What If You’re Not CEO Material? [Excellent article by David Cohen @davidcohen of TechStars]
http://j.mp/y7qE0u
Demise (plancast)
This article written by Mark Henderson of Plancast took a lot of courage. The Uphill Battle Of Social Event Sharing: A Post-Mortem for Plancast | TechCrunch http://j.mp/wCnYov
By putting the words Post-Mortem in the title he made it very clear that the company is failing, a shocking move in our current startup world. So many companies/people/vcs pretend they are succeeding when they are stuck – can’t scale revenues, especially over the past 5 years or so. Once they finally shut it down they often still claim success, or invoke the over-used “pivot” panacea.
By calling it as it is, Mr. Henderson allows a true discussion about what went wrong and other strategies that could possibly change the fate of Plancast and other startups in the same position. He is also helping other startup leaders and investors to possibly follow his lead of raw honesty, so this industry can focus more resources on a smaller number of companies that truly have something special and defendable. That helps people to better learn how to do it right, contribute to bigger better businesses, create profits.
In several of my past postings I’ve touched on this problem. It’s endemic to the startup world right now, and can’t lead to a good future. Of course startups always have a low probability of success anyway, but this current environment of pretending like every company that gets angel or super-angel seed funding is made up of geniuses with genius ideas is a house of cards. Articles like that above could start the process of correcting the market back to realism and eventually streamline resources. Mark has put his ego aside and done a great service to all of us. And who knows, by publishing the companies issues he may crowd source some answers (and funding) to actually save his company.
Here are some of the comments people made about this article:
“I hope TechCrunch publishes more well-composed articles like this in the future.”
“This industry is lacking such honest analysis. Thanks for keeping everything so real.”
“I greatly respect you posting this as a way to help others learn when you could have just disappeared in the startup abyss.”
Ii looks like the beginning of several who will come forward soon. What’s the lesson here? I guess more journalists should launch startups. @tomnora
CASH IS KING. Or is it?
Aurum Rex. Nummus Rex. Emptor Rex.
I.e. Cash Is King. An old sayings, but so true in the startup growth equation. Where does revenue fall here? Is it more or less important? What about Strategy? Revenue? Growth? Buzz? Profit? A “Right On” product?. Smart People? Ambition? Your position on the Bell Curve?
When a startup has none, cash seems like liquid gold that can flow over the business and cure all – salaries, resources, exposure, growth, success, new offices, marketing. But often entrepreneurs fool themselves into thinking that lack of cash is their only problem. I’ve been involved or almost involved in so many early stage companies that said “If only we had $XXX in cash, everything would be o.k. Sometimes they get the new cash but still can’t scale or survive. Cash is certainly required to play, but it has to be part of a larger system, purpose, goal.
Venture capitalists, controllers of cash, are always looking for mind blowing new things that can “change the world”; can step out in front of our regular world and catch fire, anticipate what the world needs that no one else has figured out yet. And they have cash, high risk cash, to take a shot at being part of these new phenomenons. They get in early and guess at the future, which means they could be often wrong. But that’s not a problem; they only have to be right once in a great while to win big. That’s the game they’re in. What an exciting job!
On the other side we have the yet-to-be-funded or need-more-funding startup. Whatever cash is in this company is less than enough to spark it to the next level quickly enough to meet the business goals, or often just to make the next few payrolls. Is this you?
So what about REVENUE? Revenue is close to cash in it’s power within a startup. It can solve so many problems, including cash issues. It attracts more cash investment, it creates profits, it legitimizes your business. Revenue has to be managed properly and leveraged wherever possible, but those are good problems to have. It’s eventually more important than cash, especially when it’s steadily and predictably growing. Growing revenues, not cash, create higher valuations.
Early on, most startups focus more on adoption, eyeballs, users, traffic, assuming these will infer and convert to future revenue (Twitter, Google, Zynga, Facebook). The actual cash on hand and/or revenues don’t fully support the business, but no problem if major growth is apparent.
So is that it? User adoption? For Twitter it is, they’re currently at a valuation of 40X revenues, way high. But there’s no question that they’re permeating the globe, possibly with more longevity than Facebook.
The bottom line is value. What value, how many valuable things is your company providing. What’s better, cheaper, faster, unique, easier. Google is a great example of amazing and increasing value to user. It’s all of the above, mostly free, with an attitude of always wanting to provide more to its users while simultaneously simplifying use of everything digital.
Early on Google didn’t focus much on cash or revenue; they eschewed it, they had a higher goal – organize all the worlds information. Their goal and execution of it was most important to them. Of course they also happened to be a few blocks away from the highest concentration of venture capitalists on the planet, but they went 3 years without VC funding. Their first 2 years they had no revenues and received only $100K in funding, from Andy Bechtolsheim. A year later they raised $25 million. Their great ideas and excellent execution came before any cash.
So maybe cash shouldn’t be #1 for an ambitious startup, rather amazingness should, true passion, even if it’s nights and weekends around your day job.
@tomnora @cowlow @norasocial
INTERNAL VS. EXTERNAL GROWTH
What’s more important for your company, growth that is stimulated internally or externally? Which is more Organic? More Sustainable?
The answer is that both are equally important, and quite dependent upon each other. Internal (proactive and reactive) actions by your team must intertwine and hopefully spawn and tune external factors that match your growth goals.
Externally stimulated growth, where the market is coming to you, is when the outside world has significant impact on your message, your “buzz” increases as well as your message hitting where you want it to. Viral growth. Can’t be stopped (for now).
External growth is more exciting, also more difficult and more expensive, but can be quite rewarding. Expensive means using precious cash, which most startups are very reluctant to do. On the other hand, if well placed promo dollars (internal) cause external market to take off on it’s own, it may be worth it.
Internally stimulated growth is all the things you do, inorganic, synthesized. A strong internal growth plan focuses on coordinated, timed, manipulated maneuvers, paying for press releases, making sales priority 1. Internal growth is safer and controllable but limited in it’s effect without your message catching on externally. Old school internal growth strategies are still vital to the plan: marketing, advertising, marcom, sales, work ethic, camaraderie, common vision, right attitudes, belief in the leader. All of these things help you to be prepared for external spark when it happens.
But External growth is harder to synthesize, unless you’re Steve Jobs. Stimulation can come from many places – the momentum of the market, outbound marketing, results from outbound marketing, all trying to create this external alchemy.
The best channel these days for external pop is Instant Social Media. Instant Social Media can make your message travel very rapidly to giant volumes of people, into the highest levels of the market, for little money and hassle, viral marketing. For more see my Instant Social Media blog entry.
The key to all this is to challenge yourself for the best in both areas. Please contact me if you want to discuss your situation and plans.
FIRST REVENUES – THAT CRITICAL STEP
First revenue are a major validation milestone for a startup after much sweat and tears. You’ve gone through initial idea, sat at coffee shops or peoples houses brainstorming, discussed and executed the company formation, started building a product, are going through your launch, interacting with first users and maybe even have gotten some press, but none of that compares to people paying for something you’ve created from nothing. It also is the first “organic” fuel for the building process for your company.
Recent developments in web business models have made this hurdle much lower. For example Googles AdSense, Facebooks virtual economy, micro-payments and wide use of the Freemium web model. But it’s still quite a nice feeling to see revenues coming into your enterprise, and makes you want to figure out how to build upon it.
Revenue can change many things for you and your company – valuation, respect, confidence, negotiating position, attraction of other revenue and cash, retention of your equity, and the ability to attract key people and partners. If the revenue is significant, as in a major partnership that pays six figures or more, it can set in motion the next phase of your strategic planning.
Preparation, a Chief Revenue Officer
Also, you must be tactically ready for this step before it happens – know exactly how you want to accept revenue, prepare all required forms, build template legal agreements that may be required, seek help from experts where needed, have your banking in order.
But how to get these first revenues? Aside from the low hurdle examples above, there are many other ways. These days almost everything involves the web and automation, but there is an all important factor – human to human contact. Call it sales or marketing or bus dev, but the important piece is dedicating yourself to spending some time face to face with those you hope will be your highest consistent paying customers. Not “unpaying” users or beta testers, but strategic customers, partners, influencers, those who will take you to your first levels of success beyond investors. This is how you “get it going”, how you start the revenue ramp upwards.
For many startups this face-to-face part of revenue development is where they spend the least amount of their time, for hundreds of reasons, but mostly because they aren’t comfortable with this part of the process. If you can overcome that issue, you’ve overcome a major hurdle to growing revenues. The impact of hearing live from another human about your product is immeasurable, proven over generations of business.
One way to vastly increase your company face-to-face hours per week is to early on have a dedicated partner/co-founder who does only this – “Chief Revenue Officer” – talks to people, gets out there, constantly hunts for new money for the company and articulates the vision. In the beginning the rainmaker is usually the founder/de-facto CEO, but not always. Some startups bring in someone pre-revenue to take responsibility solely for getting the first revenues. I’ve actually been that person at a few startups; it’s a great job for the right person, whether you call it sales, business development or even CEO. The key is getting the right person/people, indoctrinate and empower. And get that first revenue.