taps into the reciprocity effect inpsychology, which essentially states that if you do something nice forsomeone, they will feel compelled to return the favor. You give thecandy and they will see a demo. You give the chance at an iPhone andthey won't have a problem giving you their card.You can read more about reciprocity online, but basically it's whatthe Moonies do to you at the airport when they put a flower in yourhand and than ask for a donation. The book "The Power of Persuasion"has a good read/listen on this subject: http://bit.ly/eLhfr
8. How to demo your product=============Create a very short interactive overview of your product. For example,here is how I would demo Mahalo Answers:Me: "Have you ever used Yahoo Answers or seen a question from therecome up in a Google results?"Attendee: "Yes/No/Maybe."Me: "OK, great, well, Mahalo Answers is like that but way morepowerful. Here, you can see, I've asked people what their favoritecover to a Bob Dylan song is, and you can see I've received over 120answers in just three days, and many folks embedded a YouTube video ormp3 file!"Attendee: INSERT SOME OBSERVATION OR QUESTION HERE.ME: "Exactly! That's a great observation" (i.e. something to show youlistened to their response), "Let me have you try it... What questiondo you have today? Think of some problem in your life you're trying tosolve... maybe a vacation, car or product decision? Parenting orhealth?"As you can see I've set this up to be interactive and engage theperson and I'm showing--NOT TELLING--the core value of the product tothe user. I'm getting them right into the product and having them tryit. That is what you want to do: show the product and get thepotential user to TRY the product.
9. Do assume the Internet will be down=============I don't know if I've ever been to a conference of note that hadtotally stable Internet for the complete show, especially at techconferences. Have three different brands of EVDO cards as well as acanned demonstration or screencast of your product ready to go.1
0. Do offer swag=============Offer an easy to carry, memorable and hopefully useful piece of swag.If you're at Sundance and it's freezing, give out a scarf, gloves orwool cap--all with your logo. If you're at a beach resort in Hawaii,give suntan lotion with your logo on it, a sun visor or flip flops. Ifyou're in New York City, give folks a bike messenger bag, a customprinted Zagat guide or a journal with a pen.Don't give crummy t-shirts to people with a huge logo on it. Peoplemay take them but they won't wear them. If you are going to give folksa shirt, make it a beautiful shirt with a tiny, tiny logo on it. Makeit something someone very hip would be happy to wear to the club orgolf course. No one wants your huge logo across their chest unlessyou're a loved brand like Nike, Google or Apple.
11. Do have a raffle=============Collect business cards by having a raffle for whatever the mostrecently sold-out product in the world is. If there is a line forsomething to buy at the Apple Store or Best Buy, there will be an evenlonger line to get it for free at your booth. Have multiple handheldfishbowls ready so your booth agents can hold them out as people go byif need be.Email those people after the event and thank them for joining theraffle. Let them know they didn't win the XBOX 360, but that you areinviting them to a seminar about "how to save money with CRM" ifthey're interested. In other words, your follow-up pitch should offersomething else of value. Content is a great way to go, and the contentshouldn't be "all about Salesforce," but rather about what Salesforcecustomers care about.Try to go from the raffle to a conversation about amutually-interesting topic (i.e. a webinar) to the client. Going rightfrom raffle to client is too jarring and will feel like spam.Another idea is to send a lesser piece of swag in the mail with somecontent. So, something like: "Thank you for joining our raffle atTechCrunch50. I wanted to send you a complimentary copy of 'SiliconValley Bank's Guide to Doing Your Next Valuation' as a thank you. Ifyou have any follow-up questions, do let me know, and I look forwardto seeing you at next year's event or sooner!"
12. Have a fascinating business card=============File this under "purple cows," but having an interesting business cardcan go a long way. I'll never forget Charles Forman's business cardas long as I live. It's so innovative and cool that it got a story onGawker: http://bit.ly/2kuECT.TechCrunch50 demopit company Expensify featured their innovativebusiness card in their piece on the event: http://bit.ly/phCRWhen I launched Mahalo.com at the D Conference two years ago, I putthe names of each speaker on the back of my card in a Mahalo URL. Thatlet people see examples of our topic pages/search results forthemselves. Not as innovative as the two things above, but not tooshabby.Frankly, I'm thinking about knocking off Forman's card one of these days.Here's some more memorable business card examples: http://bit.ly/zqXUyWhat can you accomplish with your business card?
13. Wear a professional made name tag.=============A custom name tag looks better than the ones the conference gives out.Check out this one for Apple employees: http://bit.ly/2UgyW2
14. Have appropriate signage=============This is fairly obvious, but if you don't have your name around andabove the crowd height, your booth may get passed by. Big photos ofgood looking people are also good since that will catch the eye.People stop to look at photos of other people.
15. Don't hire booth babes or strippers=============Unless you work in the modeling, strip club or porn business, don'thire models, strippers or porn stars to work your booth--it'sinsulting to women. Now, that doesn't mean the folks in your boothcan't be attractive and well manicured. It just means, have sometaste. At last year's conference, someone had a bunch of strippertypes in hot pants and absurdly tight t-shirts. It was totally cheap,cheesy and lame. It's 2009, people, really.
Some assorted smaller tips that don't need much explanation:
16. Ask the conference producers for a discounted "introductory rate."
17. Have a big dish of candy next to your computers.
18. Have three times the number of staff for your booth as you need at one time.
19. Have your staff circulate through the show giving out swag, candyor party invites (if allowed).
20. Dress your staff in the company color scheme and with thecompany's logo on their front and back.
21. Consider having a game of chance (spin the wheel, blackjack, etc)at your booth.
21. Hold a post-conference recap with your team to evaluate how you did.
22. Hold a post-conference recap with the conference producers andtell them your pros and cons.
If you're interested in this you might be interested in my previous posts:
How to Demo your Startup (part one)http://calacanis.com/2009/09/08/how-to-demo-your-startup-part-one/
How to Demo your Startup (part two)http://calacanis.com/2009/09/08/how-to-demo-your-startup-part-two/
How to save money running a startup (17 really good tips)http://calacanis.com/2008/03/07/how-to-save-money-running-a-startup-17-really-good-tips/
What to do if your startup is about fail (or “Don’t Stop Believing”)http://calacanis.com/2009/02/27/what-to-do-if-your-startup-is-about-fail-or-dont-stop-believing/
PSSS - You can follow me on Twitter @jason (yes, I changed from@jasoncalacanis to just @jason).http://www.twitter.com/jasonPSSSS - You can follow me on Facebook at http://www.facebook.com/jasoncalacanisPSSSSS - You can subscribe to This Week in Startups at the followingURLs for iTunes: http://bit.ly/BSGLu or you can watch it athttp://www.thisweekinstartups.com
---
I thought I would take a moment to discuss the bestpractices for running a booth or table at a trade show or conference.These points are general and are intended to apply to everything froma 50-person SIG (special interest group), where you're given a genericfolding table, to a custom-built booth at a trade show like CES, heldin the Las Vegas Convention Center.This list is far from comprehensive, but I did query a number of eventexecutives with it to get their insights.
Tips on How to Operate a Trade Show Booth--------------------------------
1. Define your goal=============In order to maximize your investment in a trade-show booth orconference table top, you must clearly define your goals. A booth isbut one of many ways to obtain value from a conference. In fact, evenattending a conference can be a way to grow your company. It'simportant that your entire team, from marketing to product to the CEO,agree on the goals long before committing to an event.The most frequent reasons I've heard for hosting a booth are:a) to obtain leads/clientsb) to further develop relationships with existing clientsc) brandingd) educating people about your company and productse) to support your industry or the people throwing the eventf) for the fun and enjoyment of the team attending the event (i.e. "a junket")g) recruitingh) courting investorsSince your goals are going to determine your strategy, you need toreally think about which one or two of these are the most important toyou. Most companies will look at the list above--the same list that'sin the marketing materials that sold you on getting a booth--and say"yeah, we want to do a little of all of that."If you focus equally on each of the goals above, chances are you'renot going to succeed in any real way at any of them. Once you have alist of goals, you really need to prioritize them. I like to forcemyself to define one clear goal, like "we're here to find aninvestor," "we're here to get press for the latest version of ourwebsite," or "we're here to find a CTO."As an exercise, consider forcing your team to select your top threegoals and assign a percentage of importance to each. As a follow-upexercise, ask your team to now select, hands down, the most importantsingle goal. If you have too hard a time with this task, you probablyshouldn't be hosting a booth--unless of course it's 1999 or 2000 andyou feel like burning through venture capital money as quickly aspossible in order to take your company public.
2. Pick the right event=============The goals mentioned above are very specific and they target specificcategories of people: venture capitalists, clients, employees, or thepress, for example. Now that you know your goals, you need to find outwhich conference to sponsor. Most professional conferences will eitherprovide a list of companies represented at the event or a nice shinypie chart with demographics.Now you can take their word for it, or better yet, you can do your ownresearch. The best way to figure out what trade show to go to is toask the types of people you want to meet what trade shows they love.For example, if you wanted to meet developers, ask a developer for alist of their favorite events.You might hear about eTech (sorry tohear it's not returning), SXSW Interactive or Lockergnome.If you're looking to meet angel investors, you might hear back aboutTechCrunch50 or Web 2.0. For CEOs, you're gonna hear the Wall StreetJournal's D Conference or TED. You get the idea; ask the people whoactually put their money down for tickets about which events theylove.
3. Develop a strategy and timeline=============After you've prioritized your goals, you're going to need a checklistand timeline. Your conference presence is going to have a lot ofmoving parts--far too many to just remember.For example, if you want to generate leads, then you should bring yourmost sociable team members and charge them with getting business cardsinto the raffle bowl. If your goal is to land actual clients at theshow, instead of just getting business cards, well then you're goingto want to bring your most knowledgeable sales people and focus onsocializing over drinks, lunch and dinner. If you want to landdevelopers, you'll probably want to bring your developers and set upan area for them to hang out with their laptops open. (That's whatdevelopers like to do).The main point is that different goals will lead to differentstrategies and a varied punch list.Signing up for a booth is easy but running one is not. Many marketingpeople are quick to sign up for a booth, but slow in preparing to runit. After you've defined your goals you need to develop a timelineleading up to the event, during the event and for post-event.
4. Budget properly=============The cost of the booth is typically 1/3rd to 2/3rds of your totalinvestment in attending an event. Someone just told me that the absurd$18,500 fee that people pay to demo on stage at the DEMO Conference istypically 1/3rd of the total spend once you add in travel, runningyour booth and preparing. $50k to launch at a conference--ouch!NOTE: That will be the last dig at DEMO, the conference that takesadvantage of startups desperate for attention, I promise! :-).Clearly, you need to budget for things like travel, hotels, signage,swag, raffle items, staffing, opportunity cost and food. If you canbarely afford the cost of the booth, you shouldn't be doing the event,because you're going to cut corners on things like staffing yourbooth, signage and giveaways--all of which are essential.Prepare a comprehensive budget for the event and make sure all yourstakeholders understand the true cost, so that they can measuresuccess post-event.
5. Run your budget against your key metrics=============Since you have your goals and costs defined, you might considerassigning a cost to each goal and metric. For example, if your goalsare equally to get prospective leads for the sales team and to recruitnew sales people, and you'd also like to brand yourself a bit, you canrun your costs against those categories:a) Land qualified leads: 40% ($4,000)b) Recruit potential sales executives: 40% ($4,000)c) Branding: 20% ($2,000)As you can see, I've modeled this conference as a local one-day eventwith a $10,000 cost: $5,000 for the booth, $1,000 for the raffle oftwo iPhones, $2,000 in swag, $1,000 for marketing materials and $1,000in staffing costs. Since you're spending $4,000 on generatingqualified leads, you can easily back into a cost-per-lead of $10 ifyou collect 400 of them or $20 if you collect 200 of them.If you normally pay a recruiter $10,000 to find a sales person, thenyou need to find a new sales person over 2-3 events to make thisworthwhile. If you land a new sales person or two at one event, you'reway in the black.These are the kinds of discussions you need to have before committingto an event. Again, unless you've got money to burn because yourcompany throws off huge profits like Google, Yahoo, Microsoft or NewsCorp. Those companies have departments that can burn money onconferences without giving it deep consideration because they'veearned that right. They have huge profits and your startup probablydoesn't. Startups and small- to mid-sized companies need to thinkabout these things deeply, because this money might be better spent onother bullets.
6. Who should work your booth=============As mentioned above, you want to pick the right category of person foryour goal. If you're recruiting sales people, you're going to want tobring not only your HR people (who do it for a living) but also othersales people to act as references for the HR people. If you're lookingfor developers, you need to bring your developers.After you've found the right category of person to manage yourpresence, you have to buy them a copy of the audiobook or print bookfor "How To Win Friends and Influence People." If you do this, pleasebuy it from the following URL at Audible since they sponsor my show,"This Week in Startups": http://www.audiblepodcast.com/twist :-)What they will learn in this famous book is, essentially, how to makeyourself a likable person, by smiling, showing interest in otherpeople and having a positive outlook. Sure it's corny, and maybe it'sobvious to many people, but it's well worth the investment of $10-30to get each of your folks both the book and the audiobook. (Make iteasy for them). In fact, insist on them listening to it and have abook club-style discussion about it before the show.
7. Getting people into your booth=============Be friendly, make eye contact and smile. Ask people one of the following things:a) "Hello, would you be interested in seeing our product?"b) "Hello, would you be interested in seeing our product and winning an iPhone?"c) "Hello NAMEonNAMETAG, how are you doing today?" -- response --"That's fantastic, glad you're having a good time. Let's win you aniPhone and show you want Mahalo does, shall we?"d) Hold out a candy bowl, and say with a big smile, "Candy?" -- waitfor thank you -- say one of the three lines above.If someone says "no, thank you," say something like:a) "OK, thanks, would you like to drop your card in to win an iPhone anyway?"b) "No worries, perhaps another time... enjoy the rest of the show!"c) "OK, enjoy the rest of the show. See you at the cocktail party!"The giving of the raffle or candy taps into the reciprocity effect inpsychology, which essentially states that if you do something nice forsomeone, they will feel compelled to return the favor. You give thecandy and they will see a demo. You give the chance at an iPhone andthey won't have a problem giving you their card.You can read more about reciprocity online, but basically it's whatthe Moonies do to you at the airport when they put a flower in yourhand and than ask for a donation. The book "The Power of Persuasion"has a good read/listen on this subject: http://bit.ly/eLhfr
8. How to demo your product=============Create a very short interactive overview of your product. For example,here is how I would demo Mahalo Answers:Me: "Have you ever used Yahoo Answers or seen a question from therecome up in a Google results?"Attendee: "Yes/No/Maybe."Me: "OK, great, well, Mahalo Answers is like that but way morepowerful. Here, you can see, I've asked people what their favoritecover to a Bob Dylan song is, and you can see I've received over 120answers in just three days, and many folks embedded a YouTube video ormp3 file!"Attendee: INSERT SOME OBSERVATION OR QUESTION HERE.ME: "Exactly! That's a great observation" (i.e. something to show youlistened to their response), "Let me have you try it... What questiondo you have today? Think of some problem in your life you're trying tosolve... maybe a vacation, car or product decision? Parenting orhealth?"As you can see I've set this up to be interactive and engage theperson and I'm showing--NOT TELLING--the core value of the product tothe user. I'm getting them right into the product and having them tryit. That is what you want to do: show the product and get thepotential user to TRY the product.
9. Do assume the Internet will be down=============I don't know if I've ever been to a conference of note that hadtotally stable Internet for the complete show, especially at techconferences. Have three different brands of EVDO cards as well as acanned demonstration or screencast of your product ready to go.1
0. Do offer swag=============Offer an easy to carry, memorable and hopefully useful piece of swag.If you're at Sundance and it's freezing, give out a scarf, gloves orwool cap--all with your logo. If you're at a beach resort in Hawaii,give suntan lotion with your logo on it, a sun visor or flip flops. Ifyou're in New York City, give folks a bike messenger bag, a customprinted Zagat guide or a journal with a pen.Don't give crummy t-shirts to people with a huge logo on it. Peoplemay take them but they won't wear them. If you are going to give folksa shirt, make it a beautiful shirt with a tiny, tiny logo on it. Makeit something someone very hip would be happy to wear to the club orgolf course. No one wants your huge logo across their chest unlessyou're a loved brand like Nike, Google or Apple.
11. Do have a raffle=============Collect business cards by having a raffle for whatever the mostrecently sold-out product in the world is. If there is a line forsomething to buy at the Apple Store or Best Buy, there will be an evenlonger line to get it for free at your booth. Have multiple handheldfishbowls ready so your booth agents can hold them out as people go byif need be.Email those people after the event and thank them for joining theraffle. Let them know they didn't win the XBOX 360, but that you areinviting them to a seminar about "how to save money with CRM" ifthey're interested. In other words, your follow-up pitch should offersomething else of value. Content is a great way to go, and the contentshouldn't be "all about Salesforce," but rather about what Salesforcecustomers care about.Try to go from the raffle to a conversation about amutually-interesting topic (i.e. a webinar) to the client. Going rightfrom raffle to client is too jarring and will feel like spam.Another idea is to send a lesser piece of swag in the mail with somecontent. So, something like: "Thank you for joining our raffle atTechCrunch50. I wanted to send you a complimentary copy of 'SiliconValley Bank's Guide to Doing Your Next Valuation' as a thank you. Ifyou have any follow-up questions, do let me know, and I look forwardto seeing you at next year's event or sooner!"
12. Have a fascinating business card=============File this under "purple cows," but having an interesting business cardcan go a long way. I'll never forget Charles Forman's business cardas long as I live. It's so innovative and cool that it got a story onGawker: http://bit.ly/2kuECT.TechCrunch50 demopit company Expensify featured their innovativebusiness card in their piece on the event: http://bit.ly/phCRWhen I launched Mahalo.com at the D Conference two years ago, I putthe names of each speaker on the back of my card in a Mahalo URL. Thatlet people see examples of our topic pages/search results forthemselves. Not as innovative as the two things above, but not tooshabby.Frankly, I'm thinking about knocking off Forman's card one of these days.Here's some more memorable business card examples: http://bit.ly/zqXUyWhat can you accomplish with your business card?
13. Wear a professional made name tag.=============A custom name tag looks better than the ones the conference gives out.Check out this one for Apple employees: http://bit.ly/2UgyW2
14. Have appropriate signage=============This is fairly obvious, but if you don't have your name around andabove the crowd height, your booth may get passed by. Big photos ofgood looking people are also good since that will catch the eye.People stop to look at photos of other people.
15. Don't hire booth babes or strippers=============Unless you work in the modeling, strip club or porn business, don'thire models, strippers or porn stars to work your booth--it'sinsulting to women. Now, that doesn't mean the folks in your boothcan't be attractive and well manicured. It just means, have sometaste. At last year's conference, someone had a bunch of strippertypes in hot pants and absurdly tight t-shirts. It was totally cheap,cheesy and lame. It's 2009, people, really.
Some assorted smaller tips that don't need much explanation:
16. Ask the conference producers for a discounted "introductory rate."
17. Have a big dish of candy next to your computers.
18. Have three times the number of staff for your booth as you need at one time.
19. Have your staff circulate through the show giving out swag, candyor party invites (if allowed).
20. Dress your staff in the company color scheme and with thecompany's logo on their front and back.
21. Consider having a game of chance (spin the wheel, blackjack, etc)at your booth.
21. Hold a post-conference recap with your team to evaluate how you did.
22. Hold a post-conference recap with the conference producers andtell them your pros and cons.
If you're interested in this you might be interested in my previous posts:
How to Demo your Startup (part one)http://calacanis.com/2009/09/08/how-to-demo-your-startup-part-one/
How to Demo your Startup (part two)http://calacanis.com/2009/09/08/how-to-demo-your-startup-part-two/
How to save money running a startup (17 really good tips)http://calacanis.com/2008/03/07/how-to-save-money-running-a-startup-17-really-good-tips/
What to do if your startup is about fail (or “Don’t Stop Believing”)http://calacanis.com/2009/02/27/what-to-do-if-your-startup-is-about-fail-or-dont-stop-believing/
PSSS - You can follow me on Twitter @jason (yes, I changed from@jasoncalacanis to just @jason).http://www.twitter.com/jasonPSSSS - You can follow me on Facebook at http://www.facebook.com/jasoncalacanisPSSSSS - You can subscribe to This Week in Startups at the followingURLs for iTunes: http://bit.ly/BSGLu or you can watch it athttp://www.thisweekinstartups.com
Wednesday, July 15, 2009
New Incubator in Berkeley, CA
http://venturebeat.com/2009/07/15/berkeley-ventures-new-incubator-breaks-from-summer-program-model/
Berkeley Ventures’ new incubator breaks from summer program model
July 15, 2009 Camille Ricketts
Berkeley Ventures, a new Bay Area incubator for early-stage companies across tech sectors, has just launched with a unique offering: unlike Y Combinator or TechStars — incubators that run three-month programs — Berkeley will provide startups with ongoing support for up to two years.
In addition to providing $5,000 to $10,000 in seed money to some startups (in exchange for a 3 to 9 percent stake in each company), the Berkeley, Calif.-based firm will also house companies rent-free for three months, run mentorship programs, and offer discounted access to marketing, legal and technical advisers. Its members will also have the option of staying in the firm’s 8,400 square-foot space for discounted rent after the first three months until they are capable of relocating.
The incubator is emphasizing its 10-minute proximity from the UC Berkeley Campus and San Francisco as major advantages for prospective startups. It says it has connections at the university, as well as nearby Stanford to help its portfolio companies assemble strong, knowledgeable boards. It also hosts regular events where fledgling managers can meet each other and advisers, and of course investors. On specified Investor Days, startups have the chance to present to angels and venture capital groups.
Berkeley Ventures says it is looking for a diversity of startups for its flock, cutting across high tech, application development, cleantech, Web 2.0, finance, gaming, mobile and social networking.Companies from anywhere in the world can apply, but must be smaller that six employees to be eligible.
While it still reviewing applications for its first batch of startups, it has already recruited an impressive crop of advisers, including Jeff Braun, founder and CEO of Maxis before it was acquired by Electronic Arts, Anthony Patek, an attorney from Cooley Godward and Kronish, and Joel Serface of Kleiner Perkins Caufield and Byers, who works closely with the U.S. Department of Energy.
Berkeley Ventures’ new incubator breaks from summer program model
July 15, 2009 Camille Ricketts
Berkeley Ventures, a new Bay Area incubator for early-stage companies across tech sectors, has just launched with a unique offering: unlike Y Combinator or TechStars — incubators that run three-month programs — Berkeley will provide startups with ongoing support for up to two years.
In addition to providing $5,000 to $10,000 in seed money to some startups (in exchange for a 3 to 9 percent stake in each company), the Berkeley, Calif.-based firm will also house companies rent-free for three months, run mentorship programs, and offer discounted access to marketing, legal and technical advisers. Its members will also have the option of staying in the firm’s 8,400 square-foot space for discounted rent after the first three months until they are capable of relocating.
The incubator is emphasizing its 10-minute proximity from the UC Berkeley Campus and San Francisco as major advantages for prospective startups. It says it has connections at the university, as well as nearby Stanford to help its portfolio companies assemble strong, knowledgeable boards. It also hosts regular events where fledgling managers can meet each other and advisers, and of course investors. On specified Investor Days, startups have the chance to present to angels and venture capital groups.
Berkeley Ventures says it is looking for a diversity of startups for its flock, cutting across high tech, application development, cleantech, Web 2.0, finance, gaming, mobile and social networking.Companies from anywhere in the world can apply, but must be smaller that six employees to be eligible.
While it still reviewing applications for its first batch of startups, it has already recruited an impressive crop of advisers, including Jeff Braun, founder and CEO of Maxis before it was acquired by Electronic Arts, Anthony Patek, an attorney from Cooley Godward and Kronish, and Joel Serface of Kleiner Perkins Caufield and Byers, who works closely with the U.S. Department of Energy.
Friday, June 26, 2009
Cleantech IPO's on the horizon? Lets hope so!
Finallly some good news on the VC exit front! After the billions that have gone into Cleantech, it looks like we'll be seeing some IPO's in the not too distant future. Be sure to note that Steve Westly definitely has a more positive attitude than alot of other folks, but the growth in some of the companies noted here is real.
http://www.pehub.com/43201/westly-well-have-a-dozen-cleantech-ipos/
Westly: We’ll Have a Dozen Cleantech IPOs
Posted on: June 25th, 2009
Westly Group
There are cleantech bulls. And then there is Steve Westly.
The former eBay marketing director and onetime California state controller, who currently runs Silicon Valley venture firm The Westly Group, is predicting that the moribund market for new public offerings is about to wake up. In the next 12 months, Westly told participants today at VCJ’s Financing the Cleantech Vision conference, there will be a dozen clean technology IPOs. Some of them, he predicted, will be blockbusters.
It’s a remarkably optimistic outlook, given that so far this year there have been only been 13 U.S. IPOs priced in any industry – down from 35 during the same period last year, which was also a subdued period for new offerings. On the new filings front, the situation compares even more poorly – with just 12 IPOs filed this year, down 89% from last year, according to Renaissance Capital.
Still, there’s great desire amid VCs for a homerun cleantech IPO – something perhaps to rival the Netscape IPO, which ushered in the era of fast Internet riches.
Who’s on the short list? Westly mentioned Silver Spring Networks –the Silicon Valley-based developer of smart grid technology that has raised $168 million in venture funding – as a likely candidate. Silver Spring has certainly proven it can generate buzz, as it was a top pick of a few conference-goers asked to name a likely cleantech IPO hit.
Another favorite pick was Solyndra, the Fremont, Calif.-based developer of photovoltaic systems for commercial rooftops that has raised $226 million in venture funding to date. Another that’s expected to debut sooner is litiium ion battery maker A123 Systems, which is already in registration and recently filed an amended prospectus.
Magma Energy could also be a contender, though it’s making its debut in Canada. The Vancouver geothermal company, according to news sources, filed a preliminary prospectus today and is looking to raise C$50 million or more in an offering on the Toronto Stock Exchange.
http://www.pehub.com/43201/westly-well-have-a-dozen-cleantech-ipos/
Westly: We’ll Have a Dozen Cleantech IPOs
Posted on: June 25th, 2009
Westly Group
There are cleantech bulls. And then there is Steve Westly.
The former eBay marketing director and onetime California state controller, who currently runs Silicon Valley venture firm The Westly Group, is predicting that the moribund market for new public offerings is about to wake up. In the next 12 months, Westly told participants today at VCJ’s Financing the Cleantech Vision conference, there will be a dozen clean technology IPOs. Some of them, he predicted, will be blockbusters.
It’s a remarkably optimistic outlook, given that so far this year there have been only been 13 U.S. IPOs priced in any industry – down from 35 during the same period last year, which was also a subdued period for new offerings. On the new filings front, the situation compares even more poorly – with just 12 IPOs filed this year, down 89% from last year, according to Renaissance Capital.
Still, there’s great desire amid VCs for a homerun cleantech IPO – something perhaps to rival the Netscape IPO, which ushered in the era of fast Internet riches.
Who’s on the short list? Westly mentioned Silver Spring Networks –the Silicon Valley-based developer of smart grid technology that has raised $168 million in venture funding – as a likely candidate. Silver Spring has certainly proven it can generate buzz, as it was a top pick of a few conference-goers asked to name a likely cleantech IPO hit.
Another favorite pick was Solyndra, the Fremont, Calif.-based developer of photovoltaic systems for commercial rooftops that has raised $226 million in venture funding to date. Another that’s expected to debut sooner is litiium ion battery maker A123 Systems, which is already in registration and recently filed an amended prospectus.
Magma Energy could also be a contender, though it’s making its debut in Canada. The Vancouver geothermal company, according to news sources, filed a preliminary prospectus today and is looking to raise C$50 million or more in an offering on the Toronto Stock Exchange.
Monday, June 15, 2009
Got your cocktail/elevator pitch ready?
Some good solid advice on how to be ready for the well known cocktail (or elevator) pitch opportunity. It always surprises me how hard it is for entrepreneurs to explain their companies in a minute or less. If you can't do it, you certainly can't expect your advisors or exisiting investors to do it. Even bigger companies have a hard time with the short speech too.
Work on it, and practice - it helps!
http://blogs.wsj.com/venturecapital/2009/06/11/winding-up-for-the-cocktail-pitch/
June 11, 2009, 9:44 AM ET
Winding Up For The “Cocktail Pitch”
By Scott Austin
Say you’re an entrepreneur at a cocktail party snacking on some trail mix when you strike up an innocent conversation with the guy next to you who turns out to be a venture capitalist. He’s interested in hearing more about your company - are you prepared to make the pitch?
Mark Suster, a general partner at Los Angeles-based venture capital firm GRP Partners, appeared on the Fox Business Network yesterday to help new entrepreneurs develop what he calls the “cocktail pitch.” As he stated in the Fox interview:
“You know that you’re going to be faced with this cocktail party pitch scenario a lot of times in your career. It’s not just pitching a VC - you bump into a potential customer, you bump into a business partner, you bump into a journalist who wants to cover your story…what are you going to say? You need to practice that so it rolls off your tongue with energy and excitement. If it’s the first time you’re saying it, or you haven’t practiced it, it’s not going to sound very good.”
I’ve embedded the Fox Business clip at the bottom of this posting for your viewing pleasure. Suster also recently blogged about this topic, and with his permission, I’ve reprinted some of his tips below. If you’re a new entrepreneur, Suster’s advice is very helpful. For more on this topic, please check out Suster’s blog or the original post in which he also advises what topics the pitch should cover.
1) Show energy & enthusiasm – Passion sells. Show energy and excitement. Get your game face on. Make an impression. This is your shot and you have my attention. Don’t waste it on low energy, mumbling, limp handshakes or lack of assuredness. I’m not saying go “over the top” in your excitement, but enthusiasm for your idea is contagious. If you’re shy or introverted I don’t expect you to be something you’re not – it will come across as insincere. But at least practice your pitch enough so that you can say it with gusto.
2) Be human (no jargon, give me examples) – Most people who pitch me use jargon. I have a simple philosophy. If you can’t explain to me what you do in simple terms I assume that you don’t know what you’re talking about and you’re hiding behind terminology to sound more intelligent. The most difficult of topics can be explained in human terms. I like people to use real world examples. When I talk about my recent investment in RingRevenue I like to talk about the problem that affiliate networks have selling high value products. I call it the “treadmill problem”. If I want to buy a treadmill I won’t click and order over the Internet when a treadmill costs $3,000 or more. I want to speak with a sales rep to understand the 8 different models and which I should buy. With RingRvenue affiliate networks can track calls like Internet sites track clicks. Explaining this in “treadmill” terms I believe puts a human face on the issue.
3) Use numbers - Numbers speak. And they help convince people that you know what you’re talking about. In the RingRevenue example the pitch goes something like this: ”The highest that a product costs in an affiliate network is $200 because above that price people prefer to call a sales rep rather than buy online. Affiliate marketing is a large market already: $10 billion of goods sold through this channel of which the networks make fees of $2 billion. We think we can increase goods sold through this channel by 10x making it a $100 billion channel.”
4) Tell me what you want from me – In marketing or sales terminology we call this a “call to action” and I’m surprised at how few people incorporate this into their pitch. What is your goal in telling me about the virtual reality game you built that targets teens? Do you want me to meet you at some point in the near future? Do you want to approach me in 6 months but just want to be on my radar screen? Do you want to follow up with me via email to find out who invests in $250k deals in Southern California? Close by telling me what the next steps are or how I can help. Please don’t always make it a meeting for next week if you aren’t immediately fund raising. It can be as simple as, “I just want to say hello and tell you what we do so that I can speak with you next year when we’re raising money. Do you mind if I drop you a quick email with my contact details?”
5) Be prepared for the deep dive discussion if I engage – If you’re pitching me the Cocktail Party Pitch you had better be prepared for a deep dive. I might have just been thinking about investing in a self-service retail kiosk company so the fact that you have a product like this is great. I can cover the “Deep Dive” another time, but one bit of advice now … don’t do all the talking. I remember a friend from Australia had a saying that always stuck in my mind. He said, “that chap is a crocodile. All mouth an no ears.” Selling is about listening, asking questions and peppering in commentary. The Elevator Pitch is as much about selling as it is about pitching. So if you get beyond first base (the first 1-2 minutes) get ready for two-way dialog.
Work on it, and practice - it helps!
http://blogs.wsj.com/venturecapital/2009/06/11/winding-up-for-the-cocktail-pitch/
June 11, 2009, 9:44 AM ET
Winding Up For The “Cocktail Pitch”
By Scott Austin
Say you’re an entrepreneur at a cocktail party snacking on some trail mix when you strike up an innocent conversation with the guy next to you who turns out to be a venture capitalist. He’s interested in hearing more about your company - are you prepared to make the pitch?
Mark Suster, a general partner at Los Angeles-based venture capital firm GRP Partners, appeared on the Fox Business Network yesterday to help new entrepreneurs develop what he calls the “cocktail pitch.” As he stated in the Fox interview:
“You know that you’re going to be faced with this cocktail party pitch scenario a lot of times in your career. It’s not just pitching a VC - you bump into a potential customer, you bump into a business partner, you bump into a journalist who wants to cover your story…what are you going to say? You need to practice that so it rolls off your tongue with energy and excitement. If it’s the first time you’re saying it, or you haven’t practiced it, it’s not going to sound very good.”
I’ve embedded the Fox Business clip at the bottom of this posting for your viewing pleasure. Suster also recently blogged about this topic, and with his permission, I’ve reprinted some of his tips below. If you’re a new entrepreneur, Suster’s advice is very helpful. For more on this topic, please check out Suster’s blog or the original post in which he also advises what topics the pitch should cover.
1) Show energy & enthusiasm – Passion sells. Show energy and excitement. Get your game face on. Make an impression. This is your shot and you have my attention. Don’t waste it on low energy, mumbling, limp handshakes or lack of assuredness. I’m not saying go “over the top” in your excitement, but enthusiasm for your idea is contagious. If you’re shy or introverted I don’t expect you to be something you’re not – it will come across as insincere. But at least practice your pitch enough so that you can say it with gusto.
2) Be human (no jargon, give me examples) – Most people who pitch me use jargon. I have a simple philosophy. If you can’t explain to me what you do in simple terms I assume that you don’t know what you’re talking about and you’re hiding behind terminology to sound more intelligent. The most difficult of topics can be explained in human terms. I like people to use real world examples. When I talk about my recent investment in RingRevenue I like to talk about the problem that affiliate networks have selling high value products. I call it the “treadmill problem”. If I want to buy a treadmill I won’t click and order over the Internet when a treadmill costs $3,000 or more. I want to speak with a sales rep to understand the 8 different models and which I should buy. With RingRvenue affiliate networks can track calls like Internet sites track clicks. Explaining this in “treadmill” terms I believe puts a human face on the issue.
3) Use numbers - Numbers speak. And they help convince people that you know what you’re talking about. In the RingRevenue example the pitch goes something like this: ”The highest that a product costs in an affiliate network is $200 because above that price people prefer to call a sales rep rather than buy online. Affiliate marketing is a large market already: $10 billion of goods sold through this channel of which the networks make fees of $2 billion. We think we can increase goods sold through this channel by 10x making it a $100 billion channel.”
4) Tell me what you want from me – In marketing or sales terminology we call this a “call to action” and I’m surprised at how few people incorporate this into their pitch. What is your goal in telling me about the virtual reality game you built that targets teens? Do you want me to meet you at some point in the near future? Do you want to approach me in 6 months but just want to be on my radar screen? Do you want to follow up with me via email to find out who invests in $250k deals in Southern California? Close by telling me what the next steps are or how I can help. Please don’t always make it a meeting for next week if you aren’t immediately fund raising. It can be as simple as, “I just want to say hello and tell you what we do so that I can speak with you next year when we’re raising money. Do you mind if I drop you a quick email with my contact details?”
5) Be prepared for the deep dive discussion if I engage – If you’re pitching me the Cocktail Party Pitch you had better be prepared for a deep dive. I might have just been thinking about investing in a self-service retail kiosk company so the fact that you have a product like this is great. I can cover the “Deep Dive” another time, but one bit of advice now … don’t do all the talking. I remember a friend from Australia had a saying that always stuck in my mind. He said, “that chap is a crocodile. All mouth an no ears.” Selling is about listening, asking questions and peppering in commentary. The Elevator Pitch is as much about selling as it is about pitching. So if you get beyond first base (the first 1-2 minutes) get ready for two-way dialog.
Friday, June 12, 2009
The Basics of the Financial Food Chain
Here's the basics of the financial food chain for newbies. Good honest info on this from ReadWriteWeb (as usual) but there's a lot more info out there on each rung of the ladder. If you're interested in learning more about each step, do you homework!
http://www.readwriteweb.com/readwritestart/2009/06/the-capital-raising-ladder.php
The Capital-Raising Ladder
Written by Bernard Lunn / June 11, 2009 4:55 PM / 3 Comments
This is one post/chapter in a serialized book called Startup 101. For the introduction and table of contents, please click here.
The amount of capital you will need depends on what kind of venture you plan to build. You may need to go no further than the first rung of the ladder. You might be able to build a very good business that meets all of your financial needs without raising a dime from anybody. You might also strike it lucky and get phenomenal growth without needing capital. But being under-capitalized is a big source of venture failure. So you need to assess how much capital you'll need. Your chances of realistically getting that capital should factor into your planning. If you can reach only the lower rungs of the ladder, don't plan a business that needs higher levels out of your reach. If your first venture is a success, the other steps on the ladder will be more easily accessible if you decide to pursue another venture.
10 Steps on the Ladder
You may need only a few of these steps. This is not meant to be a "do this, then do this, and then do this" progression. You can skip steps and stop at any point.
- No cash, moonlighting, sweat
- Credit card or savings (personal round)
- Friends and family round
- Incubators
- Serious angels and small VCs
- Classic VCs
- Corporate VCs
- Non-recourse working capital bank loans
- IPO
- Exit: Capital Realization
Our aim with this chapter is to help you understand what these investors want. Habit #5 in Steven Covey's "7 Habits of Highly Successful People" is:
Seek first to understand. Then to be understood.
1. No Cash, Moonlighting, Sweat
This is the earliest possible phase, when all you need is to build a website that can be uploaded to your server and that demonstrates your idea. If you are a non-technical entrepreneur, this step is not feasible. The non-techie equivalent would be a business concept: identifying a big gap in the market, doing enough research to be credible, and developing a unique approach to filling this gap.
2. Credit Card or Savings (Personal Round)
Now you need to load your site onto a production server (or create a fancy slideshow) and buy business cards. Maybe your phone bill just went up, or you need to travel somewhere to meet someone. No problem; no need to ask anyone for money. Just keep track of these little items. They are pre-operating expenses. If you get to profitability without external investors, these loans of yours to the company can be re-paid. If you raise external capital, this is almost always regarded as sweat equity (meaning you don't get it back until exit time, when you sell your equity).
Be careful. Loading up on credit card debt is risky. You almost always need more money than you think, and it takes longer than you think to raise real money. You can rack up a sizable debt fairly quickly. If your credit card company tightens up, you'll have no options. If your venture fails, you'll be left with a nasty bill, probably with crippling interest rates.
3. Friends and Family Round
You are now at the stage where this venture of yours might really take off. But now you need more than you can afford but less than is sensible to ask from an angel. This is the friends and family round, people who "invest" because they know you, like you, and trust you. Don't take this as validation of your venture. It is purely validation of how they feel about you.
Keep the deal simple. This has to be convertible debt. That means:
They loan the money to your business,
It converts into equity at the first equity round.
This lets you avoid having to ask your friends and family to valuate your venture. They are not experts, and it makes for difficult conversations with people who still like you.
Your friends and family will always be important to you... more important to you than this venture. Don't make promises you are not 100% sure about. Be totally open and transparent, and do your best. If you follow these simple rules and your venture fails, you at least won't lose your friends and family.
Document what has been agreed on, even if only with an email trail. Memories may prove faulty.
4. Incubators
The US alone has 600 technology incubators. One may be near you.
Some are little more than office space and offer no real value: don't waste your time with them. Look for ones with a track record of successfully incubating ventures. That track record means that angels and VCs look to these incubators for deal flow, meaning you will get access to capital when you need it.
Incubators should give you four things:
Cash. Not all incubators have cash to invest. Look for the ones that do. This could replace a friends and family round. They might do a convertible deal, letting the angels or VCs set the valuation. That is ideal. If they insist on a percentage for a small amount of cash, take a long hard look at their track record. Those deals of, say, 10% of the venture for $20,000 may work for some first-time entrepreneurs if the incubator can really deliver the credibility and network you need. But note that later investors make their decisions based on the merits of your venture. The incubator just gets you through the door and may coach you on what to say as you walk through. Is that worth 10%? Because $20,000 is probably not worth 10%.
Services on a deferred-payment basis. These would be from vendors (landlords, lawyers, accountants, designers, advisors, etc.) who get paid only after the venture is funded. So, these vendors are also betting on the incubator's track record.
Mentorship and championing. This should come from the person in the incubator who really believes in your venture but also challenges you at every step to make sure you are really ready to take it to the next level. Look for a mentor/champion who has been an entrepreneur. There has to be chemistry. See the chapter on Building An Advisory Board and follow those guidelines when choosing a mentor/champion in an incubator. Yes, you choose them. It is not just about them choosing you.
A network of entrepreneurs and investors they can tap into on your behalf.
Why do successful entrepreneurs put time and money into becoming incubators?:
To get in on the ground floor of a great venture and make some money.
The buzz of startup life is addictive.
To do some good, and repay the good fortune they have had.
To help the local region. Perhaps they came from here, went to Silicon Valley because it was their only option, but wished they had an incubator like them locally when they were starting out.
Good incubators are a great rung on the ladder. But choose carefully: some will only waste your time
5. Serious Angels and Small VCs
Serious angels do what they do for a living. That is their day job. Sure, they love it and are passionate about it, but they also want to make money from investing. These serious angels are very different from the person in a full-time job who enjoys the distraction of hearing pitches and occasionally writing small checks.
The serious angels operate just like small VC firms. Some work in association with other angels so that they can provide enough funding that the company doesn't have to rely on VCs too early on. Some have raised money from other angels and in effect become small VC funds themselves. Serious angels take all of these steps because of one overriding fear:
They fear getting squeezed by a VC that invests in a later round.
As an entrepreneur, you need to be sensitive to that fear. Almost all entrepreneurs are too optimistic about their plan. They assume they can reach whatever milestone they have with less time and money than they really need. Then, when the venture runs out of money, the angel has two options:
Invest more money. At this point, they are investing in an entrepreneur who has not hit their numbers and whose credibility is questionable. So this does not feel good. The smart ones will just assume at the outset that they will have to invest way more money than you are asking for. For example, if you say, "We can get to profitability (or some other milestone) with $500,000," they will assume that something more like $1 million is needed and plan accordingly (by reserving as much of their or their partner's capital as is needed).
Get squeezed by a VC. In this case, their stake will be massively diluted. Say they invested $500,000 and got a 20% stake. Now, the venture is running out of money and needs $3 million urgently. The venture has good prospects, so VCs are interested. Some VCs will extract harsh terms under these conditions. Angels obviously don't like being treated this way. The venture is a winner, and they spotted it early, so why should they be the loser in this game? Bear in mind that you, the entrepreneur, get squeezed in this situation as well, but you are in a better position than the angel because the VC needs you to continue working to build value. But basically, this is bad news all around.
You can avoid this situation in two ways:
Be more realistic in your business planning. Yes, this is hard. Planning with multiple levels of uncertainty is hard. That is why investors, who know this fact very well, usually want more time to evaluate your venture than you'd like to give them. Use the angel's experience to help you with business planning. Check your assumptions against their experience. The mechanics of a spreadsheet are simple; the mistakes always lurk in one or two main assumptions. This is why the real-world experience of your advisor, incubator champion, or angel is critical.
Work with angels who, with their partners, have enough cash to invest if you do end up needing more money than planned. Work with angels who have a strong track record and good connections with people on the next rung of the ladder: the classic VC funds. VC funds are less likely to squeeze (read, alienate) an angel who they know is a great source of ventures.
6. Classic VCs
If you are a serial entrepreneur who has already built and sold a VC-funded company, you can jump straight to this rung of the ladder. If not, don't even think about it. For Web technology ventures, classic VC funds have become a source of late-stage expansion capital. Some of those VCs are getting back in the early-stage game by one of three methods:
Establishing a separate early-stage fund. Unless the VC has different partners, this separate fund is probably little more than a name and hypothetical allocation of money.
Acting as Incubator. This works like a convertible loan and can be a great solution.
Cultivating a network of friendly angels. The idea here is that they send deals to these angels, who bring those deals back when the ventures need more money.
Be careful. Many classic VCs like to work with a few "entrepreneurs in residence" to create ventures in-house. Their interest in any of these projects may be no more than due diligence.
In short, if you don't have a good relationship with a classic VC, don't start here.
7. Corporate VCs
Higher up on the ladder are corporate VCs. They get their deal flow from classic VC funds and invest with strategic objectives. They typically look to grow the market for their core product. They may want a minority stake in a venture that they see value in acquiring later on. Corporate VCs can be great, but make sure the deal does not come with strings attached that would scare off other potential acquirers.
8. Non-Recourse Working Capital Bank Loans
This is the high-five moment for bootstrapped ventures. It means you have been profitable for a while but need working capital because of fast growth. Most banks like to fund these. The big deal about non-recourse loans is that you are not personally liable. The bank uses your company's cash flow as collateral. For entrepreneurs who have gone into personal debt to build their venture, this is a big, big milestone.
9. IPO
This is the golden ticket for a VC-backed business. Well, at least it used to be. And it may be so again. It is another rung on the capital-raising ladder. You do an IPO to raise money, at least in theory. In reality, the larger motivation is to get your stock tradable (i.e. "liquid") so that you and your investors can sell some of it.
10. Exit: Capital Realization
The final step is to realize value by selling some or all of your stock either in a trade sale or to public market investors if you have done an IPO.
If you are starting out, then yes, all of the steps above the fifth rung on the ladder may as well be on the moon. But as with anything, take it one step at a time.
Subscribe to:
Posts (Atom)
Posts
