OnStartups

Freemium Pricing for SaaS: Optimizing Paid Conversion Upgrades

Dharmesh Shah — Tue, 22 May 2012 14:11:00 GMT

The following is a guest post by Rishi Shah, Co-Founder of Digioh and 500 Startups Mentor. Join his newsletter and get his eBook "10 Paying Customers in 10 Days" for free.

I've been building a new product and I'm almost ready to launch it. However, I'm having a really hard time figuring out the right pricing structure so I'm going to analyze my favorite Freemium SaaS businesses.

Here is what I know I want:

A free plan. Since we are just starting out I really want people to use the product for free (no credit card required). I'm okay with killing off the free plan if it isn't working economically (existing free users would be grandfathered in).
It is a hosted product so it will be recurring revenue. There will be a monthly fee for the paid packages (with an option to pay yearly upfront for a discount).
Based on many many studies the paid packages will end with a "9". So the packages will be priced with that in mind (i.e. $11.99, $24.99, etc.)
I want to leverage our free plan to get more referrals. For example the free members can earn more features or storage by referring a friend or posting a status update with our link in it. Pretty much exactly what dropbox and appsumo does.

Questions:

How generous should our Free plan be?
What limits should we place on it?
We need our free plan to be something amazing so people will sign up. However we don't want it to be so amazing that they don't ever need to upgrade.

I decided to take a look at some Freemium SaaS company that I know of and analyzed what I think they did well at.

I'm going to start with 37Signals (the godfather of small business SaaS). This was their pricing page before their relaunch. I like how they have the free plan but don't promote it at all. They don't mention it on their homepage and it is hidden at the bottom of their pricing page. A few years back they heavily promoted their free plan and said that 98% of all accounts were on the free plan. Check out their call to action on their homepage. They don't even mention the free plan. They do mention a 30-day free trial though.

Some insights (and assumptions) from 37signals' pricing strategy:

They really focus on getting paid customers.
The # of Free-to-Paid Upgrades is probably really low. They probably get most of their paying customers right at sign up which is why they have a 30-day free trial on paid packages and have their call-to action towards paid sign up (not the free plan).
I think a great way to launch is having an amazing free plan and once you start getting bigger focus your homepage on the paid signups.

Wufoo is probably my favorite SaaS business. In a presentation about SaaS he says:" always always display your highest priced package to the left and your cheapest package to the right". I made this switch for Flying Cartand he was right about it. Here is what I like:

Highest priced on the left, the reasoning is customers read from left to right. The $14.95 price tag doesn't seem so bad when you just read the $199.95 price.
The Free plan is perfect. Just enough to start (not super limited) but I am happy to pay once I have a little bit of success. This is what I call investing in your customers.
I also like how they have multiple thresholds from the free to the paid plan. Notice how the "Bona Fide" $29.95/mo plan has 5 users and the free plan only has 1 user. If you have 5 users you must be a bigger company and can afford the cost. This also gives a chance for Wufoo to get paid customers right from day #1.
I really like how they don't offer a 30-day free trial. They have a free plan so there is no need to have a free trial as well, allowing them to pull in cash as soon as possible.

Above is a screenshot of the DropBox Pricing Page. They don't promote the pricing page on the homepage at all.

Here is what I like:

Heavily promote their very generous free plan on their homepage - they don't show any prices, just a video and a download button
They leverage their free users to get more customers - amazing referral program. You can earn more space by referring people.
Up-sell customers after many months of usage and dependence on their product. I bet they have really good lifetime value on their paid customers.
My assumption is that DropBox has an amazing free account to paid account upgrade ratio which is why they focus on getting you to use the product as soon as possible.

I'm including Intuit but I really don't like it at all. This is exactly what I don't want.

Very confusing. Each pricing tier looks like it could be a different product.
An Asterisk next to their prices? Are you kidding me. Whenever I see an asterisk I get really scared that the price is going to jump after the first month.
The "Try it Free" is an okay call to action. The word "Try" makes me think I'm getting roped into something.
The reason I think this works is because they have a really strong brand value. People trust Intuit and they have a solid product for business accounting.

MailChimp is similar to dropbox. They have an amazing free plan.

Mailchimp puts a "MailChimp" ad in the footer of the newsletter promoting their services and allowing the end user to earn more credits with them.

Carbonmade has one of the most fun pricing pages. Here is what I like:

The top package is super cheap. $12/mo - wow. That's it and I get it all
How they display Free vs. Paid. The Paid package seems so much more fun and cool. I feel like a total loser clicking on the "Meh" package. I would rather just pay the $12 and feel better about myself. Other companies do this by highlighting their middle package with a "Best Option" headline.

Experts exchangeis a developer focused question and answer service. So if you need a coding question answered you can sign up and a real live person will email you right back. This is sometimes better than Stack Overflow or Quora because at times no one answers your questions. The Experts Exchange isn't your traditional Freemium business. When you sign up you are signing up to a paid plan (with a 30 day free trial). However when you become a customer you are given the opportunity to answer questions, the more questions you answer the cheaper your member ship becomes. This is a really interesting freemium approach. Their "Free" customers are helping Experts Exchange get paid customers. What I like:

The plans get cheaper if you pay for multiple months
They allow you to earn Free. It isn't given.

So what am I going to do?

I'm going to take the best from each one:

Launch a free plan that is amazing. We aren't the first service that will be doing what we do so we need to go the Mailchimp route.
Allow people to earn more features and storage if they share our service (similar to dropbox)
Make our paid plans feel amazing by adding a fun icon next to them (similar to carbonmade but won't be as awesome)
Make our highest paid package displayed to the left and offer multiple barriers so we can take payment on day one for bigger companies (similar to wufoo)
Learn from our data after 7 months and either de-emphsize our free plan (like 37Signals) or over emphasize it (like dropbox).

Here is what my current pricing page looks like:

What do you think of my freemium pricing analysis? Any tips or tactics you've learned from your own freemium pricing experience?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

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Building It Is Not Enough: 5 Practical Tips On User Acquisition

Dharmesh Shah — Wed, 02 May 2012 18:25:00 GMT

The following is a guest post by Brian Balfour, Co-Founder and CMO of Boundless. You can read more of his writing on his blog at BrianBalfour.com.

Stories about the growth of "hot" startups such as Facebook, Instagram, AirBNB, and others have created a belief that if you build the right product, customer acquisition will be easy. Don't be fooled. These stories are the exception, not the rule, and don't tell the entire story of the immense effort it took to grow their customer bases. Finding scalable acquisition channels is a time consuming and strategic effort.

If you build it, they may not come.

You probably have a product roadmap and a development process. But do you have a process and plan to discovering your scalable customer acquisition channels? For software development we have well documented processes such as Agile, Waterfall and Kanban. For finding product market fit we have an increasingly defined process in customer development and the lean startup methodology.

Finding scalable customer acquisition channels is as much of a process as software development or finding product market fit. Here are five mistakes to avoid in finding your initial customer acquisition channels.

1. Do Not Test A Lot Of Channels At Once

This is the ol' throw stuff against the wall and see what sticks strategy. Unfortunately this rarely works. Consider this, with Facebook ads you typically need to change your creative every 24-48 hours across 10 - 20 different segmentation combinations, with 4 - 10 ads per combination. That is in addition to all of the landing page testing you'll need to do for those combinations. It is easily a full time role. Think you will have time to focus on another channel at the same time?

Inbound marketing takes an incredible amount of time for content development. SEO requires testing thousands of page combinations, time to build influential links, and plenty of on-page optimization. My point is, properly testing any single customer acquisition channel is extremely time consuming and requires focus.

It is easy to think that the fastest way to find a channel is to test a lot at once. But with limited resources it is the exact opposite. Let's look at it a different way. If you had very limited engineering resources, would you have them try to build 4 different products at once to find one that works? I hope not. You would end up with 4 partially built products with little information on which one is going to to work.

Instead, you would likely evaluate each product idea, strategically choose one, focus, iterate on it for at least a couple months, and only then decide to keep moving forward or move on. Finding scalable customer acquisition requires a similar amount of strategic decisions, focus, and iteration.

The quickest way to finding your first scalable channel with limited resources is to focus on one at a single time and iterate based on feedback (metrics) just like you would with building product. At Boundless, we have been lucky to have enough resources to test two channels at once. But even with close to $10M in funding, we won't go beyond testing and optimizing two channels for awhile. Don't underestimate what it takes to properly test and optimize a single customer acquisition channel.

2. Diversity Of Channels Is Not Important In The Early Stage

Entire companies are typically built on the back of one or two channels. Look how far Zynga has gotten with basically two channels - Facebook Ads and Viral Mechanics. Only now are they starting to diversify with the launch of their new platform. Facebook itself relied completely on viral growth until they had reached millions of users. Only then did they start optimizing for SEO. AirBNB grew their initial user base almost completely on the back of craigslist.

For reasons discussed in number one, diversity of channels actually increases your risk that you never find a scalable channel at all. Remember this - momentum of growth trumps diversity of channels. Once you find a channel that is working at a small scale, don't be tempted to add another channel to the mix. Instead, focus on optimizing, scaling, and milking your initial channel for all its worth.

Your goal in the early stages is to grow as fast as possible with limited resources. Finding further growth in a channel that is already working is typically easier than finding a completely new acquisition channel. When you start to reach the max potential (where the growth curve starts to flatten), only then should you add another channel to the mix.

3. Paying For Users Is Ok

Magical stories of instant viral growth has formed a negative stigma around paying for users especially in the early days of a product. Entrepreneurs almost feel guilty if they pay for users. This leads to startup pitches that often include a slide that says "we've grown to X# of users with out paying for a single one."

Every, and I mean every, acquisition channel costs money. It is just a question of whether the cost is direct or indirect. Channels such as PPC obviously have a direct cost. However channels such as SEO and Viral are commonly seen as "free" channels. They aren't. To properly optimize SEO and Viral mechanics takes significant engineering and other employees' time. That time is costing you money. The cost is indirect, but you are still paying for users.

Those "free" channels are certainly valuable in the long term. But they often come with short term disadvantages. For example, SEO typically takes months of effort before you gain meaningful traffic. In the early stages, speed of learning is the most valuable thing. Do you really want to wait a few months to learn the same thing you could learn in less time with another channel?

Viral growth deserves its own mention here. It is the treasure that most entrepreneurs are seeking. They want to be the next Pinterest or Instagram. Keep in mind a lot of products aren't suited for viral growth. I think a lot of entrepreneurs overestimate whether or not their product is a fit for pure viral growth. If your business isn't suited for viral growth, that doesn't mean you have a bad business. You just need to find a different customer acquisition strategy.

4. You Only Need 3 Tools To Test Your Customer Acquisition Channels

The "measure everything" mantra has lead to a belief that an array of tools is needed to find a scalable channel. Between analytics, A/B testing, ad platforms, feedback, support and a host of other tools it is easy to get lost. If you wanted to learn to play basketball, would you go out and spend $1000 on the latest gear first? Or would you just grab a ball, find a hoop and start playing? Hopefully you answered the latter.

To test any customer acquisition channel all you typically need is Google Analytics, Excel, and some basic SQL skills. Those three things will take you surprisingly far for any channel before you need anything else. Don't get caught up with the tools, just get testing.

5. Avoid The Button Color A/B Testing Rabbit Hole

The rise in A/B testing and other analytics tools have created fairy tale stories of changing a button color, or moving the CTA from the left to the right and suddenly you have game changing improvements. Once again, these stories are the exception, not the rule. It typically takes 10 A/B tests to find one that produces any improvement at all. And when you do have a positive improvement, it is typically incremental instead of game changing.

Being metrics focused is important. But knowing how to properly influence them is even more critical.

In the early stage you should not be focused on incremental improvements. Your initial CPA for any new channel is likely to be a factor off from your target. That means you need to try and make big improvements to understand the viability of the channel. To see big improvements, focus on messaging, targeting and activation methods. Save your color experiments for when you are ready to optimize and scale a channel. Not when you are testing the viability of a channel.

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What do you think? Any additional tips on how to acquire users for early-stage product?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Startup Founders: Don't Freak Out

Dharmesh Shah — Thu, 26 Apr 2012 19:57:00 GMT

When I was working on building my first startup, Really Bad Things(TM) happened on an alarmingly regular basis. I was in my early 20s and living in Birmingham, Alabama (where there was no startup ecosystem at the time). So, when something happened that we thought would quite possibly kill the company, one of us (I had a co-founder) would freak out. Sometimes, both of us would freak out. Sometimes, we would freak each other out. Then, we would ultimately decide to take the Scarlett O'Hara (Gone With The Wind) approach — “I'll think about that tomorrow” and get back to work. After all was said and done, things worked out quite well. But, there were so many “near fatal” events, that we lost count.

I've since done two more startups and spent time with many, many entrepreneurs — often in some of their darkest days. I have one piece of advice that's going to sound trite (because it is):

Don't Freak Out.

The reason I advocate not freaking out is that it doesn't help —and often hurts. What you want to focus on during these trying times is ensuring you don't go into a tailspin (often, when you panic after something bad happens, you cause more bad things to happen). More on this later.

Before we continue, just to set some context, here are some of the kinds of things entrepreneurs freak out about. See if some of them sound familiar.

1. Your lead investor in a funding round backs out in the final stages. (By the way, when this happens, you're almost never going to hear what the real reason is).

2. You get a certified letter in the mail from some big law firm you've never heard of (nobody's heard of law firms, until they they do). The envelope the letter came in is the nice, creamy, heavy-stock kind. It's more expensive-looking than the one you used for your wedding invitations. The letter uses a lot of words to basically say “you're being sued”.

3. Your lead developer leaves. This is about half way into a project to rewrite your product in Scala, which he convinced you to do.

4. A very big customer deal you were just about to close falls through. Normally, this wouldn't be a big deal, except that you spent a bunch of time and money trying to get this deal done. Time and money you couldn't really afford to waste.

5. You were about to be acquired, and now the acquirer has “gone dark”. Despite your best intentions, the team and you have been making decisions based on the impending acquisition. “It would be silly to do X, Y and Z when we're going to be acquired next month…”

6. The production system that hosts all your customers came crashing down. And that live backup system you thought you had isn't all that live.

7. One of your competitors just went and raised a ton of money. They're blanketing the industry with PR, marketing, fancy new booths at tradeshows, local events involving a winnebago and taking out ads, seemingly all over the Internet. Potential customers, investors, friends and even your mom ask you about this big, bad competitor. You get tired of saying: “But their product sucks!”

8. Co-founder takes a job somewhere. Feels really badly about it. Promises to help out nights and weekends. You don't have the heart to say: “Yeah, but it's the emotional support I'm going to miss the most…”

Remember, if the pain doesn't kill you, it only hurts a lot. A lot of the time, near-fatal events are often just that — near-fatal. They don't quite kill you. Startups are vulnerable, but generally resilient.

Your natural reaction when something really bad happens is to think about the worst-case scenario. But, that's usually counter productive. Think about the most likely scenario and solve based on that.

Try and make a realistic determination of how important it is to respond quickly. Often, when something really bad happens, entrepreneurs make the mistake of assuming they have to respond immediately. In many cases, that's both unnecessary -- and risky. For example, if someone threatens legal action, resist the temptation to respond immediately

What you don't want to do is start compounding a bad event with panic-induced mistakes. It's important to remain calm and give yourself time (and sometimes distance) to make plan a thoughtful response. I know, that's easier said than done. If it makes you feel any better (it should), know that most entrepreneurs (even the successful ones) have near-fatal events happen.

What do you think? Have you had a near-fatal event recently?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Don't Make Raising Angel Funding Your Plan B

Dharmesh Shah — Mon, 16 Apr 2012 15:20:00 GMT

The following is a guest post by Chris Sheehan. Chris is a seed stage VC and angel investor at CommonAngels. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures.

I wear two hats one as a general partner of a couple of seed stage VC funds, the other as an occasional angel investor. Wearing my angel-investing hat, I wanted to highlight an issue that I encourage founders to be careful about when pitching. There are variations on the theme, but essentially it's a line that goes something like:

“…we've talked to some VCs who are really interested, but they tell us we are too early for them to finance our round. So we are raising a small seed round now to hit the milestones they want and then will raise our A round. Its often followed by, we just need $[insert here, but typically $100k - $500k] for [6] months to hit our milestones…”

So what's the problem with this pitch to an experienced angel investor? When I hear this, I'm thinking:

1. The way you have pitched it to me says you struck out with VCs so now are turning to angels as a backup strategy.

2. From your voice, tone, body language, it feels like you really want the VC money and angels are just a stepping-stone to get the VC round.

3. You are probably new to the process of raising money from VCs. You miss reading the buying signals, and are possibly confusing interest with a genuine desire to finance your startup. It's the job of a VC not to miss out on a potentially good deal, so the process can be full of we're interested signals rather than an outright no.

4. The likelihood of raising money from any of the VCs you are talking to is probably very low. Not impossible, just unlikely.

5. So not only is there high seed stage risk (product, market, team), there is very high financing risk on the deal. It's unlikely you will hit the milestones in the time frame you're thinking and the most likely outcome is that you need to approach your angel investors around the table for more money, which will set up a potentially challenging discussion and negotiation.

6. Even if the scenario plays out that short money leads to solid metrics, which then leads to a VC funding the next round, the way this has been pitched, it doesn't feel like there is the basis for a strong partnership.

Ok, so what can you do? Its perfectly fine to test your concept with VCs with large funds to get a range of feedback on various elements of the business like “is it fundable?”, “where are the key risks?” “what other analogs have they seen?” And if you're not getting them to bite on the seed round now, recalibrate your funding strategy for angel investors. But when you do that I'd suggest:

1. Pitch to angels as partners not just a means to get the VC round. This will comes across in your slides, voice, body language and how you frame your overall financing and de-risking strategy.

2. Consider if there a better financing approach. Is it possible to operate on a small amount of money for say 12 18 months, which will give you enough time to experiment, learn, adjust, and de-risk the opportunity? This seems like a more attractive proposition to an angel investor and if it works out, there is a good probability that a larger VC raise will be done at a decent up round valuation.

3. If angel financing is not available for 12–18 months, is it possible to work with the angel investors to do a small seed with agreed testing/learning/milestones that will lead to them funding another round?

Approaching experienced angel investors in this way will hopefully result in them leaning forward instead of backward, and being much more enthusiastic about finding a way to work together. What do you think? Any lessons learend from navigating the angel and VC funding?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

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Fall In Love With Your Business, Not Your Business Plan

Dharmesh Shah — Fri, 30 Mar 2012 15:40:00 GMT

That business plan, that business plan,

I do not like that business plan.

I do not like the writing part,

I do not even like to start.

I do not like them at a bar,

I do not like them from afar.

~Dharmesh (with h/t to Dr. Seuss, who I read every day to my son)

My feelings on business plans varies: from extreme dislike to just mild irritation.

I don't think business plans are completely useless, just mostly so. And sometimes, they're even dangerous.

Here's why…

1. Business plans are energy-depleting exercises. When I went to MIT Sloan for business school, I took what was (and is) one of the “definitive” classes for entrepreneurs “New Enterprises”. The class was oriented around coming up with ideas, forging a team of classmates around that idea (you had to actually sell them) and then having that team write a business plan during the course. All of this was intermingled with some presentations and some guest lectures. All around, I loved the class but hated the writing of the business plan. It was painful. I had a great team — and it was still painful. We had a real business (what later morphed into my current company, HubSpot) — but it was still painful. And, took a lot of time. I'd much rather have been talking to potential customers or building product prototypes — both of those activities, unlike writing business plans, are energizing.

2. You should be committed to your business, not your business plan. As a way to capture your current plan and thinking about the business, business plans are inefficient. Shortly after you're done writing it (or editing it), you will realize that the plan is a little out-dated and does not reflect your current reality. Startups change constantly, especially in the early days when you're trying to find product market fit. The market changes, you get more feedback from your customers, and your understanding of the opportunity changes. Even more simply, you might just change your mind. In the early days, your startup is likely changing so frequently that going through the effort of making sure your business plan keeps up with your latest thinking is frustrating and futile. You're much, much better off spending that time and energy talking to customers and making the product better. Business plans are often dangerous, because you become overly committed to what you've written down. The risk is that you revise the plan so much, have toiled so many nights getting it just right that you actually start becoming emotionally attached to the plan. It becomes your baby — not the business itself. This can be fatal. You want to stay pragmatic and willing to change. If you have a 100 page tome that you've poured your heart and soul into late into the night, you'll have this small piece of you that begins resisting the change to the plan. That's a Very Bad Thing.

3. Business plans are written in the waterfall method, and you need to be agile. Some entrepreneurs take the “classic” approach to a startup. Have idea. Write business plan. Rewrite business plan. Rewrite busines plan. Pitch plan to investors, team maters, etc. Keep pitching until you get money or fall into the dark abyss. If you raise money, go out and start “executing” on the plan. Later discover that some of the core elements of the plan were flat out wrong. Does those sequence of things sound familiar? If you're a developer, it will sound to you an awful lot like the “waterfall method” of software development. And, in that case, you just listen to your instincts to run screaming in the other direction. Agile is not just for software development, it's for startup development too.

4. Nobody will read your business plan. If you enjoy the act of writing a business plan and like having it, that's fine. Perhaps you like sleeping with it under your pillow because it gives you comfort. That's cool. As long as you don't have some delusional idea that anyone is going to actually read it, you're fine. It's when you expect potential investors, team members and other unsuspecting victims to read your masterful work of brilliance that you have a problem. Once you get through the first few iterations, it's likely that even you won't want to read the plan anymore. You'll become sick of it.

5. It's a work of fiction. The executive summary can be useful (but can be manifested in much better ways), but a lot of the marketing sizing, financial projections and long narratives around go-to-market strategy are usually complete works of fiction. Some plans have more reliable market data than others. Some include more realistic projections than others. But, they're all works of fiction. All that varies is the degree to which the business plan resembles the truth and the degree to which the entrepreneur believes the fiction.

6. Write a blog, not a business plan. Although I advise against writing the classic business plan, I'm not against writing down your ideas and describing them in a way that is consumable by other humans. In fact, I'm a big fan of that. Just not in the form of a business plan. Instead of writing a business plan, which nobody will read, write a blog instead. Unlike a business plan, a few people will actually read your blog. The blog has the added value of being interactive. People can leave comments on your blog. They can poke at your ideas, tell you about these other 3 startups that sound like they're working on something similar. They can call you an idiot. All of that is useful. The earlier in the process you can get feedback from places other than the voices inside your head that talk to you at 1am in the morning after a long day of work, the better off you are. Unlike a business plan, a blog is useful forever. It pulls people into your business (through things like Google search). It helps people visiting your website to get a better understanding of what's going on in your head. It serves as both a vehicle for crystallizing your thinking and as a tool for marketing. In fact, it's one of the most important inbound marketing tools at your disposal. Every startup should have a blog.

What do you think? Have you tried writing a business plan? Do you know of a "friend" that tried to write one, because they thought they needed one for some reason?What's your take?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Avoiding Founder Failure: 26 Quick Tips and Real Data

Dharmesh Shah — Mon, 26 Mar 2012 13:20:00 GMT

Several years ago, I met with Noam Wasserman who had recently joined Harvard Business School as a professor. I initially came across Noam because he was doing some fascinating research on startups -- particularly in the arena of founder relationships. When I met him for lunch, he brought up some of the toughest issues I've ever encountered in my entrepreneurial career: Should you start a company with a close friend or family-member? Is it wise to divide equity in the startup equally among the founders? If you had to pick, do you want the cash (get rich) or the control (be queen/king)? What about your co-founders? Deep, deep, topics.

I've seen too many startups flounder and fail because of co-founder conflict. Everyone starts off with the best intentions -- and then things start unraveling. In many of these cases, the conflict could have been avoided -- or at least surfaced sooner, if the founders had confronted some of the potential issues and asked each other the hard questions early-on.

I've written about this topic before in "Important Questions Startup Co-Founders Should Ask Each Other". There are only two times when lack of clarity and understanding between founders becomes a problem for a startup: when things are going well and when things aren't going well.

So, back to Noam. He's taken the result of his years of research and conversations with founders and created what I think is the definitive book on the topic: "Founder's Dilemmas". If you are a founder or thinking about becoming one, you should read this book. I agree with most of what Noam says in the book. Howver, it doesn't matter whether I agree with it or not, unlike me, Noam's actually collected data.

Below are some quick tips and stats from the book, made ready for convenient tweeting.

Tips and Insights From The Founder's Dilemmas

1) In 73% of founder-CEO replacements, the founder was fired rather than voluntarily stepping down. [tweet]

2) Founders feel like Lewis and Clark: Rough idea of where to go, but don't see a clear road ahead or upcoming pitfalls. [tweet]

3) Founding-team turnover increases dramatically when the startup raises its first round of financing. [tweet]

4) Unfortunate but true: If entrepreneurship is a battle, most casualties stem from friendly fire or self-inflicted wounds [tweet]

5) The chances of founder-CEO succession rise with each new round of financing. [tweet]

6) 65% of startups fail due to problems within the management team. [tweet]

7) Feel like a "people decision" is a no-brainer? You may be in for a nasty surprise later on. Decide rather than default. [tweet]

8) A dirty little secret of entrep: Many decisions along the journey push a Rich-and-King outcome further out of reach. [tweet]

9) Each additional social relationship within the founding team increases the likelihood of cofounder departure by 30%. [tweet]

10) Friend/family cofounders are often the least likely to tackle the elephants in the room (Relationships, Roles, Rewards) [tweet]

11) Playing with Fire by cofounding with friends and family? Carefully construct firewalls and discuss worst-case scenarios [tweet]

12) After a 6-month honeymoon period, teams with prior social relationships are the least stable. [tweet]

13) Founders often fail to realize when they are about to make a fateful decision. [tweet]

14) Examine the motivations of your potential cofounder to see if they are compatible with your own motivations. [tweet]

15) Motivational compatibility does not guarantee success, but incompatibility is asking for trouble. [tweet]

16) Founders often describe their equity-split negotiations as "war," "exasperating," or "stressful." [tweet]

17) Is pivoting a possibility? So why do more than 50% of teams split equity without allowing for adjustments? [tweet]

18) 73% of teams split equity within a month of founding: amazing given the big uncertainties they face. [tweet]

19) The Founder Discount: A labor of love can become a trap in which you're paid less than an equivalent non-founder. [tweet]

20) Within each of the 3Rs (Relationships, Roles, Rewards), the most common choices are often the most fraught with peril. [tweet]

21) The trial by fire of founding a startup often burns a team rather than forging a stronger team. [tweet]

22) Neglect the 3 Rs (Relationships, Roles, Rewards) at your peril. Misaligned 3Rs cause tension, dissension, and blow ups. [tweet]

23) Rich founders should be making very different investor choices than King founders; understand your core motivations! [tweet]

24) A founder-CEO's success at leading a fast-growing startup can accelerate his or her own obsolescence and replacement. [tweet]

25) 52% of founders are replaced as CEO by the time the startup raises its third round of financing [tweet]

26) Firing yourself as founder-CEO enables you to remain more involved with your startup after you're replaced. [tweet]

Two quick notes: The links to the book are affiliate links. I donate all money made from such links to non-profits (I'd rather a worthy cause get the ~5% than Amazon keep it).

So, what do you think? Have you run into any tough founder issues yet? How did you go about resolving them? What issues are you struggling with right now?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

How To Get Media Coverage For Your Startup: A Complete Guide

Dharmesh Shah — Thu, 22 Mar 2012 15:00:00 GMT

The following is a guest post by Leo Widrich, co-founder of Buffer, a smarter way to post on Social Media. [Note: I'm an angel investor in Buffer and love what they're doing]

The Complete Guide to Getting Press Coverage For Your Startup

Whoa, this guide was long, long, long overdue. Over the past few months, a lot of people reached out for help on how to best get press for their startup. I could help them with a quick email response, but it never felt quite appropriate.

So from now on, just a link to this guide will hopefully be useful.

Over the past 6-9 months, I am extremely thankful for the amazing stories lots of great writers from news and tech sites have written about Buffer.

To put it into perspective:

Mashable featured us 6 times, TechCrunch twice, over 10 articles in The Next Web, plenty of write-ups from ReadWriteWeb, GigaOm, LifeHacker, VentureBeat, Inc. Magazine and others. In total, there were over 40 stories by these notable sites written about us, each one based on the tips in this guide.

It is up to you to judge how good or bad the above outcome is and there are others who have done better of course. And one of the things I still fail on, is getting covered by mainstream media, such as CNN, Forbes,and FastCompany and co.

Yet, I wanted to share my experience with you on what we have achieved with Buffer and spill all the knowledge I have for getting covered. Literally everything, down to the tiniest detail.

First off, I don't want to fool you and need to emphasize the nature of our product, Buffer. It is a tool for Social Media, making you more efficient and productive. It is a consumer product, helpful to anyone using Twitter, Facebook or LinkedIn.

That's pretty helpful if you want to get featured by tech sites. So, please bear in mind, that any results below, are biased towards and tied to the nature of Buffer. It might not make any difference to your approach, but just in case.

Secondly, don't be overwhelmed with the info below. A lot of these things took me a long time to figure out. Trying to follow all these points right away, might leave you frustrated and with too much to do at once. I would suggest:

read one section,
do it,
get back to the guide at a later time to do the next step.

I believe, getting your startup covered, is one of the most important things you can do to get your product out there. It can help with and did so for us with a lot of things, such as new signups, getting investment, partnerships and biz dev deals.

Especially if you are a first time entrepreneur, who can't rely on a huge personal network, that helps you get the word out, press can be an amazing way of doing it.

All set? Let's get started:

1) Have your own startup blog, learn to tell stories

Yes, I can't stress this first point enough. Especially as it seems quite unclear at first. A lot of the success I have had with getting covered comes down to us having a very active blog.

I have written before about why your startup needs a blog. This point is different to anything mentioned there. That's great right? On top of all the good things that happen through having a blog, it also plays a major role when getting covered. Here is why:

If you learn to blog, you will learn to become a better writer. You will understand why one headline gets shared more than others. You will understand, why one piece of content attracts more readers than others. You will understand that no one wants to hear about your product, unless it provides a focused insight on which problem it will solve for your readers.

So once you run your own startup blog, 2 things will happen:

a) Once you submit stories to tech writers, you will be on the exact same level with them. You will understand their struggle. See, a writer doesn't care about your product. But they care about providing value for their readers. Once you understand that, the door to getting loads of write-ups is wide open. You will be a writer suggesting a great story, not the marketing guy trying to get his startup featured.

b) Being a blogger and knowing how to write, will give you an immense pull. You can provide your own coverage on your own blog. Let me give you an example. Recently we added Buffer for LinkedIn. The write-up on our own blog, got well over 500 shares, brought more sign-ups than the tech coverage we reached out for AND without any further emails triggered 4 more write-ups from notable blogs, just because it was getting shared so wildly.

So the first step to getting coverage for your startup is to build an active blog, that teaches you about writing and telling stories.

2) How to get to know writers via Twitter and Facebook

Mashable doesn't cover you a writer does!

Here is one of the biggest mistakes I made at the start. I thought if I had something news-worthy, I would pitch that Mashable site or that TechCrunch blog with a story. Not surprisingly, we never got any write-ups from it.

Then I realized something, it's not the news-outlets that write about you, it's individual writers that do. Sounds stupid and obvious right? Yet, it changed my approach completely.

So, in order for your startup to get covered, you need to know those writers and you need to know LOTS of them.

The first thing I did is follow them all on Twitter and subscribe to their Facebook updates. Here is a list of the about pages from Mashable, TechCrunch, and ReadWriteWeb (these are just examples, make a much bigger list, than just those 3). Go ahead and find the most suitable writers covering the industry your startup is in.

Now that you follow them and are subscribed, become interested in what they do. I don't mean to make this a big task, do it very casually and make it a habit. Browse your Twitter and Facebook stream and you will come across them.

The best part? Those writers are all great people. It's a lot of fun to read their stories and hang out on Twitter and Facebook with them.

Answer some questions if they ask, reply to Tweets and Facebook posts, retweet their stuff, comment on what they write about. Do it, because you are interested and they write about your industry. One more time:

Become genuinely interested and understand what they like.

Your pitch will be ten times better once you email them. You will be able to relate personally and they will have seen your face before. When they see your name in their inbox, they are much more likely to at least open that email.

So the second step is to start connecting with those writers on Social Networks.

3) Do your best to avoid the Alexias and Sarah Lacys

So, we have added this great functionality to our product. And there is that woman Alexia, who writes about startups. What a great match, let's get in touch!

Oh boy, was I naive, when I started out. Later I understood that it is not enough to just submit a news tip and realized I had to reach out to writers themselves.

Armed with lots of courage through this newly gained knowledge, I would email Alexia, Ben Parr, Sarah Lacy and MG Siegler, with my fantastic story for them.

And yet still, no response. Here is the thing:

These writers are the busiest of them all and most exposed to pitches all day long. They get literally hammered with hundreds of them every day. The chance that they will pick up your story is very slim. Do yourself a favor do not reach out to them.

Instead, be laser -focused on writers, that cover your industry. And look for people, that are young and new and don't get hundreds of emails every day.

This is very easy, just go to the front page and browse through the latest stories. You will easily and quickly find the right person, after you have seen 3-4 stories from them over the past few days.

So as the third step, avoid to reaching out to the most prestigious writers. Narrow your focus and find the rising stars. as much as you can.

3) Crafting that email pitch for reporters an example that got us on Mashable

With anything you do in life, expect to have a 25% success rate. ~ Auren Hoffman, CEO Rapleaf

We have come a long way by now. You know it is all about your story, not your product. You know you need to build personal relationships with writers and you know you need to reach out to younger writers, who actually write about stuff related to your product.

If you have come that far, you have probably already increased your success rate of getting featured by a large multiple. The road to getting covered is still a tough one.

So lets work on that pitch. That's what will likely actual part that will determine, whether a story about your startup goes live or not.

Here is an email that got us written up by Mashable:

———————————————————-

Hi Sam,

Really loved your post yesterday on how the fan managed to get a job with the team, this is priceless and amazing example of how passion can help us succeed!

We have some big news for you. With the new release of Twitter.com, we have just released a way to post retweets via Buffer right from Twitter.com at a better time. It works seamlessly via installing our browser extension. You will have now, next to "reply" "retweet" and "favorite" a new option to "Buffer".

I believe this will allow anyone to spend very little time, glancing over their Twitter stream and retweeting everything they find interesting - yet without ever flooding their followers with too many Tweets in a row. It should be a great way to Tweet interesting content at the best times, well spaced out over the day straight by using Twitter.com. A bonus tip here is to use this in connection with Twitter lists, where most people have a lot of great content aggregated, but a hard time sharing from there.

You are the only newssource I have approached with this, do you think this could be an interesting story for you and your readers?

Best,

Leo

——————————————————-

Let's go through it paragraph by paragraph:

Really loved your post yesterday on how the fan managed to get a job with the team, this is priceless and amazing example of how passion can help us succeed!

The opening is not at all about myself or anything related to our startup. I have been following this writer for a few weeks. I really love his posts and Tweets, I still follow him and enjoy reading his posts today. So I thought of opening with a note to one of the posts I enjoyed the most.

Now, the first paragraph is about your product. What has changed, how does it work. I found making this very descriptive can help a lot. There is no talk about how it will change the world (yet), just what it does. Concise and easy to understand.

This part is only about the value for the reader. Why would anyone care? Which use cases are there? How can this be interesting for a reader? Think of this part as the one, where a writer can scan his brain for headlines and imagine a story about this written up.

You are the only newssource I have approached with this.

Do you think this could be an interesting story for you and your readers?

The last part is as important as everything else. Be sure to always give the story away as an exclusive. Then, ask one clear question, that the writer can respond to.

Triggering a thanks for thinking of us, but I will pass on this story. Can be as important as getting a yes. You will be able to either move on or work with that writer on the story.

A lot of my pitches get declined or no response still, it's completely normal. Make that your expectation. Never expect that writers don't like you or are annoyed by you. It's not true. They are just super busy. Move on, fire off the next pitch and learn.

One more thing on this. As you grow, your bargaining power grows too. You can add deadlines to when this will go live on your own blog/emailed out. If you start out, just try lots of different pitches. It is a great way to learn what works and what doesn't.

Oh and here is the end result of that pitch as a post: Buffer App Lets Users Schedule Shares Directly From Twitter

4) The art and timing of sending that pitch off and getting in touch with reporters

You have crafted your pitch, and are ready to hit that send button. Hold off for just a little bit.

You are facing tough competition. Not only from other startups, but also from plenty of PR firms, who want stories written up for their clients. The one great advantage you have, is that you can add that extra bit of personality.

Here is what I normally do:

Before I send that pitch off, I would send a Tweet to the writer saying: "could I drop you a quick line on an exclusive story?" I've found that Twitter is a much quicker medium and triggers answers much faster. So once, I get a reply, I can hit send and it will be much easier for the writer to recognize my name and at least look over the email.

You can do the same thing by sending a Tweet after you have emailed. Mentioning them with a simple "Just sent a quick email over on an exclusive story, I hope you will be able to take a look." It again gives you a differentiating element.

Your messages often get ruled out as a mass email, so you need to take that extra step and add personality to your approach. I have had great results doing this.

Play around with this. I have also tried sending no Tweet and it worked. It is really up to you judging based on the situation. If one thing doesn't work, try the next one.

In any case, be sure to make it personal, from writer to writer, not from startup to Mashable.

Timing of your email and Tweets

Timing is also a very important aspect for getting you covered. The best days for traffic for getting coverage of your story I have learnt are Tuesday, Wednesday and Thursday. Monday is way too fast to get you written up, the inboxes of reporters are full it's just not a great day.

If you launched something, what I would do is, get that email over to reporters in the morning, before 10am.

Make sure you check with time zones. Most reporters live in either SF or New York. 10am PST can be a very poor timing for an EST reporter. They will see it early afternoon, when they have most stories for the day already on their to do list.

At the same time, I learnt that, whilst Fridays aren't as good for traffic, the news is slower. So your chances of getting covered on that day can be higher. With a recent story about Buffer on Mashable, I took advantage of this. I followed up on a story I had pitched earlier in the week. Since it was extremely busy, I wouldn't get a response, yet a quick follow up email on Friday would receive an immediate response.

Play around with timing and the approach through Social Media, in either way, focus on getting your pitch out before noon.

5) A story about your startup is written and published now what?

Yes, yes, yes! You finally managed to get your story written up. A great tech blog picked it up, and wrote about your latest feature. Especially if it is your first time and you are only slightly similar to me, you are jumping around in your room, opening that bottle of champagne.

Yet, now is the time to show up, roll up your sleeves and make the most of your success. It is something that a lot of people forget, yet, the results of doing the following 7 steps can be immense:

Monitor the comments on the post, be lightning fast in responding to feedback and support if readers ask for it.
Write a comment yourself. Be grateful, thank the writer for the story, and highlight something you liked.
Share the story, again, by emphasizing the writer. Mention their Twitter handle when you Tweet. Mention their G+ name when you post.
Monitor the Facebook posting from the blog on your story. Do the same thing as with the comments, reply to them, jump in and offer your support.
Monitor the Twitter stream, thank people for retweets of the story, pick up responses and conversations. Again, jump in, be grateful for feedback and offer support.
Send a follow up email to the writer, thanking them for the story and truly appreciating their work.

One big point here, if you get hammered in the comments, don't try to defend yourself. Instead, be appreciative, say thanks and look into the problems. Make yourself vulnerable, it's amazing how this works to build a community of raving fans. I have seen this go bad a few times with other startups and it just ends in a pointless, opinionated argument.

So really, why are you doing all that? The answer is very simple: To get more press in the future. Remember, this is not a one-off event, you want to get featured many, many, many times.

If you go that extra mile, by really showing how grateful you are, appreciating the writer's work, chances are you will be remembered and make it have it a lot easier next time you want a story written up.

For our first Mashable story, we did exactly that. Check out the example here:

HOW TO: Space Out Your Tweets Without Being Online All Day

When I sent a follow up email that day, I received a reply mentioning how great it was that we were in the comments and how well the story sat with their readers, and that I should please keep them posted on any new features we release.

You bet I did!

6) Four completely different types of stories you can pitch

The goal when getting covered by the press, as I have briefly touched on above is to get covered again and again and again. In order to achieve that, you need to have a few different types of pitches up your sleeves.

Here is a list of 4 very distinct ideas you can use for pitches alongside some examples that got written up for each of them.

Big disaster happened your product is there to help pitch

This is something very powerful and also difficult to detect. It demands quite a bit of creativity from your end and again, the mindset of a writer. If you are not convinced to have a blog by now, head back to chapter 1 and check it out again.

Let me give you 2 examples of this:

When CoTweet, a popular Social Media tool shut down their free version recently, I thought that a lot of people must be annoyed by this. So, I realized, they will definitely be looking for a replacement.

I reached out to Mashable and suggested them a story to them on this, titled CoTweet Gone: Here Are 7 Great Alternatives. I didn't even have to ask whether they could include Buffer.

When Summify, popular news aggregation tool was scooped up by Twitter and announced it would close its services, News.me did the exact same thing. They reached out to news sites and said they are a great replacement for Summify. There were lots of posts written up about them.

Again, the key for me was to always think about how you can provide value for readers, not how you can get your startup covered. If you do that, you will have a great amount of new opportunities to get features about your startup written up.

Awesome data - pitch

News sites love, love, love data. Especially if it is in some way related to the biggest Social Networking sites. Why do they love data so much? Because it spreads like wildfire on Social Media and is a very interesting insight for readers.

Let me give you an example of how we got over 5 stories written up about one data set we collected:

We looked at 1 million Tweets that were sent through Buffer and realized, we are adding a lot of value for users. Basically, we could show, that if you start using Buffer, you will get 200% more clicks on Tweets, double the number of retweets and an increase in your Klout score by 3.5 points.

This was absolute gold and the news sites loved it. How could any site not want to write about a tool that increases clicks on your links by 200%? We could use that data on many occasions even in future write-ups, when the study was no longer the focal point.

Dig up some interesting stats from your users and find out, what might be an invaluable insight for readers. It will again open up lots of great opportunities for sites to write about.

Brand new features to make users awesome - pitch

This is the most well known pitch startups use these days. You have a new feature added to your product and think it's worthy of getting covered.

The point I want to focus on with new features pitches is to keep it to 1 feature only. I have made the mistake plenty of times in the past, that I would send a pitch saying: We have added this feature and this feature and also this and this and that.

If you remember the email pitch in chapter 3 you will find, that I have only focused on one single aspect. Just that one thing, nothing else. And in fact, it was a tiny thing. Yet, by working out exactly how it will be helpful for readers, I could give a very compelling pitch.

Try and do the same, only pitch one iteration or addition of your product. Not 10. It will make your pitch a lot clearer and easier to understand. Writers have a very short attention span, and if they need to figure out how they can add up all your different new iterations in a story, they will be a lot more likely to just move on to the next pitch that sits there in their inbox.

And it will also give you an opportunity to pitch lots of different stories, as you are adding different features.

Hit big milestone - pitch

The last type of pitch that has worked well for us is the Milestones pitch. This is a great one, not only for signups, but also for branding. People will see you are still around, you have grown, you are worthwhile to get a proper first or second look.

I learnt that this is also a great one for news sites, as they get a unique insight into your startups background, that no one else has access to, like for example a feature.

In our case, we had an early story once 1,000 000 Tweets were sent out using Buffer. The key here is to pick a big number. Oftentimes, signups won't be the one. It can be any number that shows great usage of your app and makes readers curious to check you out and writers curious to cover you.

With this type of pitch, it is particularly up to you to show why the mentioned figure is relevant. Klout for example, made a big deal out of the fact that they had 100 million users scored with their algorithm. It didn't mean that they had 100 million users, yet sure enough but it helped them to trigger a huge amount of press around their milestone.

7) How to make getting covered a habit, not an accident

Whoa, we have gone a long way. I tried to go into every detail I could think of to help you get your startup written up. And yet, I have one last point, that I think might be as important as every other one mentioned here.

You don't want your startup being featured once, twice or three times. You want it to show up in the news in a cycle. Every 2 to 3 weeks, you should pop up again. With a cool new feature, with some interesting data, a big new milestone, you name it.

If you make this your goal, everything you do, will be much more focused on the long run. And I learnt, I will be able to motivate myself a lot better for things that wouldn't make sense as a one-off.

The relationships are easier to build. Writing your blog is easier to do. Being grateful once you get one story is much easier to focus on.

Everything mentioned in this guide, should set you up for making it easy to get into this cycle of constant coverage and news mentions. Of course, the development of your startup needs to clearly follow that path.

Given that you have launched with a true MVP in Lean Startup fashion, and are iterating like a madman, you shouldn't run into any troubles to come up with a new story ever two to three weeks.

If you do, work with your team and push yourself to release more stuff, more frequently.

Work on different stories as mentioned in the previous chapter, and set yourself a schedule for reaching out for write-ups. If 2-3 weeks is too tight at the beginning, make it once a month, but have it as a consistent and recurring point on your to do list.

Are you ready to rumble? Get yourself out there and get that startup covered. By following the steps from this guide, I have no doubt you will manage to do so.

If you still have any questions, just let me know in the comments below or shoot me an email leo@bufferapp.com.

What do you think? How have your PR efforts gone? Had any big hits you'd like to brag about? If so, please share in the comments and teach us a few things.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Be Captain Of Your Destiny - Not Prisoner Of Wishful Thinking

Dharmesh Shah — Thu, 15 Mar 2012 16:04:00 GMT

The following is a guest post by Mike Troiano. Mike is a former New York ad man turned venture-funded entrepreneur, now a Principal at Boston-based Holland-Mark. You can follow him on Twitter at @miketrap, and connect with him elsewhere through About Me.

It's hard to will a business into being. Anyone who doesn't understand this through intuition figures it out soon enough through experience.

To win, an entrepreneur needs the conviction to overcome inertia. People have gotten along just fine without whatever it is you hope to sell them. Fact is your early attempts to convince them otherwise will almost always fail, which means you need the tenacity to keep swinging until you connect with the market.

George Bernard Shaw famously observed that the reasonable man adapts to his circumstance, that only an unreasonable man would seek to adapt the outside world to his own needs. Progress depends on the unreasonable man, said Mr. Shaw. It's a quote I've always loved. It means that apparent failure is just another obstacle to be overcome by an individual with the will, and the character, to do so.

That's an attractive idea to an entrepreneur. But sometimes that attraction is fatal.

Pin It

For every story of conviction overcoming a perceptual speed-bump, there are 10 of an entrepreneur who hung on too long after the point where the market responded with a resounding, “Meh.” The stronger your sales skills, the longer you'll tend to hold out past the “point of meh,” and the higher your opportunity costs will be versus investing in an offering with the potential to be pulled by the marketplace rather than pushed by the brute force of your sales and marketing prowess.

So how do you know? How do you tell the difference between a light at the end of the tunnel, and the oncoming train of market indifference?

Here are 5 questions that can help:

1. Is your quality of execution sufficient to take quality of execution off the table as a variable? Poor execution of the right strategy will most likely lead to failure, just as brilliant execution can hide the holes in a flawed strategy. So where are you on that scale? If you're happy with the quality of your execution, on balance, you need to look deeper for the source of the challenges in your business.

2. Do your customers understand your offering differently than your prospects? The world has a learning curve, and dealing with it is part of the entrepreneurial adventure. But does the perception of the people who've climbed that curve — your existing customers — really change in important ways from that of your further-out prospects? If the answer is no, you're seeing something your customer doesn't. And that usually means it doesn't exist.

3. Are others finding success in your space? This one is simple. Is someone in your space kicking butt? If so the competitive threat may be important, but so is the validation that you're chasing something which can be caught.

4. Will the larger context change in some way to smooth your path to success? m-Qube was the 800-lb gorilla in a non-existent industry for years before the US text messaging phenomenon took off. We kept our powder dry, and waited it out. Are you doing the same? If so agree on a tangible trigger and conserve your cash until you hit it. If not consider giving the money back, and changing over to a game you can actually win.

5. Is the source of your conviction what you need, or what actually is? I love Shark Tank, and in almost every episode some amateur tells the sharks that their idea will take off because they need it to. Cuban and Kevin typically bow out soon after that. The reason? Entrepreneurs motivated by an objective opportunity have a much better hit rate than those motivated by an internal psychosis, or an external requirement.

This last one breaks my heart, and I see it a lot. I get that you hate to disappoint your uncle Nunzio, or that you promised your spouse you'd make it work this time. But the fact is those things are irrelevant to the question of whether your idea will fly, and anyone willing to point that out to you is someone you can trust over the long run.

Don't be that person, folks. So much of the pain in life, over time, is caused by distance from the truth. And the same is true in business.

Ask these questions of yourself, and try hard to answer them honestly. If the news is bad and you deal with it like an adult, I promise you'll live to fight another day. If the same is true but you're a good enough salesperson to sell yourself eventually you're going to hit somebody else's wall, and create collateral damage you might otherwise have avoided.

There's a fine line between being the captain of your destiny, and the prisoner of your own wishful thinking. Use these questions to help sort out which side of it you're on, and please share what you learn with the rest of us here.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

How I Enjoyed SxSW 2012 Without Attending The Mega Parties

Dharmesh Shah — Wed, 14 Mar 2012 16:56:00 GMT

Late last night I got back from a few days at SxSW 2012. This was my second time going to the event/conference/festival or whatever the right term is.

I don't usually write “diary-style” blog posts, but making an exception in this case, because it feels like the right format. I'm writing this as much for myself as I am you. I'll sneak in some insights and such as well.

Lesson 1: SxSW is about the people — not necessarily about the parties. If you like mega parties, that's awesome — you should go to them. You'll meet some fun people. If you don't like mega parties, that's fine too. You can go to the sessions, hang out in the bars/lounges or try to get included in some of the smaller gatherings.

Friday

Due to some scheduling snafus, got in to Austin a little later than I had planned, so had to cancel an earlier meeting. But, was able to have a nice, quiet dinner at the Driskill Grill with Clara Shih (CEO of Hearsay Labs and now a board member at Starbucks). Clara is awesome. Smart, personable and super-successful. And, the quietness of the Driskill Grill was a nice, stark contrast to the craziness of the Driskill Bar right outside (once you're in the restaurant, you don't hear the noise at all — they did a good job with the design of the restaurant and acoustics). And, they had a fantastic 2005 Tempranillo by the glass that Clara was good enough to spot.

Saturday

I had a panel that was part of the Lean Startup track at SxSW. The topic of my segment was “Startup Metrics: Measuring Success”. The title (which I suspect Dave McClure wrote) was “Check yo self before you wreck yo self”. The room was completely and totally at capacity (about 500 people) and rumor has it there were another 100 people in line trying to get in. I can attest to this, because I was in that line trying to get in for an earlier session. I couldn't get in. I think my talk went pretty well — though I find it much much harder to do a 10 minute presentation than a 45 or 60 minute presentation. (Which is why I rarely accept invites to short speaking opps — but I'm friendly with Eric Ries and Dave McClure).

That afternoon, on the same stage, I had the opportunity to hear the just appointed CTO of the United States, Todd Park. He was an amazing speaker. We need more passionate, entrepreneurial people like him in the government. Simply amazing.

I also had a chance to see the live session with Scott Cook (Intuit founder) interviewed by Eric Ries. A few notes from that particular talk:

* Scott pitched Intuit (personal accounting software) to 25 venture firms. They all turned him down.

* The consumer product (Quicken) became a $100 revenue business. But, the follow-on (QuickBooks) is now over a billion in revenue. (Lesson: The product that ends up being super-successful may not be the one you started with).

* Great discussion on how to drive innovation inside a big company. Scott's advice: Ask yourself, how soon after a new employee joins the company can they run a real, meaningful experiment? (Try and reduce that time). To really succeed, you have to pick smart, passionate people to pursue new ideas and put them on an “island of freedom” so that they can attack big, meaningful problems.

* The battering average of managers when it comes to picking ideas is pretty bad. It's much like VCs — one idea out of 10 will be good, a couple will be mediocre and the rest will fail. The difference is tat VCs know that their batting average is low. They try to create a portfolio based on that. Managers in companies trying to pick ideas don't do this — they think all of the ideas they pick are good and will generate a return. That's a mistake.

* Put “experiments on tap”. This is something we do reasonably well at HubSpot. [Note to self: Write about how HubSpot experiments work at HubSpot]

OnStartups Tech Founders Dinner

That evening, similar to what I did at SxSW 2010, I organized a small dinner for some fellow tech entrepreneurs. I try to do a variation of this for every conference that I go to — and it's one of my favorite kinds of activities.

Attendees this time:

1. Drew Houston Founder/CEO, Dropbox

2. Aaron Batlion, Founder/CTO LivingSocial

3. Chad Dickerson, CEO Etsy

4. Ryan Holmes, Founder/CEO HootSuite

5. Daniel Ha, Founder/CEO Disqus

6. Ade Olonoh, Founder/CEO FormSpring

7. Adam Smith, (ex founder/CEO, Xobni)

It was once again, an awesome group and one of the highlights of the SxSW trip for me. By convention and pinky-swear, the conversation is under a “cone of silence”. I always learn more from these few hours, over a meal and some nice wine (in this case a 2005 Brunello) than I do from any other activity. It's why I go to Sx.

But, one thing I can share, based on this and other dinners. In a startup, just about all of your issues are eventually going to be people issues.

Tip: Whenever possible, get a round table for discussions like this. Also, solve for environment and acoustics (not popularity). People are there for the conversation. It makes for a much better discussion. Everyone can see everyone else, and it's easier to keep a single thread of discussion going. It's the reason I picked the same restaurant this year as I did for the last OnStartups dinner at SxSW.

Sunday Night

Invited to the Wiley Author party, and had planned to go — but ended up missing it. I had dinner over FaceTime with baby Sohan (this is the first time I've been away from home) and he was thankful to at least “virtually” have me there.

Was invited to the Capital Factory VIP dinner by Joshua Baer — who is totally plugged in to the vibrant Austin startup scene and an accomplished entrepreneur himself. Got a chance to sit next to Stephen Wolfram at dinner (yep, the guy that created Mathematica). He's unsurprisingly brilliant and knowledgeable (which I had expected). What I hadn't expected was that he's also super-clueful on business issues. In retrospect, I shouldn't be that surprised, he's built a company with 700 employees that has been profitable for over 24 years.

A pleasant surprise guest at dinner was Naval Ravikant (AngelList). I'm an advisor to AngelList and a big, big fan. Most of the startup investments I do now come through AngelList. It was awesome to hear Naval and Stephen Wolfram chat about data analysis. Can't share any of that stuff. Some of the things the AngelList team is working on are super awesome.

The really rare part of the dinner was the after dinner conversation. I watched in awe as my friend (and founder/CEO of WPEngine), Jason Cohen had what seemed like a pretty deep debate on physics with Stephen Wolfram. (Turns out, Jason's not just a great entrepreneur, but an amateur physicist — who knew?) There was talk of cellular automatons, string theory, Feynman's work and a bunch of other things that were way over my head. This was then followed by a discussion on startups, how to execute on a portfolio of ideas and build innovation teams (I was able to add some value to this particular discussion). Also gave me the chance to spend some time with my friend from Boston, Sim Simeonov, co-founder of Swoop. It's sad that I don't see my Boston friends as often as I should.

So, about 5 hours later, I finally went back to my hotel room (was almost 1am). But, I was wired and not quite ready to call it a night yet. So, pinged my buddy Drew (Dropbox) who was kind enough to invite me to join a small group of tech friends/celebrities (people and companies you'd recognize) at a private party. Hung out with those nice folks until 5am. Didn't quite enjoy the night walk back to my hotel — it was quiet out and a weird fog had settled into Austin. Made it kind of creep. To add to the suspense, my phone (which I rely on to get me places) was on low battery. Uneventful walk home though. Got to bed a little after 6am. Fun day!

Monday

Got up at noon for some meetings. Visited the WPEngine.com offices to see my friend Jason Cohen (@asmartbear). Exchanged a dozen emails with Eric Ries to try and meet-up (both of our schedules were crazy). Finally ended up having what I will loosely call lunch at the Austin airport. He's always fun to talk to and I learn a lot.

Some Advice and Notes For My Future Self for SxSW 2013:

1. The introvert in you is going to want to skip SxSW next year (you'll come up with all manner of lame excuses). Don't skip it. You'll have a good time. You don't have to go to any of the mega-parties.

2. Setup some small group dinners in advance. Gives you something to look forward to, and it's easier to get on people's calendars before they get caught up in the madness.

3. The Driskill is not a bad place to stay. The WiFi was reasonably reliable and it's a popular hangout for people. Only downside is that it's a few blocks from the convention center.

4. Figure out what it takes to get a “featured speaker” slot and do a solo session. Panels are not your thing.

5. Make a list, like you did in 2010, of people you want to meet-up with. It helps.

6. The sessions are a mixed bag. It's hard to “sample” the really popular sessions, because it's hard to get in. Make sure laptop battery is fully charged and just do email if you get stuck in a bad session. Don't try to extract value from a bad session by live tweeting it or taking notes. If it's not good, it's not good.

7. Figure out who is launching their book at the event (particularly first-time authors). Support them. They really appreciate it.

8. Wear your favorite HubSpot t-shirt (the gray one with the logo in the center). It worked out great. Random customers/fans will come up and say “hi”. Will make your day.

9. Try and stay through Monday night. Seems there's still a lot going on, and the marginal cost of the extra day is not that high.

Until next year. Cheers!

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

8 Ways Writing a Book Is Like Starting a Company

Jason L. Baptiste — Tue, 13 Mar 2012 15:05:00 GMT

If you've wondered why I haven't been blogging so much, it's because I have been been writing a full length book for Portfolio called the Ultralight Startup , from the same folks that brought you "Art of the Start" and all of Seth Godin's books. It's basically the book I wish I had when I started out as an entrepreneur five years ago and knew no one or nothing. While writing the book, I realized that it's a process very similar to creating a company and have even applied a lot of the lessons learned back to Onswipe. Both writing a book and building a web app are the same exact thing - creation.

Build Something You Wish Existed

I wrote the book as a way to give the world something I wish existed five years ago when I first got started as an entrepreneur. The book I wanted to read wasn't there, so like any entrepreneur, I set out to create exactly that. I looked at the book very much like a time capsule. When creating a product on the web, you want to create something that not only other people want, but you yourself want to see in the world. When you have a desire to see something become a reality, that will push you through the long nights.

It Will Take Constant Iteration

The total length of my book is close to 55,000 words, but after multiple revisions, I cranked out closer to 80,000 words. The same will happen with what you're coding. Code will get refactored and made better over time. Writing my book took just as much time to perfect the writing as it did to write the first iteration of the book. You need to set specific deadlines as an entrepreneur, but you should give yourself enough breathing room to iterate on the product before shipping it to the world. As a writer, I had a very tight deadline of less than 10 months to take the book from first word to being due to the publisher. This is the equivalent of having code locked for a product release. From there, the time and process of the publishing industry to shop takes a fair amount more time than launching a product on the web. When I finally turned the book in I felt completely satisfied and that I had created the best product possible after constant iteration. Since then I've strived to feel the same with each and every product release at Onswipe.

Getting Signed is a Lot Like Fundraising

I'm very fortunate that I was approached to write a book. Getting signed as an author is a lot like getting funded as an entrepreneur doing a consumer web startup - very very hard. The key is to start out getting traction on a smaller level. I was signed as an author due to my blogging on my personal site and here at Onstartups. Onswipe received funding due to starting on a smaller level as a simple side project that eventually gained project. Never start out looking for money or seeming desperate. If you create something on a smaller scale that people want, the money will come to you to turn that into something bigger.

Launching Is Just Another Step

Everyone thinks launching your product is the final step, when it is really just yet another step in the grand scheme of things. My book launches on April 12, but there is going to be constant promotion beyond that. Once your product is out there in the wild you have to think of how to constantly bring it to another level. Launching your product is the lift off, but you have to have gas to continue on through the trip. You will also want to start promoting the launch of your product well before it's out into the public. My publisher suggested waiting only a month before the launch to start promoting, whereas with a web app, you should be soliciting press/feedback/interest as soon as possible.

Managing Writing Is Just Like Managing Projects

Products get built in multiple steps and should have specs, a timeline, and more to it. If you don't organize how you're going to build the product scope creep kicks in and you never ship anything. I applied a lot of the basic project management skills from Onswipe to writing the book to get it "shipped" to the publisher on time. To get the book complete, I took the following steps: 1 - Outlined the main chapters and topics, which were the equivalent of writing a technical spec 2 - Put a date and time schedule to each chapter that I wanted to write, which is the equivalent of putting timelines to a technical spec 3 - Completed each part of the book piece by piece depending on what I was inspired by. 4 - Redid many chapter multiple times, which is like refactoring code 5 - Sent the book to my editor, who made suggested changes and found problems. This was a lot like bug fixing. 6 - The book finally went for cover design review and asked for blurbs (including one from Dharmesh!). This is a lot like getting marketing, ui, and ux ready.

Going from Blogging to Writing a Book is a Lot Like Going from a Side Project to Full Time

Blogging is tons of fun and I love it to death. That's why I'm writing this post. I've never made a single dime from blogging, but I've learned a lot and met some pretty damn cool people. The same is true with side projects. They are usually done for fun and some of the time result in profit, but not often. It's when that kernel of an idea from the side project can become something bigger that things start to matter. The feeling of going from blogging to writing a book is a lot like how it felt to go from Onswipe being a side project to a funded 25 person company. There was a lot more polish, work put into it, and also a larger audience to reach.

Nail Down Your Elevator Pitch

Explaining your book is a lot like explaining your product. You should be able to do it in one quick main sentence and then a few supporting sentences. At Onswipe, we have a very simple elevator pitch of "We make it insanely easy for a publisher of any size to make their content look great on tablet web browsers in under 3 minutes." With my book, I did the same of "The book I wish I had 5 years ago when I started as an entrepreneur and knew nothing or no one." The supporting information was: "The Ultralight Startup is a comprehensive, easy-to-follow guide that will prepare any entrepreneur for success. Learn how to raise money, launch a product, get covered on TechCrunch, and the secrets behind companies like Onswipe, Foursquare, Twitter, Dropbox, Mint, and more."Many books are published every month, just like there are many web apps launched every month. You have to come up with a very simple way to explain what your product does and why it matters to people.

Authors Help Each Other Like Startups Help Each Other

The most amazing thing I've found throughout the process is that writing a book is a lot like a startup when it comes to the community. When I was first negotiating my book deal as a naive blogger, Josh Kaufman introduced me to his agent. Dharmesh and authors like Seth Godin kindly wrote me very nice blurbs. Brad Feld wrote a very early review. Just like startups are a pay it forward industry, so is the publishing industry. We are creators in both industries and we have all been just starting out. My hope is that as an author, I can now pay it forward with advice to other future authors, just like I have been able to with other entrepreneurs.

Not everyone who blogs, wants to become an author and dealing with the publishing world can be a pretty cumbersome process. My hope is that some of the insights shown here bring clarity to you, the entrepreneur, who will be spared the process of writing a full length book :). If you're so inclined to read The Ultralight Startup, you can check it out here.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Founder Focus: Don't Kill Your Startup With 1,000 Trivial Tasks

Dharmesh Shah — Mon, 05 Mar 2012 15:53:00 GMT

This article was written by Noah Kagan, the Chief Sumo at AppSumo.com (#1 ecommerce site for entrepreneurs). He was employee #4 at Mint.com and employee #30 at Facebook.

A few weeks ago I had wine with some very successful entrepreneurs. How successful? On their best days they were generating $100,000 a DAY in revenue. That’s $36,500,000 a year.

Insanity, huh?

But what was the most surprising thing to me was that they were STILL doing their own data entry and dealing with small clients.

Holy crap. Think of it this way:

Let’s calculate their hourly sales:
$100,000 / 8 hours a day = $12,500
Divided by 2 guys = $6,250 / per hour

Do you see where I am about go with this? :)

After spitting out my wine, I started berating them with hate words about how dumb they are and why aren’t they focusing on higher-value things for their business?

Their response?

“We want to make sure it gets done right.”

Ahh, now it makes sense. They have Jewish mothers and are control freaks. (disclaimer: I'm proud to also have a Jewish mother.)

This is something I had a problem with myself, once upon a time: We want to do everything ourselves, which means we aren’t focusing on the highest-value things we can be doing for our business.

I used to do the same kind of data entry. I’d write up the emails for AppSumo.com, do customer support emails (which I actually like, most of the time), and other low-level things.

It all changed when my buddy Joe from MyChurch opened me up to outsourcing.

“Come on, Joe. Those people are crappy and it’s so weird,” I said.

He finally convinced me, so I had Nimesh Mehta at $4 / hour start aggregating certain data from me.

LIGHT BULB.

It wasn’t about outsourcing to India. It WAS about maximizing the best use of my time.

As an example: what do you think is a better use of my hour?

1. Writing this article that hopefully gets 500+ people to discover and check out AppSumo.com, or
2. Doing data entry to put a new deal in our system.

Take a guess.

Writing this article, of course! It generates way more value which is a way more ROI / value / monetizable use of my time.

Coming back to how you can save yourself before it’s too late:

- Start small. When hiring other people to do your tasks, you need to be concise in your instructions. Delegating is a skill (not a talent) gained from experience.

- Think investment. Don’t think of outsourcing as a cost. I LOVE hiring for AppSumo!

- Guard your time. Next time you think about doing something, think if you are REALLY adding value (i.e. only your special skills can do it) or if someone whose value of time is lower could handle the task instead, thereby freeing you up for better things.

That's fine and all, you might be thinking, but aren't there some seemingly trivial tasks that keep me closer to the business? Like customer support-- how do you find the right balance between outsourcing/delegating and maintaining the little things that make the business differentiated and special?

Trivial tasks will never go away. Invest in the things that matter. Wow, I can throw a few more cliches just to finish off the article nicely.

Look, if support is going to be a differentiater like we want it to be at AppSumo then we don’t try to pass off phone support, live-chat, email, etc. to a lower wage person. But processing refunds, merging email accounts and helping the customers get what they want can be passed off.

I guess the ultimate balance comes from identifying what is important to you. I still like updating Excel each month with my finances vs. using Mint.com (which I helped build). Doesn’t make it the “right” choice, but it makes me happy.

A helpful tip to see how you can start evaluating what you want to delegate is to literally write out your entire day by tasks. I did this with Andrew Warner from Mixergy.com too and it seemed really helpful. Then pick out the things that are high-value or you personally get value from doing. Keep those. The rest of the stuff, get someone else :)

What do you think? Have you identified the key areas to apply your time and energy, and shifted the rest? What's working for you?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Startups: Attack The Problem, Not The Competition

Dharmesh Shah — Fri, 02 Mar 2012 18:26:00 GMT

Pin It

Do not become obsessed with beating the competition. Instead, obsess over beating the problem you are out to solve. There are several reasons for this:

1) The goal is not to win over the competition, the goal is to put a dent in the universe.

2) It's possible that the competitors are not solving the same problem and don't care about the same things. You are better off solving the problem you want to solve and that you think there's a market for, then someone else's definition of the problem.

3) You will never know all that is going on with your competition. If you're paranoid, you will think they're doing most things right. If you're an optimist (or delusional) you may think they're doing everything wrong. Either way, you're likely wrong. Don't let the competition define your strategy. Focus on the problem.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Selling or Funding A Startup? Tips On Surviving Technical Due Diligence

Dharmesh Shah — Tue, 28 Feb 2012 15:18:00 GMT

The following is a guest post from Karl Treier. Karl is a serial entrepreneur, currently with ProspectStream and SaaS Capital. He currently blogs at The Alien Entrepreneur.

Be Better Prepared for Technical Due Diligence

I have been on the receiving end of several technical due diligence assessments instigated by VCs (pre-investment) or acquirers (pre-purchase). I have also been the inquisitor on a few occasions. So I thought it might worthwhile to write this post to share my thoughts on this process and hopefully help companies better prepare for this event.

The first thing to recognize is that the assessor is not there to catch you out, trip you, up or somehow prove you are incompetent, nor is it likely that he's there to try steal your job, so first and foremost don't be threatened or intimidated (it's not the Spanish Inquisition, after all "Nobody Expects the Spanish Inquisition"). It is however extremely likely that he or she is, or has been an entrepreneur and empathizes with you, so be cooperative and cordial (maybe even down right friendly). They will understand the challenges and the realities of startup, rampup and speedup life and are not expecting perfection. I personally would love it if every entrepreneur could get funded, or exit with an acquisition that gets them the rewards they have worked so hard to attain, but the reality is different. Remember however the assessor is contractually obligated to do a thorough evaluation and report honestly any deficiencies, to not do so would risk a lawsuit for negligence. Also keep in mind that the purpose of an individual doing this, rather than have the investor or buyer just deliver a survey to you for you to complete, is that they are evaluating you and your team, how well you think on your feet, how you engage, and your thought processes. So expect it to be an interactive conversation, more than an outright quiz or exam, which would be painful and boring for both parties.

In my opinion the primary purpose of the assessment is to evaluate four facets of your business from a technical standpoint, Vitality, Scalability, Maintainability and Continuity. Vitality, really? I'll admit no one has asked me to go assess the vitality of an organization, but I'll explain in the next paragraph why I use that word because I think it fits perfectly with what I'm looking for. I'll precede each section with the dictionary.com (edited) definition of each of the four words so you see just how well they fit the goals of the assessment, a narrative of the objective of assessing that characteristic of the business, and a list of questions you just might get asked.

vitality [vahy-tal-i-tee]
noun, plural -ties.

1. exuberant physical strength or mental vigor: a person of great vitality.

2. capacity for survival or for the continuation of a meaningful or purposeful existence: the vitality of an institution

3. power to live or grow.

So what am I looking for when I assess the technical vitality of an organization? Really I'm looking to see first and foremost if the technical lead or founder is still excited about the business. Does he or she have a real vision of where to take the product next, are they a fountain of ideas. Sometimes the original technical founder(s) may have left, so is the replacement a caretaker, or do they have their own ideas of where to take the technology and business. In my opinion this is a very important thing to assess. The best and fastest growing software companies in the world have great technology leadership. You can't build great software companies with only MBA's at the top. Yes you need the MBA types, but you also need the engineer types that can see emerging technologies and see how they can be applied to the product to further the business. The truth is that great technical leadership also attracts great technical talent, which is essential to the vitality of the company, and essential to ensuring all the other bases we will discuss below are covered. Here are some questions you might get asked which really assess the vitality of the organization.

Do you have a clear vision for where you want the product to be in one month, six months?
When you advertise a programmer vacancy how many applications do you get?
How many people have left, and how many have joined in the last year?
Do you have people working for you now, who worked for you elsewhere in the past?
How do you capture user feedback about the product, who sees it?
How many releases have you had in the last year?
What keeps you awake at night?
Do you make interviewee's write code?

scalability (ˌskeɪləˈbɪlɪtɪ)
noun

1. the ability of something, esp a computer system, to adapt to increased demands.

This one is pretty obvious though any assessment of scalability extends beyond the system itself to include the technical organization, and the answers to the first two questions below will indicate how the respondent thinks about scalability, not just from a technical perspective, but an organizational one also.

What would you have to change to accommodate 10, 100, 1000 times more users?
What would you have to change to accommodate a million users?
What do you monitor?
What metrics do you use to determine if you are not scaled appropriately?
What aspects of the system do think might not scale well?
Where are you hosted, and why?
Do you use any third party services, what happens if they go down?
Can you show me a network diagram?
What single points of failure exist?
What keeps you awake at night?
How many open features/user stories are there, and how old is the oldest?

maintain [meyn-teyn]
verb (used with object)

maintainability, noun

1. to keep in existence or continuance; preserve; retain.
2. to keep in an appropriate condition, operation, or force; keep unimpaired.
3. to keep in a specified state, position, etc.

Maintainability is a favorite assessment topic of investors and buyers alike. They usually are either paranoid that existing staff will head for the hills post acquisition, or incoming staff will discover a plate of spaghetti code, or they want to turn a non-profitable company into a profitable one by eliminating "engineering" or they worry that a potential future investor might discover a huge plate of spaghetti code during their due diligence and not buy. In all the above scenarios there is all too often distrust of the engineering types by the MBA types and so they want to know if the code maintainable? Usually it is. You might notice many of these questions below originate from Joel Spolsky's 12 point test, which I think it's OK to plagiarize because they are just common sense.

Do you use source/version control?
Do you build on check-in, daily, weekly, whenever?
Do you require comments on check-in?
Do you create unit tests?
Do you have code reviews?
What development methodology do you use?
Can you deploy a build to staging or production with one click?
Do you have dedicated testers?
When do you deploy?
Does the software automatically notify you of errors?
Do you have a bug tracking system?
Could you walk me through some code?
How many defects did you close last month?
How many open defects are there?

continuity [kon-tn-oo-i-tee, -tn-yoo]
noun, plural -ties.

1. the state or quality of being continuous.
2. a continuous or connected whole.

This is typically the area where often the greatest weaknesses appear in the assessment, particularly with younger companies. There is an assumption that the Data Center will always be there, and that nothing can go wrong, that the world will always stay the same. Even everyday occurrences like a few inches of snow (or feet depending upon where you live) can cause serious disruption that should be planned for. So many of the questions below are aimed at ascertaining if the technical lead lives in a utopian world where nothing goes wrong or if they allow their utopia to be tainted by a touch of realism.

Do you have a Disaster Recovery plan?
Do you have a Business Continuity Plan?
Is there any part of the system that is understood by only one person?
Is your Version Control system backed up, where, how often?
If the Database Server exploded how much client data would be unrecoverable?
If a 747 crashed into the Data Center how much client data would be unrecoverable?
Does your staff have laptops?

In Conclusion

Please don't take this as an exhaustive list of questions. Quite frankly the role of the assessor is to think on their feet and open up the questioning to explore avenues of weakness and strength. But what I do hope is that this post gets you thinking about how you would answer these questions, and what questions might get triggered based upon your answers.

Have you been on either side of the technical due diligence process before? What were the lessons you learned?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Things Entrepreneurs Never Confess To Their VCs

Dharmesh Shah — Wed, 22 Feb 2012 19:15:00 GMT

Note: This is intended be a light-hearted piece that hits just close enough on some counts to (hopefully) be funny. Please don't take it too seriously. (Oh, and for the record, I've actually said more than one of these things myself).

Things Entrepreneurs Never Confess To Their Investors

1. You know that candidate you introduced me to? Well, he was kind of a schmuck.

2. We had our management team meeting yesterday and we've concluded that we're kind of screwed.

3. I know I should know this, but I have no idea what participating preferred means — and who should prefer it.

4. We've got a big launch of our mobile app scheduled for April 1^st, we've lined up some great PR and everything is ready to go. Just one minor detail: We have no idea when Apple's going to approve the app for the AppStore. We wisely refrained from putting an early version through the process, because we're in “stealth mode”.

5. It finally hit me that revenue and cash are not the same thing. Customers provide “revenue”, employees want to be paid in cash.

6. I'm wondering if I should worry that the 10 year Oracle sales executive we hired for VP of Sales hasn't really sold anything yet. Oh, and I think he wants my job.

7. My co-founder had a major life event come up (the event was that he decided he wanted one). He'll be leaving us but is happy to continue to contribute as a strategic member of the board of directors. I didn't know he had a lawyer, but the lawyer assured me that my co-founder would “Vest In Peace”, which sounds like an amicable parting.

8. Learned from tech guy yesterday that our entire back-end runs on a single “virtual” Amazon EC2 instance. Also learned that “virtual” means that it can virtually disappear whenever it wants. That's why the engineering team has been working for months on this horizontally scalable, self-replicating, auto-healing architecture so that when we start getting some paid customers, we'll be ready.

9. Had to execute some “executive leadership” yesterday. At the last management meeting, our VP Marketing was telling me we were getting crushed in the market because of two big missing features. I told her that on the startup battlefield, wars are not won by features. Besides, we're investing in our future, not our present. That's why the entire engineering team is working on building a scalable, self-replicating, auto-healing architecture.

10. We have 11 months of cash left in the bank. Adjusted for inflation. But, not adjusted for the fact that we have no idea if any of our large, enterprise deals that our VP of Sales sold is ever going to pay us in a form that can be used to pay bills and payroll. Our landlord is clueless and doesn't understand the importance of the strategic deals we're doing and the raw brand-value of the logos we're collecting for our website.

11. Our VP of Sales keeps saying “land and expand, baby, land and expand”. I don't know what that means exactly, but we've been doing a lot of landing and not a lot of expanding.

12. I'm super-excited! We had our first acquisition offer yesterday. Well, it wasn't really an offer. And no, they didn't really use the word acquisition, or M&A or “buy”. But there was some high-level, strategic talk about how we could work together. And, he paid for lunch, so there must be some interest.

13. We're planning on throwing a big, bad, holiday party. It's not one of those crazy launch parties. We want to treat it as a “recruiting” event. Yes, yes, I know that there's no additional head-count in the budget, but we to be proactively filling the candidate funnel. Startups are “all about the people”.

14. Back in college, when you “audit” a course, it meant you just tried it out and see if you liked it. Why does “auditing financials” have to be so intense?

15. We've found new office space. To be consistent with the 5 year pro-forma we showed you at the last board meeting, we'll be signing a 5 year lease that matches the space needs based on those projected numbers. It's nice when things just work out, isn't it?

16. I woke up this morning with this really big idea. It'll make the idea you invested in pale in comparison. The good news is that we can reuse the work the engineering team has been doing. Not only have they been building something that's horizontally scalable, self-replicating and auto-healing, they had the foresight to build something infinitely flexible too. Now I know the importance of hiring great people — ones that have the vision to see your vision and can adjust their vision based on your new vision. This is going to BIG!

What do you think?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Why FastCompany Gets "The Lean Startup" Almost Completely Wrong

Dharmesh Shah — Mon, 20 Feb 2012 19:58:00 GMT

Normally, I don't like to criticize someone else's content — particularly when it's from a source like FastCompany, which I respect and enjoy reading. But, today, I came across this article that talks about the values of the “Not-So-Lean” Startup. It caused a visceral reaction in me as I was reading it. Not that it didn't make a few good points (like the importance of sales and marketing and the value of inbound marketing and content creation), but it seemed that the author was attacking the lean startup method, popularized by Eric Ries in his best-selling book “The Lean Startup” without actually understanding it all that well. Also, I'm a self-proclaimed Lean Startup fanboy. [Note: The link to the book is an Amazon affiliate link. I donate all money I make from Amazon to non-profits — I figure the non-profits need the money more than Amazon does].

The following are some direct quotes from the article about the lean startup method and my reactions.

1. “In life and in business, failure can mean certain death, without a chance for another loop.”

Sure, failure can mean certain death — but one of the ideas behind the lean startup is to not only make loops short and fast, but try to maximize the odds that you can iterate enough times to get to product-market-fit.

2. “…another Riesian commandment that equates to plowing through "build-measure-learn" feedback loops until one discovers that special (and monetizable) moment when a product and its market interest collide.”

If you met Eric Ries or read what he's written, you'd know that he doesn't deliver commandments. He's scientific and thoughtful. He delivers ideas. He has a theories, and he argues for his theories — pretty well, I might add. To refer to a “Riesian commandment” misleads readers into thinking he's some arrogant know-it-all — which is simply not true.

3. “Indeed, too many startups have died (or are doomed to) by applying this method to their businesses, especially as their investors watch in horror.”

Really? How about some examples? Most startups die. How does the number of startups that have died (or are doomed) by applying the lean startup method compare to the number of startups that die because they didn't apply the method? By the way, as an angel investor myself (30+ startups), I will say that I am more “horrified” when I see startups not follow the lean startup model.

4. “you only get one shot to make a real splash with a product launch and truly impress the world, right?”

Actually, wrong. If your strategy is to bet it all on a single product launch and the hopes to get the magical ingredients “just right” to make that big splash and impress the world, odds are, you've already lost. In any case, it's at least sub-optimal. Why put so much emphasis on this “big bang” lauch model? Why not try and learn from early users, iterate and maximize the odds of market enthusiasm when you do think you're ready?

5. “Yes, the lean startup movement is correct in saying you shouldn’t throw wild parties and give Teslas to all your new employees--but isn’t that just common sense?”

Yes, that is indeed, common sense — but it has little to do with the lean startup. Once again, I will repeat, with emphasis, being lean is not about being cheap, it's about being fast. Every time I see someone make this msitake, I wonder if they're ever heard Eric speak or read the book.

6. “You can’t be a startup forever. And you shouldn’t want to. The lean startup model only offers tools to get you so far.”

Right. That may be why it's called the Lean Startup Model. The idea wasn't to come up with the grand unifying vision for all that is good and true in the universe. The reason the lean startup exists is to reduce the rate of startup failure and the related loss of human time and talent. I think it does that really well, and frankly, that's plenty of value right there.

Disclosure: I didn't realize until reading the early part of the article that the author of the article was Phil Fernandez (hi Phil!), someone I know and respect and who is the CEO of Marketo, a company in the marketing software industry. (My company, HubSpot is also in the same industry). Once I figured out it was Phil, I think I reduced my level of snarkiness. :)

So, what do you think? Did I over-react? Are my points misguided?

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Startup Gamification Lessons From a Kindergartner

Dharmesh Shah — Mon, 13 Feb 2012 20:24:00 GMT

The following is a guest post by Mads Srinivasan. Mads is a co-founder of Neemware, a mobile customer engagement company. He blogs here and tweets as @mitmads.

During super bowl week, during a short drive, my kindergarten son was trying to talk to me about what they did in their class that day. He was muttering words like - “Welker, 83, 400 points, fruits, vegetables”. At the same time a friend was trying to reach me over phone, so I couldn’t concentrate on what he was saying. Once we reached home I asked him to repeat the story.

This is what I gathered talking to my son. In order to make the kids bring healthy food to class his class teacher had come up with a simple game. (Yes. ‘gamification’ is everywhere). According to the game, the class (as a group) should achieve 400 points by bringing fruits and vegetables for snacks. For every serving of a fruit or a vegetable a student brings, a point is added to a class chart. And at the beginning of the game the class has to randomly select a Patriot’s player and use his number as the starting point. The class got Wes Welker, No. 83.

Companies play different kinds of games for different purposes - from acquiring customers to keeping them engaged. In this classroom game, I can see some aspects of a good game design. Here are my observations:

1. Make it Simple - If it takes a long time for someone to understand a game, they are less likely to play it. Simplicity is a key aspect in good game design. Players should be spending more time playing the game vs. understanding or explaining it to their friends. Maybe it is good to have a ‘kindergarten test’ for games - Can a kindergartener understand the game? Even better, can the kindergartener explain it to his/her parents?

2. Set a reasonable goal - If it is too hard, then folks lose interest mid-way and they may drop out. If it is too easy, then it is not as fun. The game then becomes a ritual and will not get the intended benefits to the game designer.

3. Give an incentive for just starting - If you have set yourself a goal to run 10 miles and you are feeling a bit tired when you are at the 3 mile mark, you are most likely to bear the pain and run the full distance. Same principle applies to sunk costs. The game players are most likely to continue the game if they are given some ‘sign up’ points for just signing up to play the game. This will give the participants a sense of being already in the game and slightly push them to go further. The ‘sign up’ points should be reasonable. Not too high, not too low. (Its good the class got Welker and not Brady !!!)

As a matter of fact, this is what happened when I was writing the article - I started the article before the BIG game on Sunday. And obviously after the game I was not in a mood revisit the article. But since I’d already started it and had written couple of paragraphs, I wanted to finish it. So I came back to finish it.

4. Make it topical - It is good to associate the game with a popular/timely topic. As many games are temporal, it is better to associate with the current topic or brand of the time. Game players are motivated by associations and also there will be more signups for the game.

5. Set a time limit - Games are temporal. They should be time bound. The time limit depends on the game. In the example mentioned above, the game is based on a semester. An internal ‘sales game’ by a company’s sales department can be based on a quarter. Many games designed for retail customers are based on days (or some times hours). Setting the right time limit will give a sense of urgency and hence more sign ups.

6. Make it group oriented - In the ‘game’ mentioned above, individual students do not get credit for the points they score. The points they earn go towards the class. This works well when all of the participants are on the same side of the team. For example if a development team is jointly trying to achieve a zero-bug state or a non-profit group is marching towards a special fundraising target, or as a group people are trying to lose weight. Though individuals don’t get credited with points, the team spirit in this setup will motivate every team member to perform well. In a subtle way in increases the competitiveness of the team by removing the competition amongst the individuals. (This kind of technique may not work well in a setting where the participants don’t know each other or where the participants are not tied by a common goal).

At one point of time in our startup (admit it – all of you have come through this phase), we were spending too much time in meetings. And we soon realized the meetings were not adding much value to us. So we designed a 100 point game that goes like this – if we set up a 1 hr meeting and we were able to get through the meeting in 50 mins, we add the 10 mins saved towards the 100 point goal (if we go over the meeting limit, the extra time will be subtracted from the point). Once we reached 100 points we'd go and have a beer as a group. We wanted an instant gratification system, so we developed an app to instantly highlight us the value of our time. (Thinking back, its good to have the beer game also in place.)

There have been many articles written on how companies use gamification in marketing their products. The intention of this article is not to talk about product gamification. It is to discuss how startups can use some elements of intelligent game design in their day-to-day activities – either to become more productive or to motivate a team or to meet any of their internal goals.

Now it is your turn. As a startup what kind of games would you play? Have you tried any games in your team?

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Startup Lessons From 17 Hard-Hitting Quotes In "Moneyball"

Dharmesh Shah — Thu, 02 Feb 2012 14:20:00 GMT

I'm an idiot. Not all of the time, mind you, not even most of the time, but every now and then, I'm an idiot. Like the time my friend and co-founder Brian Halligan asked me to read the book “Moneyball”. This was back when we had first launched our startup, HubSpot. “But, I'm not a baseball guy,” I said. “It's not about baseball. It's about data.” And, I put it on my reading list, and then still failed to read it. I even bought the book, but still failed to read it That was a mistake.

I just got done watching the movie “Moneyball” for the second time. The first time I watched it was last night. It's the only time I've watched the same movie twice in two days. It's not just because it was a great movie (it was), but because I felt I missed so much the first time, that I had to watch it a second. If you haven't seen the movie yet, you should stop reading this article and go watch it. If you get distracted and never make it back to this article, I forgive you.

So, without further ado, here are some great quotes from Moneyball

Brilliant Startup Lessons From Moneyball

1. He passes the eye candy test. He's got the looks, he's great at playing the part.

Spectacular startup success often becomes a game about scouting and recruiting. A common mistake entrepreneurs make is recruiting team members early on simply because they look the part. In the long run, it doesn't matter if on paper, someone's perfect. You want people that can actually do the job. That VP of Sales candidate that has 15 years of experience at Oracle? Likely not worth it for you. They'll look the part, but they're not guaranteed to be able to actually do the job. And, like Johnny Damon, they're going to be expensive. Get good at seeing talent where others don't.

For example, at HubSpot, most of the early team did not look good on paper at all. Most of us had little or no prior background doing what we were setting out to do.

2. You're not solving the problem. You're not even looking at the problem.

Identify a fundamental problem and then focus, focus, focus on solving that problem. Don't get distracted by all the the things that are swirling around the actual problem. Don't listen too closely to those that have deep industry expertise and are emotionally attached to the status quo — it's possible that they're part of the problem. Figure out what the actual issue is, and solve it.

For example, look at Dropbox. Drew set out to solve a really hard problem -- getting data to synch across different devices. He had many people (including me) that were telling him that this particular idea had been pursued so many times before. He didn't get distracted by all that noise. He dug in and fixed the problem. Today, Dropbox is valued at billions of dollars and has millions of happy users.

3. We've got to think differently.

Reminds me of Apple. Only, Steve Jobs wrote it as ”think different” (intentionally going with the grammatically incorrect version because it “sounded better”). Like the Oakland As, your startup too is working under constraints. Often, big constraints. Often, unfair constraints. If you're trying to disrupt the status quo and beat competitors that are much bigger and better funded, you're not going to do it by playing their game. You'll need to think differently. Playing the old way when you're at a disadvantage is a sure-fire way to lose.

This is one that I'm personally very passionate about. When we started HubSpot, everything we had learned about startups -- and the convention wisdom was "do one thing, and do it very, very well." Generally, that's really, really good advice. Except when it's not. Like in our case. The problem we saw was not that there weren't great marketing apps out there -- the problem was that none of it was integrated or worked well together. So, we thought different. We decided to do the crazy, crazy thing of doing it all. Why? Because that's what we believed the problem was.

4. First job in baseball? It's my first job anywhere.

Experience is often over-rated. Some of the most successful startup teams consisted of people that lacked relevant experience at the time they joined. But, what they lacked in experience, they more than made up for in sheer talent and hunger. In the early days, hire athletes. People with raw talent and a propensity to get things done. Don't be resistent to recruiting people that are early in their careers. You're looking for arbitrage opportunities. You're looking for the future stars -- because you likely can't afford or convince the current stars.

5. Your goal shouldn't be to buy players, your goal should be to buy wins.

I'm going to illustrate this point with a quick paraphrasing with a conversation I had with an entrepreneur last year. It went roughly like this:

Me: What do you need?

Them: We need to build a management team.

Me: No, what do you actually need right now?

Them: Well, right now we need a VP Engineering.

Me. What for?

Them: Well, we need head up our product development effort.

Me. No, you actually need to write code and release a product. You need to respond to customer issues. You need to iterate quickly so you can learn quickly. You don't need a VP of anything, you need a doer of stuff that needs to get done. Don't think about buying titles — think about buying outcomes. Think about plugging gaping holes in the company. Signing up customers so fast that you can't respond to all the support emails? Don't hire a head of support, hire someone that helps you tackle the support issue. Someone that's maniacally committed to customer happiness. They can become your head of support some day.

6. He really needs to accept this as life's first occupation, a first career.

This statement was made to the young Billy Beane when he was trying to decide between the full scholarship to Stanford and a career in Major League Baseball. Billy's mom asked if he could do both. The answer was, he couldn't. And, that's true in baseball, in startups and just about any hyper-competitive activity. You can't straddle the fence, because you will get your ass kicked by someone who's almost as good as you, but much more committed. You can't take that investment banking job and do a startup. You can't maintain two feet firmly planted on the ground and take the leap of faith. You have to pick. It's not an easy choice, but you have to pick. And, if you're in school, my personal (and unpopular in some startup circles) advice is stay in school . Make learning and building connections your “first occupation”.

But whatever you do, don't sit on the fence. Commit to something. Don't hedge. Give it all you have. Make it your life's first occupation. If you can't get excited about it -- find something else. I've made lots of stupid mistakes in my professional career -- the stupidest was trying to run two startups at the same time. That's a story for another day. I'm going to close with a quote from my co-founder at the first startup: "If you sit on the fence too long, your genitals are going to hurt."

7. Why do you like him? Because he gets on base.

The startup world is filled with superstars that get overlooked or don't quite make it because they're "quirky" or otherwise don't fit preconceived patterns of what you think a person in a given role should look and feel like. None of that matters. When recruiting engineers, find brilliant people that write code that solves the problem simply, effectively and can be maintained without brain damage. When hiring sales people find those that have high emotional IQ and care about truly understanding customer problems -- and selling them a solution. Figure out what success looks like for a given role, and ignore the irrelevant details. (Note: Culture fit is not an irrelevant detail. Things that are irrelevant are age, nationality, gender, etc. -- things that have no bearing on the outcome).

10. Hey, anything worth doing is hard. And we're gonna teach you.

Your ability to teach is one of the single biggest levers you have in a startup. Why? First, because it's one of the biggest benefits you can deliver to your team members. They can get a higher salary somewhere else. They can get better perks somewhere else. But, at your startup, they can learn things. Second, it's unlikely you're going to find the "perfect" 5-tool player. Even if you found them, you likely couldn't afford them. If you're willing to help people with a specific super-power fill in gaps in their knowledge/experience, you create lots of value.

12. It's day one of the first week. You can't judge just yet.

Be a little bit patient. Often, your best people will take a little time to really shine. Don't judge too early. Determine the context. If someone's not cranking yet, is it because getting up to speed is hard? Everyone's too busy to show them ropes? Their lack of early performance could be the context, so be patient

But, don't be too patient. If someone isn't at least moderately productive in the first month or two, it's unlikely they're going to be super-productive in the following year. The really great people tend to deliver some value almost immediately.

14. Where on the field is the dollar I'm paying for soda?

It is good to be budget-conscious in an early-stage company. Instills the right kind of discipline that will help long-term. But, don't be a penny wise and a pound foolish. There are little things that don't cost that much, that makes people happier. It's not about the money (they can all afford the soda), it's about the inconvenience and the principle. Remember, deep down inside, people are human. [smile]

One quick example from HubSpot: We launched a book program whereby any employee can request any book they think makes them a better HubSpotter. I personally handle all requests and send out a Kindle version of the book immediately. It's not that expensive, but it's been super-well received.

15. These are hard rules to explain to people. Why is that a problem, Pete?

One of the best segments in the movie. Pete is troubled at how different what they're doing is, and why it's hard to get others to understand and accept it. But, the point was, when you're transforming something and making massive change, not everyone is going to understand. The important thing is to be right -- and then make the change happen. The best way to convince people that your theory was right is to be right and show them (not tell them) you're right. Most people will never be convinced otherwise.

16. I'm not paying you for the player you used to be, I'm paying you for the player you are right now.

Hard-hitting advice. I'd extend this to say: Recruit on potential but reward on performance. Customers are not going to be delighted by the code a brilliant engineer could have written. On a related note is the quote "If he's a good hitter, why doesn't he hit good?" Or, "If she's such a good sales person, why can't she sell?"

17. We're going to change the game.

And really, that's what it's all about. It's not about exiting for millions of dollars or going public. It's about changing the game. It's about seeing something that's not quite right in the world, and deciding you want to fix it. For me, personally, it was observing that marketing is broken. Most people hate marketing. we want to transform marketing into something people love. It's hugely ambitious, but I have this feeling, deep-down inside, that we're right.

How about you? What is the flaw (big or small) that you're seeing in the universe that you're trying to fix? Any favorite lines from Moneyball that you'd like to share?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Startup Tribes: Tips on Roles and Recruiting

Dharmesh Shah — Fri, 27 Jan 2012 16:22:00 GMT

The following is a guest post from John Greathouse. John is an entrepreneur and investor. He currently blogs at Infochachkie where he provides practical startup advice.

You may not realize it, but your adVenture's Core Team, the senior executives who make the key decisions which drive the company's strategic direction, is akin to a primitive tribe.

Primitive tribes and your startup both entail a small number of people banded together to battle an uncaring, hostile world. Like the tribe, your company's survival is always in question and never guaranteed. Success depends upon everyone pulling together for the common good and striving to accomplish common goals. Everyone's efforts must initially focus on survival

before the tribe can prosper and eventually evolve into a thriving, self-sustaining community.

Tribes are effective societal structures, as evidenced by man's ascension to the top of the food chain. Understanding the tribal organizational structure is vital to gaining an appreciation of the various roles played by your Core Team.

In partnership with Docstoc, I created the following video, in which I discuss the various roles in a tribal startup. You can watch the embedded video below or at YouTube: http://youtu.be/o_nEUIPS60U

Tribes and startups thrive when labor is efficiently divided. Long before Meyers met Briggs, people in tribal communities migrated to those roles which best suited their personalities, proclivities and skills. The key roles in tribes and startups are identical: Hunter, Skinner, Shaman, Chief and Tribal Elder.

Hunter

The Hunter provides for the tribe and literally brings home the bacon. These individuals are highly autonomous, independent and thrive on frequent recognition. When they have a successful hunt, they want everyone to know about it.

The Hunter is generally not a visionary. However, once they are pointed in the right direction, they are clever enough to improvise a tactical plan to achieve a strategic objective. They do not want to be told how to take the hill, just which hill needs to be taken.

At your adVenture, the hunter is the rainmaker, in the form of a Business Development Executive, VP of Sales or Corporate Development Officer. Once they are told the type of deal that is needed, they are capable of autonomously devising the appropriate tactics to get the deal done.

A typical Hunter's characteristics include:

Work hard
Driven to do right thing
Fast and furious
Under communicate - do not like to confer with or answer to the group
Excel under pressure
Emphasis on achieving goals - second guess their tactics at your peril
Deliver quantity over quality - close enough is okay
Work well outside the box

Skinner

The Skinner makes the Hunter look good. When the Hunter brings back the kill, it is the Skinner who dresses the meat, tans the hides and preserves whatever is not initially eaten for the tribe to subsist upon during lean times.

The Skinner at your adVenture will likely take the form of the VP of Operations, VP of Professional Services or Chief Operating Officer. They ensure that your company delivers on the Hunters' promises by exceeding your partners' and customers' expectations.

A typical Skinner's characteristics include:

Work correctly
Driven to do things the right way
Slow and careful
Service oriented - want to meet stakeholders' needs within the organization
Over communicate - encourage meetings and agreement regarding goals
Quality over quantity - do things by the book
Work well inside the box

Shaman

Shamans invent new tools and processes that improve the overall quality of life within the tribe. For instance, the Shaman will spend his days thinking of a better fishhook, a new tool for cleaning skins or searching for new medicinal plants to cure the tribe's ailments.

At your adVenture, the Shaman is often the Founder. They may also take the form of Chief Technical Officer, VP of Engineering or VP of Product. By whatever name, the Shaman is the person who devises and develops the innovations upon which your business is based.

A typical Shaman's characteristics include:

Work differently
Creative visionary
Communicate differently - requires careful listening
Seek a better way
Create quickly and freely
Tripped up by details
Prone to devise complicated solutions
Prize a solution's technical elegance over its functionality
Are unaware that a box exists

Chief

Every tribe needs a Chief, just like every adVenture needs a CEO. The Chief defines and communicates the tribe's strategic direction, such as a new valley to forage or a mountain retreat to escape the heat of summer. The Chief listens to the opinions of the other tribal members, makes decisions that impact everyone and ensures an adequate level of acceptance of such decisions to facilitate their ultimate success.

A typical Chief's characteristics include:

Work together
Shepherd the team toward its strategic goals
Slow and connected
Communicates clearly and supportively
Driven to maintain cohesion within the team
Indecisive
Prone to being railroaded
Defines the box

One of the best CEOs I worked with exhibited nearly all of the above characteristics. As a Hunter, I was frequently frustrated, as he was often slow to act. In his effort to keep harmony within the Core Team, he seemingly agreed with everyone, even people who held diametrically opposed opinions.

In retrospect, I now realize that his ability to sincerely empathize with everyone's respective positions, especially on difficult issues, was imperative in keeping our Core Team together during the numerous challenges we encountered on our road to a successful exit.

One of his favorite sayings infuriated me at the time, but I now appreciate its underlying wisdom, Some of the best decisions I ever made were the decisions I never made. Despite my Hunter-driven frustration at his hesitancy, more often than not, his resistance to making a snap decision proved to be prudent.

Tribal Elders

Tribal Elders spend their time sitting by the fire dozing and recounting the tribe's history. They cannot be counted on to do any heavy lifting nor are they in a position to execute the day-to-day tasks necessary for the tribe to thrive. However, they occasionally offer bits of sage advice that allow the tribe to avoid hardships and reap windfalls. As such, the wise Chief knows when to solicit their counsel and when to allow sleeping Elders to lie, as described more fully in Free Advice.

At your adVenture, the Tribal Elders are represented by your Board of Directors and Advisors. The Board Members likely have a varied and broad business history upon which to draw. They may be able to provide general guidance at certain pivotal points during your adVenture's journey. However, as noted in Your VC Is Not John Lennon, do not heed their advice blindly, as it is impossible for them to have your level of insight into the operational details of your adVenture.

Pop Quiz

Question: Which Tribal member is the most important?

Answer: All of them.

Without the Hunter, the Shaman's ideas would never be put into practice. Likewise, without the Skinner, much of the Hunter's efforts would be wasted. He might be able to feed himself, but he would not be able to sustain the tribe on his own.

Without the Shaman, neither the Hunter nor the Skinner would have the tools necessary to carry out their respective roles within the tribe. Without the Chief, the tribe would wander aimlessly, fighting among itself until the group eventually dispersed and the individual members were melded with other tribes with healthier cultures and a more focused sense of direction.

Balance is the key to a successful team. Thus, every member of your adVenture's Core Team is the most important member. Your Core Team is your startup's most important asset. Respect man's evolution and heed the tribal lessons of old. If you do, you may just end up on top of your industry's food chain.

So, what kind of tribal member are you? What types are you looking to hire and add to your tribe next?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Startup Branding: A Practical Guide for Entrepreneurs

Dharmesh Shah — Fri, 20 Jan 2012 17:40:00 GMT

1. What does startup branding really mean for an early-stage company? Is it just picking a name and a logo?

"Brand" is one of those words everybody uses and nobody really understands, so I'll start with a definition.

It's important for entrepreneurs to understand that their "Brand" is the collective emotional response to their product or service. A brand is not a logo, and it's certainly not a URL. Those things are the stimulus, while the brand is the response. It's something out there, in the hearts and minds of the people you hope to sell to.

So... Do I think it's important for startups to be thoughtful about the nature of the emotional response that might serve their interests, and try to build a graphic identity designed to elicit that response? Abso-freaking-lutely.

2. Any favorite startup examples that they think are particularly clueful about brand and drawing out the right emotional response?

Sure, a few come time mind right away:

Zipcar a brand we've played a role in since the beginning - isn't about urban lifetstyle, or being green, or collective commerce, really. From day one it's been about Freedom, from both the hassles of car ownership and car rental (Wheels when you want them.) Focus on that emotional value proposition has guided everything from brand identity to vehicle selection at the company, and Zipsters around the world have responded with not just loyalty, but advocacy.

Path 1.0 was a decent execution of an interesting idea, that you could derive more value from a smaller social graph of actual friends than you could from Facebook's comparatively industrial-sized cohort. Problem was, there wasn't anything in the original UI to inspire an emotional response, and the service foundered. While much has been made of the radical turnaround in user experience for v 2.0, for me the result of those improvements is a kind of easy intimacy on the mobile device, something that distinguishes Path from other networks, and is the root of user's newfound enthusiasm for the product.

Instagram is interesting because they got it so right in the product, and so wrong in the messaging. Does anybody really love Instagram because it offers Fast, beautiful photo sharing on the iPhone? Really? I think Instagram helps us notice and share more of what we find beautiful in the world. And I know that promoting it that way would help them grow faster.

3. Speaking of names, how do I pick a great name for my startup? Does it really matter all that much?

I've always thought it matters less than people think.

10% of names are great and that helps a business at the margin, and 10% of names are crap and that hurts a business at the margin. The implication is that 80% of names are not a material driver of brand impact or business success, so sometimes it's just best to get on with it.

For proof of this, there's a great story George Lois once told me, about the first time he heard about a client called "Xerox," in the 60's.

"It sounds like a Chinese laxative," he said. I bet it did to most people, and they did OK.

The point is you can make just about any name mean something to people with great product execution over time. Spend some time getting the tactical fundamentals right - url-friendly, sticky, distinctive, that kind of thing then pick something 3 of your cooler friends think is decent, and move on.

4. What about logos? Can I just hack something together? Use a crowdsourcing service like 99Designs? Or is that a waste of time?

I think logos and the graphical identities of which they are a part matter a lot. They're something the West coast and NY-based guys seem to care about and do way better than Boston-based startups, and that's always bugged me.

Look... in the early going perception is reality for a startup. So is it worth investing a little dough to encourage the perception that you're professionals; that this is a serious and professional undertaking; that you care about design and brand response? I guess there are a few businesses where it isn't. But for the vast majority I'd say it absolutely is, that it's worth investing in a professional identity.

If you're among this vast majority, you want to work toward something smart, not just something pretty. What I mean by that is you want to start by being thoughtful about your brand meaning the emotional response you want your product to elicit as well as any practical ideas or metaphors that will help people understand what you do. Armed with that you should sit down with a reasonably-priced freelance designer to brainstorm some treatments, and keep at it until you hit on something you and others seem to like.

In my experience great design comes from the collaboration between someone with a clear vision for a problem (a thoughtful entrepreneur,) and a professional with the talent and craft to create something great (a real designer.) You just don't get that interaction using the crowdsourcing guys, which is why I think you get what you pay for there.

5. Any tips on where to find a great freelance designer for a startup logo? And, what would you consider reasonably priced?

Try checking the portfolio sites, like Carbonmade. Find someone whose work you admire, then call them to talk about your project. Look for someone with whom you have chemistry, who can bring ideas to the table and not just pictures. And take theiry're advice when they offer it they do this for a living.

Expect to pay $50-75/hour, and to be glad you did.

6. How do I decide what category my startup falls into? Is it better to find an existing category, or blaze the trail of a new one?

The short answer is, it depends, but on balance it's better to pick a category that already exists.

From a marketing communications standpoint, a category is a frame of reference for the buyer. If you think of it that way the value of one becomes clear, as does the time, hassle, and expense of creating your own.

That's not to say that sometimes it doesn't make sense to create a new category, and I've used HubSpot as an example of a company for which it was necessary. For entrepreneurs enamored of that idea, I often follow my HubSpot observation with the question, "So how's your book coming?" That question is usually met by a blank stare, but the truth is that level of commitment to IP is what it's going to take to create a category.

If the opportunity cost of doing that is too much for you, just hold your nose, pick a category, and focus on communicating your distinction within that category in a way that resonates with your target.

7. How much does good branding matter when trying to raise capital? Is smart money really fooled by that kind of this? Will I look foolish for having invested in brandinged in one?

I'll say it again: Perception is reality for an early-stage startup. One can argue that the world would be a better place if this were not so, if Excel drove more decisions than PowerPoint. But that argument is a waste of time, my friends.

VCs invest in the companies that win over their hearts and their minds, usually in that order. If you're trying to raise money it's important to remember this, and to invest the time and energy you need to court a little loving, and not just a good first look scorecard.

And the same is certainly true for customers, so sooner or later you're going to need to spruce up a bit and look like a brand they want to be a part of. Why not start now?

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Oh, and by the way, you should follow me on twitter: @dharmesh.

7 Lessons On Startup Funding From a Research Scientist

Dharmesh Shah — Mon, 16 Jan 2012 17:43:00 GMT

The following is a guest post by Ty Danco. Ty is an angel investor and startup mentor. Read more of his thoughts at tydanco.com.

My wife isn't in business, but she is wise in the way of funding. Just as I have experience on both sides of the funding table (as an entrepreneur and as an angel), so does she. As a research scientist, she gets her own grants and also reviews grants from others. While she doesn't talk in startup lingo (pivots, minimum viable product, etc.), she has taught me that many of the issues we face as entrepreneurs have a corollary in science. Here's what I've learned from her.

1. Always seek funding from the best people, even when you have easier alternatives.

Before the bootstrappers hang me, I didn't say that you have to raise a lot of money or that you should be working fat. But consider this story: my wife was slaving away writing one particular National Institutes of Health (NIH) grant knowing that the funding rate was ~5%. Why not look for a less competitive foundation to underwrite it instead, I asked. I figured that this could save her time and trouble, and that she could proceed with her experiments that much faster.

That's not how it works, she replied. That's like self-publishing a paper instead of getting it peer-reviewed. If she couldn't convince sophisticated research centers to part with their dwindling cash, she continued, obviously the project wasn't good enough. If it's not good enough to get other people to write a check, it's not good enough to be spending time on. Startup corollaryjust as a paper published in an inferior journal has less impact than the same paper in a good one, when you go for funding, get it from great people. If you have to take dumb money, you're doing it wrong.

Personal application: I'm temporarily self-funding my new startup, FX Aligned, but I'm pitching it to the best East Coast VCs who understand the space. The same logic appliesif I can't convince people who see 1,000 deals that my idea is worth funding, it isn't worth doing.

2. Proposals are always stronger once edited.

Nothing beats peer review, especially from people with deep expertise.

My chat with one VC surprised me. He thought our initial target market was too small. And upon reflection, he was right. At the same time, I was talking to another VC, and I explained to him that we intended to go after that smaller market first, get established, and then work closely with our alpha clients to find solutions to their real pain points. He quoted his senior partner, whose rule was if a new startup is counting on a two-part process to make money, don't fund it. This is exactly the tough love I needed to hear, and it saved me months to time I would have lost if I had self-funded and drunk my own Kool-Aid. We didn't need to do a two-step dance to discover the real market opportunity.

3. If the specific aims of your experiment (company) undergo too many major changes, that's a sign that you haven't thought through the issues yet, and it's too early.

No scientific grant ever makes it from start to finish without changes. Similarly, no VC or angel should be so nave to think that business models turn out perfectly on the first try. However, when a fundamental concept keeps shifting as the idea evolves, there is a problem.

My new company has gone through one major change as we search for product-market fit. However, our edit did not change the core concepts. Our pivot came as we realized that our solution for our original market would, with some minor systems tweaks, serve not only our target market of public pension funds, but now solve an industry-wide problem faced by all institutional managers buying and selling foreign securities. The aim — giving our clients a means to quickly, cheaply, and more efficiently transact foreign exchange without getting ripped-off remains the same, but now the same basic company has a far bigger potential market.

If your concept is not robust at its core, no iteration will help. Before you pivot, ask if the underlying ideas are still valid. If they are, take your time and get the change right.

4. Don't keep it secret.

Scientific grants and paper submissions are kept confidential during the review process to allow for brutally honest feedback, but generally that's the only time of secrecy. The point of science is to advance knowledge, which is done through sharing. Even before a paper is published, preliminary results typically are presented publicly at conferences and ideas are exchanged before the lengthy process of publication. These public discussions can bring in new collaborators, just as startup events can introduce co-founders to each other. Don't hide, network!

Initially I was reticent to talk to angels too much. While my angel friends were good at giving me feedback on presentation matters, none I knew had expertise in fintech, which is where my new company fits in. So I initially wasn't getting a lot of strong commentary. Thanks goes out to James Geshwiler of CommonAngels, however. While he didn't have expertise in my field, he sent me to two angels who did. One of those two angels is now on my Advisory Board, and the other is giving me solid advice on a technical matter that is critical to the company, but outside of my own expertise. What's the result? A lot less risk in our prospects. And besides, as Dharmesh says, stealth mode is for fighter jets — not startups. Read “The Real Reasons Startups Don't Talk”

The more you discuss your idea, the luckier you'll get. Never miss a chance to pitch your idea, but then keep your ears open, especially for the chance contacts that can turn out to be key.

5. It's easy to get funding in trendy areas, but focus more on impact.

I've tagged along to dinners with my wife's scientific colleagues, and once heard a story about zebras grazing. Those zebras that want to play it safe in the middle of the pack can get by, but the juiciest grass — and the greatest danger of being eaten is out on the edges. While it's tempting to go where the funding is, science is about more than just getting another grant.

Find a problem worth solving, not just something convenient for funding. And hopefully, that will be something different. The world doesn't need yet another daily deals aggregator.

By the way, no one should go through the rollercoaster that is startup life unless they are a) certifiably crazy, or b) intending to go big. (See Don Dodge on Google Dreaming BIG.) If you're pitching something, make sure it has potential to change the world.

6. Don't even think about pitching a project without preliminary data.

Scientific grants rarely get funded without substantial preliminary data. It's not just about feasibility, i.e., showing that the method can work; in addition, enough data needs to be submitted to statistically demonstrate the likelihood of the project's success.

This one is a little harder in my case, because it will take a few months to crank out a minimum viable product. However, that doesn't mean we can't test out the markets. We're talking with as many institutional investor customers as we can to get their input on what they need.

This is just customer development 101, a la Steve Blank. For startups, customer data is the best data.

7. The first funding is the hardest.

In science, like in startups, the experienced team always has it much easier rounding up backers. That's just the way it is.

That's one reason why I suggest that people who want to start their own companies begin by working for some rocketship company first. Your own startup becomes more bankable because you'll slowly be absorbing experience that will stand you in good stead in your own future startup. Whoever writes a check wants to see a return on that money, be it in science or in startups. You increase your chances of funding success when you de-risk your venture, especially when a team (or lab) has had time to gel previously.

Thankfully, the team at our new company has had success together before. And that, probably more than anything else, makes it easier this time around. Not that this stuff is ever easy

And a bonus, once you have that funding:

Always be running little experiments on the side. Especially those that can surprise you. For more on this, read Eric Ries' book, The Lean Startup. And while you're doing those experiments, make sure that they are sufficiently well-designed to give you answers.

Any other funding lessons from the lab I missed? Please leave a comment.

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Oh, and by the way, you should follow me on twitter: @dharmesh.

The Big List: The Best and Worst Startup Stuff In 2011

Dharmesh Shah — Mon, 02 Jan 2012 16:17:00 GMT

The following is a guest post by Ty Danco. Ty is an angel investor and startup mentor. Read more of his thoughts at tydanco.com. Or, check out his recent article "What To Do If You Don't Have An Idea"

It's time to review the past year, so without apology for personal taste, here's my list of the best (and a few of the worst) of 2011.

Best Startup Book of 2011: Mastering the VC Game by Jeff Bussgang of Flybridge Capital

I keep a loaded Kindle copy of this book on my iPad, and I'm constantly showing it to startups raising money. The money chapter: When the Dog Catches the Bus: Making the Pick and Doing the Deal tells you what YOU should be checking out about VCs.

Runners-Up:

The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, by Eric Ries. Had to rethink my whole approach to my startup after reading this. And I'm going to re-read it again soon.

Venture Deals: Be Smarter than Your Lawyer and Your Venture Capitalist, by Brad Feld and Jason Mendelson. A little dry, but will save you a ton of headaches.

Running Lean, by Ash Maurya. Pragmatic and quick.

Honorary Runners-Up (read by me this year, but written pre-2011):

Inbound Marketing, by Brian Halligan and OnStartups.com's own Dharmesh Shah. Simply put, a seminal book that gets you traffic.

Do More Faster, by David Cohen and Brad Feld. Really fun.

Pitching Hacks from Naval and Nivi of AngelList.

Best Interview Podcast/Webcast Series with Entrepreneurs: Andrew Warner's Mixergy

If James Brown was the hardest working man in music, Andrew Warner must be the same in startup journalism. He cranks several hundred of interviews a year, so you can't expect every show to be pure gold, but he's produced more good ones than any three other people combined in 2011. A big differentiator: he spends a lot of time looking at failures as well as the easy success stories. You can search through transcripts quickly to see if you want to download the interview, either in audio or video modes. A few favorite interviews from the last half 2011: Joel Spolsky of Trello and Stack Exchange; Sarah Prevette of Sprouter talking about rising from the dead; Eric Ries on Lean Startups; Naval Ravikant on AngelList; David Friend of Carbonite; and for me, the one that hit closest to home, Harley Finkelstein of Shopify talking about biz dev.

Runners-Up:

This Week in Startups, with Jason Calacanis. Jason remains the master entertainer, and he invented the startup webcast genre. You either love him or hate him, but believe me, you'll have an opinion. Cranking out 2 shows a week.

Founder Dialogues, with Eric Paley of Founder Collective

Founder Stories, TechCrunchTV with Chris Dixon of Founder Collective

While Founder Dialogues features lengthy, in-depth interviews, and Founder Stories is cut into smaller segments, the shows are similar: Eric Paley and Chris Dixon are both VC partners at Founder Collective, both have started and sold multiple companies, and both host shows featuring great guests.

Best Intervew Podcast/Webcast Series with Investors: Mark Suster's This Week in Venture Capital. It's hard to pigeonhole this showMark's guests include both entrepreneurs and investors, but, like the sister show This Week in Startups, he gives a lot of advice on how to work with VCs. I tend to prefer his earliest shows, which featured more VCs and less entrepreneurs, but regardless there's something to be learned every time.

Upset pick for Runner-Up: The Frank Peters Show Frank's audiocast is not aimed at entrepreneurs, but rather to his fellow angel investors. He covers the nuts and bolts topics that no one else does, such as best practices for angel due diligence, and different techniques to value companies. (Disclaimer: I've been on his show twice, including this time in 2011.) A good example of Frank's work: his 4 part series All About Angel Investing. If you're looking to hunt down angel money, you should understand your prey. The best way to understand angels other than sitting in on an angel group is listening to a few of his shows, although entrepreneurs can skip the international shows or the stray episodes devoted to cycling.

Best Startup Blog: This, the most hotly contested award goes to Both Sides of the Table by Mark Suster. OnStartups already tracks the most-read startup blogs, and you should check them out. Many are great. So why did BothSides get the nod? Well, in sports, not only do you have to perform day-in, day-out during the regular season, but you need to raise your game in the playoff. And my favorite blogpost in the last week of December is this one on profitability, so Suster takes the prize--but he cranked out many equally good in the regular season throughout 2011.

Runner-Up:

David Skok of Matrix Partners' For Entrepreneurs. Every piece is gospel.

Ben Horowitz of Andreessen Horowitz's Ben'sBlog.

I go for quality, not quantity. All three write fewer, but deeper, articles. Funny how almost all of the best VCs started out as entrepreneurs, by the way.

Best Startup Answer Sites Other than OnStartups

Three-way tie between Venture Hacks, Quora, and AsktheVC.

Favorite Blog posts of 2011:

For sheer density of learning, the verdict was already delivered by early January: Tom Eisenmann of HBS posting his startup curriculum for his coming class.

Best blog post by an entrepreneur:

A tie between this postmortem by Justin Hall about Gamelayers, and

Rand Fishkin on how a funding round got screwed up.

Runners-up: Jason Baptiste talking about how to kill it on DemoDay (which he did.)

Best blog post on an unknown backstory goes to Lee Hower's post on raising Series A for LinkedIn in 2003.

And from the personal side, my favorite blogpost I co-wrote was:

Raising Money On AngelList: 21 Tips From Two Active Angels which was co-written with Dharmesh. That post received more views in 3 days than the other 49 posts (including the companion piece on AngelList hacks for angel investors) I wrote on my own blog for the whole year. You gotta hand it to him, Dharmesh knows how to get those inbound eyeballs.

Best Communication from a Startup to its Investors: From Objective Logistics as described in this blog post. I kick myself for not investing in these guys. Talk about the right attitude.

Best Accelerator Structural Innovation:

, for coming up with the HackStars program. It sticks together massively talented hackers who want into a great startup with the killer companies that make it into TechStars. The result: a serious increase in global startup mojo.

Runner-Up:

500 Startups, for providing Designer in Residence help. Almost all of the companies accepted already have a hacker and a hustler onboard, but not all of them have (although everyone needs) some serious design. Dave McClure gives UI, UX, and beautiful design its proper due, but having not just great mentors, but trained staff in design gives a big boost to his companies.

Best Accelerator Financial Innovation:

This feels like ancient history now (it happened in January 2011), but Y-Combinator, the big Daddy of them all, wasn't resting on its laurels when it announced that Yuri Milner and SV Angel were combining to offer every YC company a $150k uncapped, no-discount convertible note. Angels and VCs gasped, but it was great for the startups on the receiving end.

Runners-up: Thomas Korte's AngelPad, TechStars and 500 Startups for following up with similar deals. Like Y-Combinator, the original AngelPad funding came from 2 entities. TechStars spread it out wider amongst its network of VCs. Both firms were reacting to Y-Combinator, (hell, every accelerator is a reaction to Y-Combinator), but both quickly reacted and recognized the merits of the program. Lessons to startups: never be afraid to copy a good idea.

Funniest Twitter Feed in 2001: @fakedavetisch. He was only active for two days, but what a great two days!

Best business card execution: Any business card from moo.com that has a face with it. If you want to make a solid impression, you should consider these heavy, slightly different-sized, super high quality cards.

Runner-Up: Jeff Clavier's business card has a wordcloud that totally describes the types of companies he's looking for. It's a perfect summary of his investment interests on a tiny card.

Best business card app: CardMunch. With one iPhone snapshot, get all data entered into your phone and get connected via LinkedIn. (Also, my favorite angel investment of 2010 and the fastest exit I'll ever have.) Thank you Manu, Bowei, and team.

Best present for an Entrepreneur:

A T-Shirt or Poster from Fake Grimlock.

Best Bank for Working with Startups:

Silicon Valley Bank

Runnerup: Nobody. Almost every startup I've invested in (plus the one I'm in now) use SVB.

Best app I can't live without: Video Skype

I pitch my company with it, entrepreneurs pitch me on it, I talk business on it nearly every day. It saves time, money, everything. And you can archive and edit it. Runnerup for telemeetings: GoToMeeting. Never fails.

Best big push by a city to build a startup ecosystem: Montreal.

From very little in 2009, the startup tribe there has launched a new incubator last year(FounderFuel), gotten big institutional and government support from the province to create funds to match angel investments and subsidize programmers, built the largest angel group in Canada soon to be one of the largest in North America (AngesQuebec), hosted a successful first international startup festival, pulled off a successful startup competition, and created a vibrant co-working space (Notman House). And it keeps on going.

And now for the flipside:

Worst Spat of Two Co-Dependents:

Arrington and Calacanis. You're both rich, you're both successes, you don't need to piss all over each other. Guys, work it out and play nice, or even ignore each other. Just leave us out of it.

Worst Meme:

Comparing Silicon Valley to anywhere else. OK, we know it's great there. Yes, it is still on top. Yes, you can build a great business anywhere. Next.

Runners-Up: We are in a tech bubble.

VCs Suck.

Worst Upgrade since Windows Vista: iOS 5 on my formerly trusty iPhone 3GS. Buggy, crashes, mysterious data losses, I could go on. I promise from now on to wait to hear others' stories before installing updates.

Worst startup launch viewed from afar: Color.com. But don't ask me about it, ask the Scobleizer, who also wins a related Best Rant for his review of their launch.

Worst startup mistake: Having a big burn rate.

Runner-up: Procrastinating by reading (or writing) blogs. Excuse me, I gotta get back to work.

Who did I miss? Anyone you think deserves a shout-out (or a call-out) for being the best or worst in 2011? Please leave a comment.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

13 Ways To Think About And Crush Your Competition

Jason L. Baptiste — Tue, 27 Dec 2011 16:55:00 GMT

A few weeks ago, there was an article that came out called "Google Currents, Onswipe's Nightmare?". I'm also preparing for our first board meeting with newly elected independents and one of the points we are talking about happens to be competition. As you start to grow competition becomes a healthy thing to think about. Here's how I think about competition as a cofounder and CEO of a growing venture backed startup:

Don't Worry About Google

Almost every growing startup comes to a point where they have to worry about "what if Google does it." If it is a market worth getting into, then Google or someone else as large as them will almost certainly get into the market. What you aren't remembering is the fact that it is probably going to be a smaller effort with little or no budget inside of the larger company. The main focus of any large company is their main profit driver, which is almost certainly not your startup's experimental business model. Microsoft, Google, and every other large company lacks the main asset of a startup: speed. By the time that a larger company really puts momentum and force behind competing against you, then the game is most likely over for them. Google took over seven years to truly compete against Facebook, which had 800 million users at that point. Everyone heralded Facebook Places as the end of Foursquare forever and that they should pack up shop. A year later, Facebook Places has faded into obscurity while Foursquare's traffic has soared. When a large incumbent comes into your space, largely ignore them and use the press for validation.

Find A Giant As An Ally

The enemy of my enemy is thy friend. If a giant such as Google comes into your market to compete against you, odds are one of the other giants are taking notice as well such as Amazon, Yahoo, Microsoft, Facebook, etc. . They might be planning to come into the market as well or already exist in the market with a flawed product. You should see this as the opportunity to partner with one of the other larger companies out there. You get massive distribution and they get the benefits of being in the space without a loss of speed or manpower. This route can also be one that leads to an acquisition at the end of the road.

Copycats don't have the roadmap

Before someone like Google comes along to compete with you, a slew of copycats will spring up. We recently had this happen with Onswipe as an unoriginal 100% ripoff popped up using our name to gain press with a shoddy product. Along the way, a copycat will constantly try to play fast follower by copying your latest and greatest feature. The problem is the fact that, copycats are always one step behind and often stay that way. They never started out creating the company as a problem they wanted to solve, but as a way to capitalize on the great opportunity that you shed light upon. The copycats will create confusion in the marketplace, which should be your greatest worry. Potential customers may ask how you are different than them. The way to combat this is to sell more than just the current snapshot in time, but the longer term vision. Since the copycat does not have your startup's longer term vision, you can out sell them.

Mis-education creates false competitors

If you are similar on the surface to another company, the press and potential partners may be fast to label you competitors. Many people think of Flipboard as a direct competitor to Onswipe. This happens because we both provide beautiful interface on the iPad, but our businesses are entirely different. The same false competition between Facebook and Twitter happened many years ago as both were thought of as Social Networks. Over time it has become very clear that Facebook and Twitter are two very different companies. To combat mis-education in the market, you should have a simple and clear 2-3 sentence reasoning of why you are different. Over time as both companies in a space mature towards their individual visions, it will become apparent to anyone the difference between the two companies. Up until that point, it will likely take a mix of explaining the difference to the market while having many one on one conversations.

Don't try to win on features

Competitors will try to constantly battle you by adding an incremental amount of features. It's tempting to want to constantly play a game of one-upping a competitor with features, but that usually results in a product that no one wants. It's the path that many tablet makers have taken when competing against the iPad. There is a constant game of one-upping on features like processor speed or 3D screens, yet nobody has even come close to overtaking the iPad in the tablet market. Why is this? Everyone is trying to BE Apple, not BEAT Apple. When it comes to features, march to the drum of your own roadmap and vision.

Price wars are a race to the bottom

Many entrepreneurs think that a competitor will come in and beat them on price. You may lose some customers, but in the long haul, a competitor can't be you by just being cheaper. If a competitor does come into your market and competes solely on price, do not be tempted to constantly lower your price to beat them. Instead you should fight on product quality and the true return on investment for the user. When it comes to a competitor that comes into your market and offers a product for free that you have charged for, then you may have a problem depending on what type of business you are building. If you are building a company built upon fast growth, then your business model may be flawed in the first place. If it's not, then you should dig in deeper as to why the competitor is offering the product for free. They will eventually have to turn a profit, whether it is by charging YOU or someone ELSE.

Speed wins

Larger companies are often slow, though large in size. They may ENTER your market, but they will often not have the speed to STAY in the market. Speed comes in a few different varieties when competing against a large company like Google or Microsoft. The first variety of speed is iteration. How fast can you iterate on a product after market feedback? A large company is going to have to stick to a much larger roadmap and won't be able to turn a ship on a dime. The second variety of speed is feature addition. Large competitors won't be able to add features as fast as you and will most likely be trying to play catch up to what you already have.

Focus on the normals

Pinterest has become a huge success and has < a href="http://allthingsd.com/20111222/pinterests-growth-hockey-stick-would-make-a-great-craft-project/">grown tremendously over the past year. The largest part of Pinterest's success story has not been its adoption by the inner circle of Silicon Valley or sex crazed college students, but those of women from Middle America. Most competitors will come into the market and try to create buzz amongst the early adopters of the tech community. Instead of falling into this trap, try to attract the normal users of the world ie- women in the midwest or a teenager that wants to find new music. It's hard to reach this audience and once you have a grasp on it, it will be hard for a competitor to come in and compete against you.

Cash matters when scaling

If you have started to grow and a new competitor comes into the market, it's wise to have enough cash on hand to really ignite your growth. Everyone thinks that products take off and that it's all taken care of. There are always financial barriers in place when rocket fueled growth kicks in. If you are lucky enough to hit that point, you want to make sure that you have the cash to leave your competitors in the dust.

You are your biggest competitor

You are often your biggest competitor. You should not completely ignore your competition, but the biggest battle happens inside of the four walls of your startup's office. Startups come down to pure execution of a strategy on a daily basis and maintaining the faith for the long haul. Most startups don't lose to competition, but because they lose the will to fight.

Avoiding the build versus buy problem

Many startups will not be competing with other startups, but with the internal development teams of their larger customers. Moveable Type lost the blogging wars to Wordpress by not moving themselves towards being a fully flexible platform. Instead of having conversations that are a build versus buy scenario where it's either your startup or your customer's internal development team, you should be positioning yourself into a build OR buy scenario. In order to do this, your product needs to become a platform that others can build upon to meet their needs. This will let you grow overtime to meet the needs of any customer without sacrificing your own roadmap. This will often require you to sacrifice some short term gains for long term sustainability. Any and all changes you make to your software have to be applicable to the greater good of the platform. That means no custom development and no bending to the wills of customers crazy demands.

Bring traffic to the table

The largest successes of the past few years have been audience driver. Twitter and Facebook have been killing search as a referral source, while YouTube has opened brought forth a new audience for professional and amateur creators alike. Tumblr has seen widespread adoption by major publishers due to the viral nature of the platform. Pinterest is getting adoption by mainstream fashion brands due to its ability to drive more traffic than Facebook. If you can bring traffic to your users, then they are going to be addicted to your service like crack cocaine. Once network effects kick in, a publisher is very unlikely to leave your service.

Bring money to the table

Most partners want two things. The first thing I touched on before, which is traffic. The second and most important is M O N E Y. If you can make partners money, then they are likely to side with you and stay when a competitor comes along. Cash is a powerful force and if your company can be a direct or indirect way for people to make money, then you are going to be hard to unseat. Everyone thinks that Google won the search wars by having JUST the world's best algorithm. They had a great product, but they gained distribution by powering search for publishers. With this, they were smart enough to make money for publishers and win the search wars. How have you dealt with competition in your space? Another interesting angle that I wish I could analyze is, what it is like to enter the market as a competitor to an existing incumbent. Whatever the scenario may be, the most important of the 13 lessons above is to remember that you are your own competitor. Keep fighting the fight and be prepared for the war, not just the battle.

You Should Follow me on Twitter: http://www.twitter.com/jasonlbaptiste, Friend me on Facebook: http://www.facebook.com/jasonlbaptiste, Email Me: jbaptiste@onstartups.com

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Visiting The Valley: Why It's A Special Place For Startups

Dharmesh Shah — Mon, 12 Dec 2011 17:01:00 GMT

The following is a guest post by Jason Evanish. Jason is the founder of GreenhornConnect.com, a hub for resources, events and jobs for Boston entrepreneurs and is presently working on a new startup. You can follow him on Twitter at @Evanish and connect with him elsewhere through About.me.

Visiting The Valley: Why It's A Special Place For Startups

I've spent the past two and a half years in the great startup community of Boston, where the ecosystem has been quietly growing stronger every day. During that time I've had the opportunity to visit a number of other startup ecosystems as well as interact with leaders of other cities. Despite this, I'd never really visited the Valley. With airline tickets cheap between Thanksgiving and Christmas, I decided it was time to finally make a pilgrimage to the center of the startup universe: Silicon Valley.

When I set out to visit Silicon Valley, I hoped to get a taste of all the Valley has to offer. I heard that San Francisco, Palo Alto and Mountain View were the key hubs, so I spent a couple days in each area. By doing so, I maximized the breadth of my experience as well as who I could actually meet and what I could see.

The Valley truly is a unique place unlike any other ecosystem I've been to (including the runner-ups, Boston and New York). I wrote elsewhere about some of the myths and facts of Silicon Valley, and there I mentioned I'd love to be able to bottle up the Valley’s special elements. Below is my attempt at capturing what these elements are based on both my experiences and discussions with native entrepreneurs and investors I met on my trip.

#PayItForward

If there's a single thing that stands out about the Valley, it's the openness of everyone there. Every person I met was excited to meet with me even with the coldest of intros I received. More importantly though, at the end of every meeting *everyone* asked me "How can I help?" and insisted on working with me until we could come up with a way they could help.

Dial O for Optimism

It's easy to dismiss wild, big vision ideas that just don't make sense to you. However, in the Valley, that's not an obstacle. Everyone is encouraged to start a company and no one is doubted because they lack a clear revenue model or doesn't pass someone's analytical test. As one Boston transplant put it, "the Boston brain in me thought the idea of 'Pandora for Shoes' was dumb, but the more I thought about it, I realized it just might work."

Beyond how people view others' ideas, there's an overwhelming sense of hope there; it's difficult to explain, but you get hit by a wave of it when you're there that makes you think anything is possible and that you’re surrounded by greatness.

Culture Counts

Yes, there's a talent war in the Valley, but there's a talent war in every tech hub. As one person I met put it, “the Valley is the Major Leagues”; there's more of everything: more founders, more capital, more startup employees, more competition. When that's the case, the only way to recruit and retain talent is with a great work culture and a fun environment.

I visited the Twilio office while in San Francisco and was floored. They have nailed culture in so many ways it can be its own post, but the key is that I heard that HR gets over *250* applicants for every job. The talent war is won and lost inside your office.

Everyone’s an Evangelist

Every person I met was telling me I have to move here. Every. Single. One. There's a "join a winning tradition" kind of attitude that I think is the same thing the Yankees do to recruit free agent baseball players. This attitude comes from a confidence in good things happening here (see ‘Optimism’, above) and also the welcoming environment; San Francisco was described to me as an incredibly transient population, so everyone is looking to make new friends.

These beliefs feel like a self-fulfilling prophecy; if you think you can, you will, if you think you can't, you won't. Believing you can succeed and so can others breeds optimism and a risk-taking attitude.

Winning with Weather

You can't change the weather of your ecosystem, but it is an advantage of the Valley. On a warm sunny day, you're more likely to go outside and not work from home. You're also able to move around before and after events more freely. Both of these cases leads to more serendipity and may contribute to the optimism (as a counter, see Seasonal Affectiveness Disorder).

Signs, Signs, Everywhere a Sign

Startup signage is simple, but actually a big deal. There's a serious cool factor to walking or driving by a building and seeing the logo of a company you recognize. It's also fun seeing startups on billboards. While on the 101 (the main highway running through the Valley) I saw signs for Box.net, Salesforce, Huddle, and Zynga. As a startup geek, I find this as cool as others do when they see a celebrity on the street. This omnipresence of startups goes a long way to thinking about a place being the home of great startups and is a hot topic in other ecosystems like Boston.

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Much of what makes the Valley special is hard to describe; you really need to see it for yourself to truly understand. If you’re starting a company, already running a company or just interested in startups, I highly encourage you to check it out. Many great entrepreneurs in other ecosystems visit quarterly to take advantage of what the Valley has to offer and after visiting, I understand why.

Have you visited the Valley? What do you think makes it such a unique place?

Special thanks to @Wayne of Crashlytics for help in refining this post

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Insider Tips From HubSpot's Launch of Marketing Grader

Karen Rubin — Tue, 06 Dec 2011 16:28:00 GMT

The following is a guest post from Karen Rubin. Karen is a product manager at my company, HubSpot. I asked her to write this article sharing some of our "playbook" around launching new applications. She loves getting new twitter followers: @karenrubin

Today, HubSpot announced the launch of a new tool called Marketing Grader. Like our other Graders, Marketing Grader is a free application. It asks you to enter a website URL and returns a comprehensive report on your marketing efforts.

The team has been building Marketing Grader for a number of months, and it is our most ambitious free tool since Website Grader debuted in 2006. The team knew it was important not just to build an awesome product, but to get the message out there, and to do it right. These are the tips and guidelines we followed to keep the launch on track.

Stay Focused & Simplify

Like many startups, one thing we never lack at HubSpot is ideas. As the team started brainstorming the launch campaign, there was talk of many different approaches we could take to announce the new tool. We could write a series of Top 10 lists or reveal the Top 100 Marketers. We could create personalized videos á la the Old Spice Man. We could somehow involve the HubSpot unicorn. The list of possibilities was endless (as it often is in a good brainstorming session.) We spent a couple of weeks tossing ideas around and trying to figure out which would make the biggest splash and launch the tool to the most fan fare.

But a couple of weeks into the planning, we realized that the main message we wanted to get out, namely, that HubSpot was launching an AWESOME new tool to grade your entire marketing funnel, was getting lost in all the other cool things. Top 10 lists go really well with Marketing Grader (since the tool can be used to build and analyze such lists). But were people just going to remember that we were doing new lists? Or that those lists were backed by a super cool new tool called Marketing Grader?

We decided to take a step back and regrouped around the idea that the launch of Marketing Grader was the real message, and that we needed to simplify in order to effectively communicate that message -- especially in the first month. It doesn’t mean we won’t try our other ideas (some of which are a bit crazy) in the future, it just means this month everything we do is laser focused on our top message.

Making Our List, Checking It Twice

Once we focused on our message, we had to think about what tools we were going to use to get the message out there. Some were easy; we’d use the blog, our email list and the other Graders to drive people to Marketing Grader. Others needed some more thought.

For social media, we could tweet about the new tool and post its launch to Facebook, but we thought that this wasn’t enough to get the message out there. So we put a plan in place that included personalized tweets to influencers as well as previous users of the Grader tools. We are also planning to participate in multiple Twitter chats, a new mechanism we have recently started experimenting with.

When planning a campaign, it also helps to think of people as tools (we mean that in the nicest way possible.) We came up with a list of bloggers and journalists with whom members of our team have relationships. We then identified the best people to reach out to them personally, introduce them to the new tool, and answer any of their questions. We also planned ways to get our customers and partners involved with using and sharing the tool.

It Takes An Entire Company To Um, Raise Launch A Product

Lastly, we realized it wasn’t enough for just the few of us working on the tool to promote it during its launch; we needed to get the entire company on board. We sat down with the marketing team and brainstormed ways to get everyone involved. This includes writing special blogs posts (like this one), creating infographics, running competitions for our partners, integrating the message with other campaigns and making related videos to promote the tool. By including the company in the campaign, people thought of new and innovative ways to get the message out and implemented these ideas on their own.

We trained our consulting, support, and sales teams on the tool so they can start using it with customers and prospects. We also came up with a sales contest to encourage the sales team to share the tool with as many of their leads in their funnel as possible. The day of the launch, we sent an email to the entire company reminding them of the launch and giving them some lazy tweets to share with their networks. For the twitter rookies out there, a "lazy tweet" is when you provide a sample tweet, fully written, so that someone who is inclined to help you, but a tad lazy/busy, doesn't have to think. They can just copy/paste the tweet or retweet an existing tweet. The easier you make it to help you, the more people do.

Launching a new tool like Marketing Grader takes blood, sweat, and tears, but the result is a tool that you’re so proud of, you want the whole world to see. That result makes the process of properly launching your new tool all the more important. we wanted to give Marketing Grader every opportunity to get out there to the public and be a rocking success. Staying focused, using all your tools and resources, and leveraging the skills of everyone in your company are great ways to get your new tool the publicity it deserves.

Here are answers to some questions we think you might have.

Why the big hoopla over the launch this time? Usually, HubSpot trickles out grader tools with an inocculous tweet from Dharmesh.

You're right. In the past, we've been much more subtle and measured when we launch a new grader product. This is largely because our new grader tools are often a crazy experiment -- we're not sure whether the market actually wants it or not. By avoiding a big launch, we avoid a big "unlaunch". In the case of Marketing Grader, we've had lots of evidence from our customers and friends (who have tried the tool) that it is super useful. We've made a big investment in this app, and we wanted to match it with some marketing. And, like all things at HubSpot, this is an experiment too. We wanted to see if we could reach people beyond our co-founder Dharmesh's twitter followers (which admittedly, is over 100,000 now).

How did you build your media contact list? What tool did you use to manage it? We try to keep things simple at HubSpot. Our media contact list is a simple Google Spreadsheet. The people on the list are a combination of folks that we know individually and someone on the team has some relationship with. Now that we've got another twitter celebrity (Laura Fitton, aka @pistachio) who happens to know just about everyone, our VIP list was bigger and better than ever.

Why use Marketing.Grader.com on its own domain? Wouldn't the SEO have been better to put it on HubSpot.com? We basically had three choices when picking domain names for our free tools. We could use HubSpot.com -- which has advantages, including brand-building and SEO. By launching on HubSpot.com, the Marketing Grader page would get some SEO authority relatively quickly because of the power of the main domain. Another option would be to put it on a completely separate domain, like MarketingGrader.com. But the option we picked is to use Marketing.Grader.com (so, make it a subdomain of grader.com). This approach has a couple of advantages. Getting a sub-domain of an established main domain to start ranking is much, much easier than a completely new domain. And, since we use this model for our other free tools, our users are already used to it. (But, of course, either domain will work -- one simply redirects to the other).

What's the difference between getting all of these efforts to happen on the same day? Couldn't you have easily just "spread them out" over time and gotten he same level of overall usage? This is a tricky one. For the most part, you are right. Rather than have 20 things happen all on the same day (which is a challenge to orchestrate) we could have spread the news out over days and weeks. The advantage to trying to "compress" some of the news into a smaller window is that there's the potential for the news to hit a "tipping point". If news of the launch hits several different channels, all around the same time, it gets "noticed" by other channels that we didn't have direct access to. Those people then might write about it, causing more people to see it. We get a snowball effect. Doesn't always happen, but it's much more likely that it will happen if we can get some strong media pickup all on the same day.

It's not fair! You folks have a reach of millions. How can my tiny little startup match that? It's a good point. We do have exceptional reach, across many different channels. That makes our jobs much, much easier. It's fun to be able to put something new out there and know that it's going to get some attention. Our advice to you would be two-fold: You don't have to have a massive reach to get attention. (We had some great successes even when we were a struggling young startup). The key is to be remarkable and even more importantly, create useful content. For example, if this article were written like a standard marketing schpiel, it would never have gotten posted to OnStartups (despite the fact that Dharmesh is one of our founders). By wrapping the "nugget of news" in a nice, useful layer of tips, tricks and lessons learned, the article becomes something people (hopefully) want to read. Maybe even share.

Does Karen Rubin actually exist or did Dharmesh just conjure up an attractive, charismatic persona as part of some weird A/B test he's running? Attractive and charming? Oh, Internet reader, you flatter me so (batting eyes in best impersonation of Scarlett O'Hara). But rest-assured, I do actually exist. What you don't know for sure is what parts of this article were part of my original submission, and what parts are late-night edits from our crazy co-founder. I'll leave that as an exercise for the reader.

So, what questions do you have? What can we tell you about the HubSpot marketing machine and how we do things? What lessons have you learned launching your own apps?

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.

Cult of Product: Marketing Isn't Just For Losers Who Pay For Sex

Dharmesh Shah — Wed, 30 Nov 2011 15:18:00 GMT

The following is a guest post by Mike Troiano. Mike is a former New York ad man turned venture-funded entrepreneur, now a Principal at Boston-based Holland-Mark. You can follow him on Twitter at @miketrap, and connect with him elsewhere through About Me.

Product, product, product. More focus on product was at the center of Brad Feld's comments at last week's Silicon Valley Bank CEO event, in response to a question about what he'd do differently if he had it to do over. More focus on product is at the core of the Lean Startup Revolution we're all getting behind, and in the spine of the Steve Jobs bio we're all reading, and in the frequent posts of the startup bloggers we all pay attention to.

And it's all true. Product is the key, at the very center of building a viable business from nothing. And by implication, marketing is so 15 minutes ago. Marketing is for products unworthy of passionate advocacy, a crutch for nice-to-have startups who invest in sprawling web sites and launch parties like losers with no choice but to pay for sex.

I spend a lot of time fighting this perception, talking about the difference between the kind of strategic marketing that can corrupt your vision with the external reality, marketing communications, which consists largely of the promotional sham-ware of the mid-twentieth century.

But you know what? I'm giving all that up. I'm going to take another approach, one I think will resonate more clearly with the Cult of Product sub-culture which seems to be sucking all of the oxygen out of the shill-o-sphere.

Ready? Here it is: You should focus on the desired response to your product, not just on the product itself.

Why must you focus so intently on your product? Isn't it because you want people to respond to your product in ways that propel your businesses to greatness? Isn't your product, then, a means to an end? Isn't it a stimulus hoping to evoke the right response on the part of the customers who buy it?

In a very real way, I'd argue yes. More than that, I'd argue that the primary dimension of product response that propels businesses to greatness is emotional response.

What do great un-advertised, Billion-dollar brands like Dropbox, Facebook, and even (until recently) Google have in common? We love them. They make us feel respectively Liberated, Connected, and Empowered in ways that enrich our lives. They make us grateful, make us want to share with others. A brand is nothing more than an emotional response out there in the world, but building brands with products instead of print advertising doesn't make them any less important, or any less worthy of early focus, thoughtful strategy, and effective execution.

It's becoming a cliche to say your product is your marketing, in an era where customers trust each other more than they do media. Well if that's true it might be time to bring a little more marketing into your product, in the form of treating the softer science of brand development with the same respect you give the harder sciences of product management and engineering.

What do you think? Where do you stand on the Cult of Product? Would love to read your comments.

Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.

Oh, and by the way, you should follow me on twitter: @dharmesh.