It’s The Profit and Growth, Stupid.

I’m paraphrasing a Clinton/Carville line “It’s The Economy, Stupid” in the title above. They used this to win the 1996 election by rallying people who were tired of such a weak, debt ridden economy. Sound familiar?

The Bubble Begins To Pop

Today it was announced that Betterworks is shutting down after $10.5 million in investment and 18 months of operation. Incredible but not. Around town people have been saying that BetterWorks is one of the strongest startups in L.A. They actually threw a party a month ago “The Silicon Beach 500”, celebrating the amazing growth of local startups.

Betterworks is one of many companies these days that aren’t really companies, they’re an idea, good hype, the ability to trick the public while they’re trying to work it out (We’re doing Great, We’re killing it. We’re hiring.) and the arrogance to say we don’t need any help. I could name another 20 startup in L.A. alone that are in the same boat – they are failing and will shut down eventually, but right now are promoting the facade of success and growth when they’re not either. I won’t names names, but I see their ads on the web. “we’re growing”, “dog friendly workplace”” We Love Startups!”. What about REVENUE and GROWTH and PROFIT and PREDICTABILITY? These are the definitions of Scalability.

Currently early stage startups all want the Facebook model – L U C K. Mark Zuckerberg invented something by accident that grew so far beyond his wildest dreams that it could cover a thousand mistakes. He got funded while wearing jeans and a hoodie. But eventually Facebook had to make Revenue and Profit. Be Scalable.

Most companies aren’t like that. They require good decisions and actions DAILY for YEARS.

Betterworks actually has/had a great idea, they just didn’t quite know how to properly build a business for the long term, and refused to listen to advice. I know that’s harsh, but another few hundred companies are doing the same right now. These companies stifle innovation, not promote it and teach the wrong skils – they need to be called out.

The result will be thousands of pissed off, unemployed people sitting on the beach in Santa Monica wondering what the hell happened. After the 2000 crash Profit and Revenue came back into style, spawning and reinforcing real companies like Google and Salesforce.com which are Profitable and Grow. 2013 will repeat the cycle, so let’s all change our thinking, get back to basics, put the egos aside and respect the expertise available to us.  Contact me if you’re in this camp. @tomnora

TALK LESS! (or, the fine art of Sales)

The current massive movement of new startups is an awesome moment in our time. The power of the individual is unprecedented.

But one of the problems with the new would be all-functions entrepreneur is lack of training in some of the key areas of entrepreneurship – SALES skills. The technology has changed, but the art of selling and closing sales has not. Humans make decisions by being convinced by other humans, even if the convincing is implemented by automation, data mining, and semantics. Respect the human sales skills.

In most of the pitches I get from early stagers these days, they start talking and demoing and don’t know when to quit. They keep “selling” me. This one one of the most fundamental mistakes of selling. It’s much better to say as little as possible, then shut up and listen as much as possible. Pretend you’re interviewing the other person and you want them to talk. You’ll be amazed.

When I hear a pitch, I want to ask questions, probe, dig deeper into specific subjects. If someone talks too much I often forget or lose interest in my original questions. I also feel like they must be a bit desperate. The other night someone was trying to show me a demo of their mobile app in a loud bar. Since we couldn’t hear the audio, they were trying to scream the features to me. Very sad demo.

So don’t talk so much, listen more, you’ll close more sales.  @tomnora

The Art of Sales by Alec Baldwin :

http://j.mp/ILFWw3

Shout Out to Seth Levine, or the In-N-Out burger startup

Shout Out to Seth Levine, or the In-N-Out burger startup

Shout Out to Seth Levine – Seth Levine’s VC Adventure – “I’m getting sick of the bull$%!^”

http://www.sethlevine.com/wp/

Seth Levine, a successful VC with the Foundry Group, wrote a great blog entry about all the hype going on currently in the startup world. Worth the read. His focus is on people bragging about how amazing they and their startup are when they usually have close to  n o t h i n g, which goes against the karma good business and screw it up for those really trying to build strong long lasting companies. If more people like Seth step up with their qualified voice, they could help save us from or lessen the big crash coming.

I’ve been harping about this a lot (too much?) for over a year:

http://j.mp/yyqNQc

http://wp.me/pKMex-1m

http://wp.me/pKMex-2e

Currently Los Angeles is in what could be a startup renaissance or an apocalypse, dependent on how long the hype goes on. Based on Seth’s article, I realize it must be happening everywhere. The signal to noise ratio continues to degrade, but it’s actually moving into the next phase. Investor groups are cutting out the management, bus dev, sales, and marketing professionals, trying to get raw, young engineering teams that have never negotiated a term sheet to give away their IP rights and equity for next to nothing.

Some of these projects will produce amazing companies. But most participants (young developers) will raise their hopes, fail and get spit back out into the cruel world within 2-3 months(!) and become a jaded unemployed 25 year old. Or realize down the road that they gave away a lot for a little. Many investors now advertise that want only developers, they will cover all business/marketing/etc. needs. Don’t put real business people on the actual team. To reuse an overused term – Wait what? They offer them zero to a few thousand dollars and office space. I call it harvesting youth.

Recently there was a developer only coding party where, in a few hours, you form a team, think of an idea, then design, develop, deploy a website. The compensation? All the alcohol you could drink and In-N-Out burgers. Now don’t get me wrong, I love In-N-Out burgers, some of the best in the world. My favorite is the Double Double animal style (see photo). But the sad thing here is that after that party many of the participants think they have a startup.

The word startup used to be about very unique technologies being deployed in very unique ways, creating new markets and capabilities in the world. Having knowledge and experience had value and a balanced team was required. Balance, humility, hard work. Facebook and Google had plenty of business people deeply involved. In fact, Mark Zuckerberg is a great salesman, and a pretty mediocre programmer. Now almost anything is a “startup”, and almost everyone is “doing” a startup. And bragging about it before it happens. We’re spreading resources over way too many businesses, knowing most have no change. I know it’s a risk game, I’ve been in it 25 years, but there should be some intelligence invested in the outset. One VC recently told me that his investors don’t care if he does no due diligence, as long as he “brings them another Facebook”.

Real startup successes are measured by growth, revenue, shareholder value, making something from nothing, ROI, longevity. Not just this weeks buzz or a $25,000 seed round. They devised with strategy, ingenuity, an ecosystem. Long term employment, new jobs.

The good news is that this hype period will end, probably soon. Then the remaining companies will be much easier to watch and enhance and benefit from.  @tomnora