(26) Startups: How to Communicate Traction... by Brendan Baker - Quora

My co-founder at RoundPegg brought this to my attention the other day.

If your company plans to be or is venture backed, it's a gem. Venture Capitalists are looking for traction and momentum. Companies exhibiting exponential progress are much more likely to be funded or further funded than companies experiencing linear growth.

Figure out what to measure, drive it, measure it.

(26) Startups: How to Communicate Traction... by Brendan Baker - Quora:

"4) Choose Your Y Axis

Broadly, I find traction most convincing in the following order:
- Profitability
- Revenues
- Active users
- Registered users
- Engagement
- Partnerships/clients
- Traffic"

RoundPegg helps you hire better people

Eight Rules for Internal Meetings

Time goes by so fast when you're in a startup. There is always too much to do and when you look around for someone to assign a task to you usually end up doing it yourself (thinking they already have too much to do too). So time is of the essence. With that in mind let's tick off my top 8 rules for internal meetings:

1. Don't - don't meet unless you need to. This sounds like a no brainer but happens more often than you would think. Sometimes you need to get together to get on the same page but most times an email suffices.
2. Agendify - know what you want to accomplish going in and work towards an agreed upon result.
3. Moderate - some people will take meetings off track from the planned agenda. Politely interrupt, acknowledge their concern, move it back on track.
4. Pare - who really needs to be there? Reduce the size of the meeting to the essential people needed to make a decision. More people = more time waste.
5. Summarize - when you've reached a conclusion, summarize it and move on.
6. Time Block - consistently have meetings in the same time block. Pick mornings or afternoons or schedule even tighter. "we will only have meetings between 1-4 on Tuesdays or Thursdays" This forces people to use the time efficiently and gives them a known productive block when meetings will not take place.
   
7. Start - start the meetings on time whether everyone has shown or not. This gets everyone in the habit of showing up on time. I have been super guilty of this in the past. It isn't good for anyone. If this is you, just acknowledge that you're time challenged and make an extra effort to get moving earlier. This shows respect for everyone there and starts the meeting on solid footing.
8. Cookies! - absolutely! If you're running the meeting you should always bring cookies.

... for completeness, here are a few other posts that cover the subject.

Meetings Require Mutual Respect and Meetings are Toxic and Make Meetings Suck Less

Alternative 18 countdown for 2009

I've listed SiriusXm's top 18 requested songs for their Alt radio station 2009. I starred the ones I prefer (one star = good, two stars = great, three stars = buy it right now. Just having dined at Cyrus outside of Napa, I'm going with the Michelin Guide stars rating system :).

As a side note, and even though none of them made it on this list are the Scots. There've been a number of really good Scottish bands to emerge lately and these three I like in particular. The entire Midnight Organ Fight lp from Frightened Rabbit is a well written emotional roller coaster with beautifully haunted arrangements.

Frightened Rabbit - The Modern Leper**
They Promised Us Jetpacks - Quiet Little Voices*

GlasVegas - Geraldine*

18. Cage the Elephant - ain't no rest for the wicked*
17. Matt and Kim - daylight*
16. Killers - spaceman
15. Spinnerette - baptized by fire
14. Franz Ferdinand - no you girls
13. The Thermals - now we can see
12. Wild Light - California on my mind**
11. Death Cab For Cutie - grapevine fires**
10. Metric - help I'm alive**
09. Manchester Orchestra - I've got friends*
08. Yeah Yeah Yeahs - heads will roll*
07. The Limousines - very busy people *
06. Kings of Leon - use somebody
05. MGMT - kids***
04. Weezer - I want you to
03. Phoenix - 1901*
02. Silversun Pickups - panic switch*
01. Muse - uprising*

other tasting notes - Ike Reilly must surely be the least known brilliant song writer out there. Hard Luck Stories just came out in 2009 and is fairly good but in the three star category are both "Salesmen and Racists" and "We Belong to the Staggering Evening." I don't know of any other artist who can quite cut to the quick of this beautiful mess we call life.

Also, if you get the chance to see Wilco in concert, don't pass it up. I saw them last minute at Red Rocks outside of Denver this year. Red Rocks is a magical venue anyway, but together with Wilco was out of this world. I believe the encore set was longer than the main set. No one wanted to leave.

Enjoy and happy listening in 2010!

Sweat Equity as Alternative Funding Model

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

I've put together a few of these agreements and they're all fairly similar. Please add a comment if you would like a sample version of one and I'll send it to you. And if your needs are greater, I'll refer you to friend and former Cooley attorney Michael Stack who has helped with some of these agreements in the past.

The mechanism is essentially this:

• Agree upon a discounted rate per hour that will be paid out in cash
• Agree upon a bonus compensation that involves granting a set number of shares per hour that feels fair. You might be able to back into this number by giving a nod to what the company might be worth if someone priced a round. So let's say you think the company could be worth $1M pre-money and there are $1M shares outstanding. After the discounted rate, the developer is willing to take in a bonus of 50 shares per hour worked.
  
• Create an agreement that contains both the discounted rate, bonus stock rate, and expectations, ceilings on hours, IP protection.
  
• 1099 the contractor for the discounted rate plus the bonus stock at the current stock value (which at a very early stage could be as low as .01/share)
• Downside to be aware of is a larger pool of shareholders in your company and some additional dilution.
  

First Things First - Creating the Pitch Deck

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:

1. Problem
2. Your solution
3. Business model
4. Underlying magic/technology
5. Marketing and sales
6. Competition
7. Team
8. Projections and milestones
9. Status and timeline
10. Summary and call to action

Read more: http://blog.guykawasaki.com/2005/12/the_102030_rule.html#ixzz0XW8WIxS7

After you've collected your ideas, pitch it. Pitch it to your close business mentors and associates, pitch it to your girlfriend, spouse, people in your target market. Pitch, rinse, and repeat.

And when you're ready to take the presentation to the next level to put a finer point on it, check out Presentation Zen. Thanks Catherine for turning me onto it.

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?

The New Deal

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.

• "You're too early stage. Keep us up to date."
• "If you were in the Bay Area we'd be interested. Have you thought about moving?"
• "Do you have a lead investor in Colorado? Is Foundry investing in you?"

These are radar meetings. Radar meetings are intended to get you onto the radar of the VC community, making them aware of you, and often resulting in a number of offshoot meetings with potential angel investors, partners, prospects, etc. It's always good to have the meetings early and not ask for the money. Ask for advice, ask for contacts, ask what the VC partner thinks about the market you're going into and whether they've seen deal flow recently in this space.

Something has changed in the process though. You can feel it at these meetings and in the attitudes of other entrepreneurs. With the majority of venture funds' portfolio companies still feeling the effects of the recession, venture funds have moved to the right--that is, to later stage investments. Any venture funds still in the early-stage game seem to be speculating on the hyped areas of social media infrastructure and applications, or on clean technology.

There seems to be an increasing gap between the very early friend and family stage of funding, and doing a professional seed round of funding. The Mint.com story illustrated this point further in a post by Christine.net after they were acquired recently by Intuit.

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.

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.

So where does this leave us on the investment side? Close to heaven. The groups stepping into the gaping void are angels. Angels typically invest in these early rounds and may even participate in the friends and family stage of the investment. In this environment they are also capable (given two or more with deep pockets) of taking a SaaS (software as a service) oriented company all the way to profitability and skip the venture funding process entirely. There is a huge opportunity for super angels, angel consortiums, or seed stage venture funds to claim this middle ground of professional seed stage investment.

Remember that in a time of disruption opportunities abound.

Ten Tips for Successful Entrepreneurs

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

1. Jump curves or create the next curve. Keep moving.
2. “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.
3. “Churn baby churn.” Do versions 1.0, 2.0 3.0, X.0. Do R&D and continual product improvement
4. Break down barriers – enable people to test drive your product or service sooner, rather than later
5. 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.
6. Let 1000 flowers bloom. Think of the many applications of your concept
7. Eat like a bird; poop like an elephant. Birds eat 50% of their weight every day. Be a voracious eater of information
8. Think digital; act analog
9. Never ask people (consumers or customers) to do what you would not do yourself
10. 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.
Best,
Jana
_______________
Jana B. Matthews
Chief Executive Officer
The Jana Matthews Group
www.JanaMatthewsGroup.com

Gregory Canyon Morning

In the woods I feel like a philosopher, all perspective, wily and grizzled. There are no cannons or fortifications of flesh and bone. The universe' missive is clear and cold and comforting. "we perish each alone" she says through the brook pounding it's way down the canyon, through the million solitary pines who brush each other in the breeze, but never speak. In this stoic house I watch and weep, ponder and rejoice, at the beautiful tragedy each day brings.