by tomnora | Mar 26, 2012 | CEO Succession, early stage, founder, Launch, Scalability, startup, startup CEO, Tom Nora, venture
“Even in the quietest moments, I wish I knew what I had to do” – Supertramp
[This is about the loneliness of the CEO in a startup. A real startup, that has employees and funding and a going operation.]
It’s late on a Sunday night and you’re sitting alone preparing for the week ahead. It will include travel, employee issues, hiring, firing, product design, cash burn, a new facility, the next funding round and some client and partner visits. You have a great team for your little startup, in management and elsewhere. You have a few “startup whisperers” who advise you from afar, your parents are very supportive. Your spouse shows incredible patience and listens to your war stories every day. It’s not that you don’t love this, you do.
But in the end it’s all down to you. No matter how many people surround you, no matter who great your ecosystem is, being the CEO of a going startup is often a lonely job. By definition, in the final step of making many decisions is you alone making them.
- Others depend on you to do this.
- You have more information than anyone else in the company.
- You get more blame and more accolades for results.
- The outside world looks to you first, wants to talk to you.
- No one is equal to you inside the company you need to maintain your leadership.
So it really is you alone.
How do you improve this situation? Draw from all these resources around you, especially external ones.
- Pick one or 2 board members to get closer to, (pick the right ones).
- Don’t ask for advise or what to do, that will confuse you and they contradict each other over time.
- Find an old college or high school friend who’s disconnected from the business. Or a favorite teacher or professor.
- Pay attention when outside mentors magically appear in your circle; I’ve met some of the best advisors at meetups and coffee shops.
- Read voraciously, not just business or CEO books, but history, biographies. etc.
- Try to mentor a potential replacement even if you’re not looking for that; you’ll learn a lot.
- Use external consultants – management, executive, legal, recruiters to discuss ideas. Mark Zuckerberg hired an executive coach so he could learn to be a leader. The Google founders surrounded themselves with a dozen moentors and advisors.
I’ve found in my CEO positions that optimizing this thinking process can make the difference between success and failure, usually does. Please reach out to me if you want to discuss any of this with me. I’m @tomnora on twitter.
by tomnora | Feb 10, 2012 | Business Development, early stage, Launch, Revenue Growth, startup
Big Revenues vs. little revenues – a strategy question that startups often struggle with. Should we focus on a business model that supports small payments, subscriptions, etc., or look for major large chunks of money from partnerships or strategic investors? There are strong arguments for both types of incoming dollars for a startup, but the correct answer is have both coming in simultaneously; it will balance your cash flow get you through valleys and help you avoid raising expensive equity capital. And will get you more respect all around.
Almost every company with long term success has used this dual revenue plan, throughout history.
little revenues
Many easy-to-set-up payment systems and business models on the Internet have recently popularized little revenues – micro-payments, price per transaction, low cost, SaaS, freemium, monthly payments. Easy to use systems like PayPal, Square, and several other new online cash acceptance systems are hen there are the thousands of derivative companies that are thriving from commissions from larger companies – Google ads, Facebook ads, and the all encompassing affiliate market industry.
I went to an affiliate marketing meetup recently (kind of by accident) and was knocked out of my chair by the size and sophistication of this world. The speaker (Shoemoney) told a great rags to riches story of making tens of millions from affiliate marketing tricks, getting ~$1 to 50 per referral. That’s a machine, maybe one that only produces for a bit, but still and semi-automatic mechanism for short term scalable revenue. He’s been at it for 10 years, so I guess he’s got the long term figured out, too.
Little revenue systems have vastly lowered the barriers to entry to starting a business, no longer must you have bricks and mortar, a merchant account, office equipment or even a staff to do business. It hasn’t decreased the need for innovation, salesmanship or marketing prowess. Many 2.0/3.0 startups are learning this the hard way.
Big Revenues
As a product company, very large injections of cash are always a nice add on to any business as long as they don’t disrupt your business strategy, kill margins or cause you to customize your offering too much. I was with a startup once where we sold our software products for average $500 each generating about $1 million per year, running as fast as we could. I was lucky enough to close 2 large contracts for $900K each within a month, and while we were negotiating a funding round. They were volume sales of standard product so caused no disruption to our processes. Those 2 deals changed our company forever, put us on the map for long term.
In the Shoemoney example above, the ultimate in trickle revenue, he has actually had several Big Revenue transactions, selling entire websites or business models, or taking on expert consultant gigs, all these for high six figure injections to compliment his $20 per click businesses.
In the auto industry, most large companies augment their car unit sales with $ multi-million R&D contracts – Ford, Cadillac, and Porsche get over 20% in extra revenues doing this.
Back to early stage startups. No matter how early, the most sophisticated startups are looking for these Big Revenues from the beginning. They bring on the expertise required to make this happen. It’s often called OEM, white labeling, or strategic partnership, but it’s big chunks of money when you need them most.
I recently met with a respectable high growth early stage startup – increasing revenues, retained all of their equity so far, thousands of customers, even made the Inc 500 recently. But they totally depend on one revenue model for 100% of their revenue, and it’s breaking down. They desperately need the Big Revenue injections before it’s too late.
If you’ve built something compelling enough, there are always larger companies that will welcome you to take their money. Current vs future revenue is very dynamic, two different businesses can leverage each other when their needs compliment each other. Connect or contact me on twitter: @tomnora
by tomnora | Jan 23, 2012 | Angel Investor, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO
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
by tomnora | Jan 10, 2012 | Business Development, early stage, founder, photography, startup, startup CEO
The other day I met with a startup in Santa Monica, and noticed a giant etch of the word d e s i g n on the ceo’s glass office wall. Their company isn’t about design per say, but it was refreshing to see the discipline given such prominence. The word design is being kicked around in the startup world a lot more these days, and I think this is a good thing.
Design is the exercise of creating or adding elements of appearance to something. It is defined as “The shape or appearance given to an object, especially one that is intended to make it more attractive”. In the startup world it can make the difference between success or failure if combined properly with great business strategies. There are many examples of great design alone in a failing startup, but great design plus great engineering and business strategies often win. Also, many startups with bad/weak design but great strategies and engineering have been winners. But that seems to be changing.
To say that someone is a visual person is a little silly – everyone is visual. Colors and Shapes and beautiful Movement attract any human, often on a subconscious level. A simple attractive Design for a website or product will change its fate from yet another to the best in a category.
Beautiful design exudes success and confidence, care about details. And most importantly – originality. great design comes from within a person or organization, not copied from outside and implemented. It’s more difficult, but imperative for long term success. Simple beautiful design is proliferating on the web – lots of white space, a small number of large font words, big open boxes for interactivity, cool icons. All of these things enhance the user experience and make them want more.
A recent great experience for me was trying out Codecademy. It has quite thoughtful design elements, many of them not actually visible, but so important to its almost seamless usability.
Style, similar but different than design, is more the process of following great designs, using existing aesthetics. Sometimes this works fine, but it’s not the same as amazing original design. Just look at the continuous march of Apple over the past 34 years. Great design plus engineering plus strategy. Accessibility, simplicity, completeness. They created the template for many other products’ style and design.
UX/IA is also an important part of all digital design now. First introduced in the late 1990s, it’s replaced and expanded on UI as the critical relationship people have when using products. Often it’s a pre-design process, trying to guess how people are going to use things, then use design to optimize the experience.
The new biography on Steve Jobs is a must read for any startup founder. It has the added benefit for readers of discussing in great detail Apple and NeXT design processes, justifications and investments. It also reveals that most of the design ideas were not Steve Jobs, but rather came from several design and marketing gurus he surrounded himself with.
Like I said, it’s great that Design is becoming central to the engineering-heavy world of tech startups, because ugly design sucks. @tomnora
by tomnora | Dec 26, 2011 | Angel Investor, Business Development, CEO Succession, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO
One of the things I tend to obsess about these days is startups that have little or even no real lifespan. Almost every day I uncover another one, some even with significant funding. In greater Los Angeles, now being called Silicon Beach, this problem seems to be more prevalent than in most areas. So many people make their goals to just b a startup, get it started and look for funding, without much thought about multi-year growth and sustainability, i.e. Scalability.
A common area of neglect in this early stage is people – Scalable People. Startup founders tend to add people that are close to them – friends, coworkers, spouses, family, neighbors, roommates, similar age, etc. These folks are very accessible and trustworthy, not much interviewing required, and often will start working with little or no compensation. It’s good to have some of these. The biggest downside is that eventually you will have to extract or diminish the roles of most (not all) of these people.
I once had an early employee at a startup I took over who was sales, marketing, receptionist and payroll. Early on we were lucky to have her doing all those things, and she received great stock options for being an early employee. But as we grew there was no doubt that we needed to replace her in most areas with a professional team that could scale with the job. Every change we made pissed her off and she fought for her position, which was counter-productive to our growth. She eventually left with some bitterness, but that went away once we went public and she could pay off her mortgage entirely.
You also have to mix it up as early as possible with real professionals that can scale when the company grows- people who “think differently”, have different experiences, drive initiative that none of you have even thought of, and want the company to be much bigger. These days a popular add in Los Angeles is someone from Silicon Valley; it adds a realness to the group and gets investors excited.
I’ve been on all sides of this situation – I’ve been the founder trying to attract the best people, and just as often I’ve come in as the “suit” to a small group of founders and early employees. It’s more work and trickier to splice the 2 groups together than to just use your inner circle, but it’s the only way to grow now and later. Please contact me if you want to discuss your startup. @tomnora
