My co-founder at RoundPegg brought this to my attention the other day.
Broadly, I find traction most convincing in the following order:
- Active users
- Registered users
The Entrepreneurs Guide - What goes on in the dark spaces between the light
My co-founder at RoundPegg brought this to my attention the other day.
Posted by Tim Wolters at 2:01 PM
Posted by Tim Wolters at 12:57 PM
In an earlier blog post I argued that the funding model for software startups is fundamentally changing. This is hardly an argument and more of an observation of the expense side going down for IT startups and legacy funds largely still caught in their bubble investment models.
There is a LOT of talk in the entrepreneur and VC community about the survivability of this model especially regarding the ability to raise more funds in the coming year. And with that, how many VC's will go into hibernation, change models (i.e. lower raise from largely non-institutional money focusing on companies requiring less capital or switch focus to industries with larger capital requirements), or quietly close their doors.
Seth Levine has an interesting article firing back at the Business Week article on How Venture Capital Lost it's Way. Here's another from Fred Wilson earlier this year on the math of venture capital. And Above the Crowd with his post on Asset Allocation and Venture Capital.
In the face of these facts the early stage software and software as a service (SaaS) early stage ecosystem remains healthy. Companies are figuring out how to generate cash flow earlier, get by with less and raise less, and in increasing numbers are eschewing venture capital paths altogether. Angels have stepped in to fill a larger role in seed stage investment but so too have the entrepreneurs and developer communities.
Contract developers are a lot like angel investors with the exception that they're throwing development skills instead of money in alongside the founders. Their "yes/no" analysis is a mix of knowledge of the founders (friends), attractiveness of the problem/solution (skills), and recognition of the market (money - or Net Present Value - NPV). There's a mix of people who've been through the bubble(s), heavy in skills and slightly jaded on the NPV calc. And there are the people who haven't been through the bubble, are anxious to make their mark and want to believe but are much more pragmatic than similar folks in the heady bubble days.
Both of these groups are willing to work for some amount of equity, and depending on the friendship card and personal cash flow needs, some requirement of cash. After all, food doesn't find its way to the table on it's own. This enables you to get your product built without having to hire someone full time and at a discounted rate. I must admit that I've put in a hell of a lot of time on my recent project to get it off the ground doing a large chunk of the development, but I've also managed to get the entire beta launched in the very low five figure range.
As a side note, I think it's infinitely useful to go back and read
37 Signals Getting Real
At the very beginning stages of a company, even if that company is merely an idea jotted on a coffee stained napkin, the first real step to moving forward is to create a pitch deck. The long and short of company creation, fund raising, and selling is that you need a way to explain what you do in simple straightforward language. This will obviously take various forms depending on the audience. Get started with an investor presentation. Taking the perspective of an investor will force you to answer the hard questions of why someone else would believe in your ingenious world-changing idea enough to give you their money.
Guy Kawasaki broke this exercise out into 10 slides in his book "The Art of the Start" published back in 2001. His 10/20/30 rule holds up.
The people you are pitching to have limited attention spans and have heard 100 business plans in the last 60 days. Guys advice on the 10 slides follow. They don't have to strictly follow this order but the order is good. The biggest one I would consider swapping is "Team." If your team is a very strong component (and it is a primary reason people will invest) then stick it up front, perhaps right after your solution slide.
Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else’s money). If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:
- Your solution
- Business model
- Underlying magic/technology
- Marketing and sales
- Projections and milestones
- Status and timeline
- Summary and call to action
Read more: http://blog.guykawasaki.com/2005/12/the_102030_rule.html#ixzz0XW8WIxS7
I ran my most recent Twitter cloud on wordle via Tweetstats. Looks like I'm mostly running, watching, listening, and meeting.
I believe the habit and purpose of tweeting are changing, or at least changing among the people with whom I tweet. Tweeting is useful as either information dissemination or entertainment. Tweets of the mundane sort are becoming less common in favor of purposeful tweets with an audience in mind. While I still do tweet about the mundane during times when I feel like reaching out and letting the world know I'm alive and usually out of some sense of social insecurity, my other tweets tend to pass on information that I think will somehow be useful. These fall into the categories of: some interesting bit of news happening in the world, a funny encounter or OH, or marking some personal milestone that I think people who know me best will appreciate.
I'm still trying to figure out the best way to interact with all of you tweeps out there, so let me know. How would you categorize why you follow someone?
I've been out fundraising for my new company, Roundpegg for about five weeks now. I've met with a multitude of venture capitalists, angels, advisors, prospects, customers, and just about anyone with a pulse. A monster meeting schedule is par for the course at this point in the company's life. You constantly walk the line of meeting schedules vs. sufficient productivity to get the product built, demonstrable, deployable. Also par for the course has been VC response. We've done one west coast swing with Roundpegg and although we had a lot of interest, with comments like, "huge market", "it's unique; I haven't seen any other deals come through that are like it", "perfect timing for the market with this kind of company", the week after the VC partner meeting we've gotten the litany of soft no's typical of this stage.
So while the venture fund community has continued to move to the right (from a business stage perspective) the entrepreneur community has moved to the left from a cost perspective. It now takes less than for forever ago to get a software startup off the ground. In roundpegg.com we've spent less than $10K in total over six months to incorporate, build the first fully functioning version of the technology, host the site, and design and build a website for the company. While this is not sustainable and now with customers going live we need a couple of more people the overall cost of getting the company between these early milestones is incredibly low.
The straight shot: Why should you raise money, and how much?
- Step 1: When you're ready with an Idea: Raise $100K from friends and family, and use it to build a prototype.
- Step 2: Once the prototype is done: Raise < $1M in seed capital, and get into market with an alpha launch.
- Step 3: After that initial launch has traction: Raise $5-10M, and use it to prove/scale the model.
Ok, I've become lazy in my posts but this is an excellent bit that was forwarded to me by my new friend Jana Matthews. For those of you who know Jana, you know what a smart, passionate, and caring person she is and I value her input on the startup game. More posts to come on that peculiar rider and vehicle, the entrepreneur and startup. This one offers good insights that you can use immediately to evaluate behavior in your own startup and the threshold to post was so low that it offered a great way to get back in the game.
I just ran across some notes from a session where Guy Kawasaki and I spoke in Cambridge, England on 9/11/2001! Think about them in the context of your own company.Ten Tips for Successful Entrepreneurs
- Jump curves or create the next curve. Keep moving.
- “Don’t worry; be crappy” In other words, ship, test, and keep improving. It’s OK if you’re 10X better than what is. You don’t need to be 100X better, e.g., bad toilet paper is still a lot better than crumpled leaves.
- “Churn baby churn.” Do versions 1.0, 2.0 3.0, X.0. Do R&D and continual product improvement
- Break down barriers – enable people to test drive your product or service sooner, rather than later
- Evangelize – don’t just sell. Show that what you have to offer is in their “best interest “. Show how it will make the world a “better place”. Capture their heart and head. It’s better to legitimize the revolution than to win the battle. Better to legitimize the web than to win market share on the internet.
- Let 1000 flowers bloom. Think of the many applications of your concept
- Eat like a bird; poop like an elephant. Birds eat 50% of their weight every day. Be a voracious eater of information
- Think digital; act analog
- Never ask people (consumers or customers) to do what you would not do yourself
- Don’t let the bozos grind you down. Don’t give up. [“ Bozocity” often happens when someone has been successful in one curve, gets stuck, and finds it impossible to move to the next curve (or find value in your new product or idea)].
I hope you find these Ten Tips useful.
Jana B. Matthews
Chief Executive Officer
The Jana Matthews Group